Ford and Its Outsourcing

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Ford Motor Company and its Outsourcing

Company Overview:
Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan, manufactures or distributes automobiles across six continents. It is a publicly traded company on the New York Stock Exchange. The Company has about 198,000 employees and 90 plants worldwide with the automotive brands include Ford and Lincoln. The Company also provides financial services through Ford Motor Credit Company. The revenue of the company is $136.26 billion with a net income of $20.21 billion by 2011. Ford’s Virtual Integration Strategy:

From the last two decades auto industry is growing more competitive. Competition from the foreign automakers like Toyota and Honda is also high. In addition to the competition, there is a decrease in the profit margins and reduced sales due to overcapacity of about 20 million vehicles. In order to compete with the other automakers, Ford wants to make some changes within the organization. As a part of changes, Ford made some plans with ambitious framework called Ford 2000. Merging of North American, European, and international automotive operations into a single global operation is the first part of this plan. This helps the Ford to save huge amounts of money by reengineering and globalizing corporate organizations and processes. Then the product development activities are consolidated into 5 Vehicle Centers (VCs), which are responsible for the development of vehicles in a particular market segment. The major reengineering projects that were part of Ford 2000 were initiated around major company processes like, Order to Delivery (OTD), Ford Production System (FPS), and the Ford Retail Network (FRN). By these processes Ford developed the ability to deliver vehicles quickly, accuracy in production, reducing personnel costs and increase in business. The traditional supply chain methods make it difficult for Ford to compete in the global automobile industry. The company changed its way from traditional supply chain method to virtually integrated supply chain method. In virtual integration method some of the functions of the supply chain are handled by utilizing outsourcing and partnerships, whereas in traditional method the company handles all the functions of supply chain. By the virtual integration method the company can outsource the design, system development, product sourcing, logistics, and even final assembly to strategic partners. This helps the company to concentrate on brand and customers which are the two important assets of a business. Globalization & Reasons for Outsourcing:

Worldwide market competition is the cause for accelerating globalization. This leads to the more competitive business environment. To get a head in the competition, the company should concentrate on mission-critical issues other than non-core functions. In a view to lead the auto industry Ford changed its traditional supply chain method to virtual integration method. By this Ford can concentrate on brand and customers leaving the non-core functions for outsourcing. There are several reasons behind Ford outsourcing. By outsourcing the company can reduce overheads and avoid capital expenditure. Efficiency can be improved with the specialized skills. The company can save on man power, training costs and operating costs. Speed and service can be improved with world-class service providers. The firm can focus on strategic thinking, process reengineering and managing trading partner relationships. Best quality services, products and people can be obtained at low cost by outsourcing. Customer satisfaction was increased. As the market became more competitive and consumers demanded more luxurious vehicles, Ford was forced to develop different models, each equipped with comfortable seats and other luxuries. As cars become more sophisticated, Ford could no longer efficiently produce them within a single plant. Since the number of tasks was more than the number of...
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