Ford Case Study

Topics: Supply chain management, Automotive industry, Supply chain Pages: 6 (1808 words) Published: April 30, 2014
Executive Summary

Ford is one of the leading companies in the auto industry. The director of Supply Chain Systems at Ford was put in a tough position to make recommendations with regards to the company’s supply chain strategy. There are two groups within Ford that have two different opinions on how Ford should be using emerging information technologies and ideas from high tech industries, such as Dell, to change the way it interacts with suppliers. The first group argued that Ford should adopt Dell’s business model to improve efficiency and increase profits. This group emphasizes that Ford’s virtual integration should be the blueprint for what ford should attempt. On the other end, the second group believes that Ford and Dell operate in two different industries and it is not feasible to adopt Dell’s business model. This case study will demonstrate the toot causes of the problem and will present the reason why Ford should pursue with the mixed approach. Some of the solutions in the mixed approach are based on Dell’s business model, while the rest are not. These solutions are costly and time consuming, but Ford will eventually harvest the benefits of this approach.

Issue Identification

Teri Takai, Director of Supply Chain Systems, is about to make critical recommendations to senior executives on Ford’s usage of emerging information technologies and ideas from high tech industries to alter the methods Ford interacted with suppliers. There are two different views on this matter. The first view, which is in favor of virtual integration, argues that technology became a major player in supply chain, and Ford needs to redesign its supply chain by adopting new technologies to prosper. Supporters of this view used Dell as an example of virtual integration. Dell utilized new technologies to cut down working capital and risk of inventory obsolescence. The other view was more conservative. Supporters of this view argued that the auto industry is much different the computer industry with regards to layers of suppliers, complexity of parts, and history. Ford supplier network is massive and has many layers and a lot of companies. The growth of Ford resulted in growing the supply base to reach several thousands of suppliers in the 1980s. Even though Ford started reducing its supply base in the 1990s, there were still too many suppliers. In comparison to Dell, Ford needed thousands of parts to manufacture a vehicle, whereas Dell need few hundreds to manufacture a computer. This shows how complicated Ford’s supply chain versus Dell’s. Ford also has to controls the supply chain for its dealerships that are spread around the globe. The longer the supply chain is, the more problems would arise. For Dell, the supply chain is shorter and customers buy directly from Dell without going through dealerships or retail stores. Ford has no direct feedback from customers due to the fact that many of the dealerships were independent and not owned by Ford. Many Ford dealers were competing against each other’s instead of the real competition. For Dell, the situation was vice versa, Dell dealt and interacted directly with customers with no dealership involvement. While Ford’s first tier supplier has moderately developed IT infrastructure, they cannot afford to invest in new technologies to keep up with Ford’s pace. The lower tiers of suppliers have very weak IT infrastructure and technological advancements, which would limit Ford’s supply chain and increase lead time and cost. In Dell processes, demand forecasting is important, where changes are shared with suppliers instantly. This is not the case for Ford. Before the Order to Delivery project, Ford never involved dealers in the forecasting process. Environmental & Root Cause Analysis:

With returns of $144 billion, and 370,000 employees in 200 countries, Ford became the second largest industrial corporation worldwide. Ford’s main business is design and manufacturing...
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