Ford is currently being faced with whether it should incorporate changes within its supply chain and move towards a virtual integration approach. Dell Computer Corporation has been able to successfully implement the virtual integration approach within its supply chain. The question is whether or not Dell’s approach applies to Ford’s model and to what degree if any should Ford implement into its own supply chain design. We need to review how emerging information technologies are having an impact on supply chain and ensure that we keep a competitive advantage in the market with any changes made. Some of the issues that we need to consider as part of the decision are: 1.
Differences between Dell and Ford - What are the differences in complexity and inventory management used by Dell and Ford? Is it possible to create more open relations with suppliers without having an impact to its proprietary business operations? How will virtual integration impact how business interacts against its competitors? 2.
Distribution Network to the Customer - Would Ford be able to eliminate costs to consumers by allowing consumers to purchase directly from them rather than using independent dealerships through the use of internet services? 3.
Impacts to suppliers and supply chain - What impact will virtual integration have on Ford’s current processes of how it deals with its suppliers? Will virtual integration allow Ford to become more efficient at managing stocks and ensuring availability to produce orders based on a pull system? Root Cause Analysis
I think it is important that we define what vertical integration is before we move forward in the analysis. Vertical integration can be defined as the use of the internet to replace physical components of a company with information. In order to accomplish this Ford will need to basically stich a business together with partners that are treated as if they’re inside the company. Differences between Dell and Ford
There are many differences between Dell and Ford that need to be examined in order to get a clearer understanding of the differences and how the virtual integration model used by Dell may be applied to Ford. The virtual integration model Exhibit 1 shows many of the financial and operational differences. I will take a look at a few of these differences and explore its impact on the virtual integration model. •
Ford currently has a great deal of control over systems today, whereas Dell’s control is questionable, especially in a crunch. It is important for Ford to maintain control over many of its processes due to legislation, safety and environmental reasons in the manufacturing of its automobiles. The safety issues related to recalls alone can be very costly and catastrophic to a company such as Ford. Due to this, it is important that Ford retain a high level of control over systems in the manufacturing processes of the automobile assembly. •
Ford is a much larger and more complex organization from the standpoint of product and process required in its assembly of automobiles and the number of suppliers required to complete a final output for sale; whereas, Dell’s product and process complexity is low to moderate. Ford has moved towards a shift of creating longer-term relationships with its “tier one” suppliers. The expectation is that these “tier one” suppliers would manage relationships with a larger base of suppliers of components of sub-systems. Many of these tier one suppliers would interact with Ford via Electronic Data Interchange (EDI). Ford would be required to build information and relationships that allows for more open sharing of information with its suppliers; this will also include sharing with some of its information with their competitors suppliers that they share. This may pose a risk to some of Ford’s proprietary information. •
Forecasting is a little more difficult at Ford than with Dell. This is because Dell is directly working with...
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