Ford Motor Company is based in Dearborn, Michigan; it is the second largest industrial corporation in the world, with revenues of more than 144 billion and about 370,000 employees. Operations span 200 countries. Although ford obtains significant revenues and profits from its financial services subsidiaries, the company’s core business remains the design and manufacture of automobiles for sale on the consumer market. Since Henry Ford, founder of Ford, incorporated in 1903, the company has produced over 260 million vehicles.
For this case study I have decided to implement Virtual Integration at Ford. However the supply chain strategy of Virtual Integration that is used successfully by several companies such as Dell and is a revolutionary business strategy would not suit the needs of Ford Motor Company. I will focus on other aspects that I feel are most suitable for Ford and tailor it to meet their needs.
I predict that by using virtual integration, Ford can expect to minimize its suppliers, eliminate middlemen, and have more flexibility in its supply chain by using virtual integration. In addition to that, like Dell, Ford can boost its sales by providing better customer service and provide faster communication between suppliers, manufacturers, and customers in the value chain.
Obviously Dell and Ford are part of two different types of industry, one being a computer manufacturing company and the other part of the auto industry, it does not seem to right to implement exactly the same form of "virtual integration" that Dell is currently using. In fact, there would be several challenges and risks that Ford would face by implementing the same type of virtual integration Dell used.
The existing supply base was in many respects a product of history. -
In 1980s there were several thousand suppliers of production materials in a complex network of business relationships. -
Suppliers were picked primarily on the basis of cost
Shift toward longer-term relationships with a subset of very capable suppliers who would provide entire vehicle subsystems. -
“Tier 1” suppliers would manage relationships with a larger base of suppliers of components of subsystems-tier 2 and below suppliers. -
Use of techniques like just-in-time (JIT) inventory, total quality management (TQM). -
First tier suppliers had fairly well developed IT capabilities (many interacted with Ford via electronic data interchange links).
Statement of Issues
There are many issues that are faced by Ford’s current supply chain strategies. Many things had to be improved in order for this company to become a much more competitive organization within the automotive industry.
One of these issues is Ford’s process complexity as for the large number of suppliers that Ford deals with (3 tiers of suppliers).
Business at Ford is usually conducted over the phone and or fax. Ford seemed to be lacking a more advanced and user friendly IT system that could allow operations to run smoothly and more efficient.
Ford, a $150 billion company enjoys tremendous leverage over its supplier’s annual component price decrease and open book. Another problem is that there is also a powerful independent dealer network that has a lot of control over the market. Ford dealers sometimes compete with each other over clients and sales instead of helping each other to improve their capabilities.
Unionized labor force is also a very important aspect due to Ford’s huge employee base (370,000 employees). Dealing with such a massive work force and try to make them all copacetic can be extremely challenging and costly for any given organization.
After many decades of success, customers have increasingly become harder to find due to new threats in the industry, an increasing number of cars and trucks are parked in dealer lots and showrooms, creating an alarming trend of stagnation and profit loss....
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