Written Case Report
As director of Supply Chain Systems, I have decided to implement the new supply chain strategy of Virtual Integration, and model its supply chain after companies like Dell. Although there are several key differences between the companies, Dell’s direct business approach can be applied to every facet of Ford’s operation. Special care will need to be taken to address the unique dependency of our custom “tier- one” suppliers. A modification of the virtual integration system currently used by Dell could be applied to Ford’s dependent supplier base, while the management of lower tier suppliers of general or generic components would be more effectively suited by the standard procedures used by Dell. STATEMENT OF ISSUE:
In 1913, Henry Ford revolutionized product manufacturing by introducing the first assembly line to the automotive industry. In the 1980’s, Ford picked suppliers based on lowest cost and the overall costs of the supply chain were ignored. Dealing with so many suppliers led to a higher overall costs and a complexity that was difficult to control. In the 1990’s, Ford cut down on the number of suppliers drastically and shifted towards more long term relationships with a set of suppliers that would provide entire vehicle sub systems. Although the number of suppliers were lower, our supply base was different and more complex then the one used by Dell.
After many decades of success, customers have increasingly become harder to find. Due to relatively new threats to the industry, an increasing numbers of cars and trucks are parked in dealer lots and showrooms, creating an alarming trend of stagnation and profit loss. Foreign based automakers such as Toyota and Honda have expanded into domestic shores and in turn have wrestled marked share from American and Canadian automakers.
To answer these threats, we have made recent attempts to transform our dated vertical (not virtual) integration model into a manoeuvrable, efficient supply chain. We have implemented Just in Time Inventory (JIT), total quality management (TQM), and synchronous material flow (SMF), as well as a multi-tiered system of supply. The tier system consists of numerous generic suppliers and tier one suppliers that provide us total vehicle sub systems. These suppliers are totally dependent on us for survival as they cater solely to our specific requirements.
We face many challenges in implementing a virtual supply chain that Dell did not have to face. Some of which include: - product complexity and rigid supplier networks
- communication channels and procurement procedures (such as the typical phone and fax). - manual ordering and accounting procedures.
- a lack the money to invest into internet technology, leaving little incentive to upgrade. - historical dealer retailing and traditional consumer buying habits. All of these challenges inhibit the full scale implementation of virtual integration.
In order to judge whether or not a good decision about implementing a new virtual integrated system has been made in this case, I would look at the potential outcome. The questions I would like to have answered are: Is it possible to successfully implement the virtual system and maintain our supplier relationships and help them to a successful integration? Can we reduce our OTD (order to delivery time) to 15 days effectively and keep it that way? Will customers be provided with the right products at the right time and in the right place? Can we reduce our costs and waste and move towards a more pull orientated supply chain then the push orientated situation we are currently in?
Despite the revamping efforts we have made, Ford remains plagued with prolonged Order to Deliver (OTD) time periods, congested inventories and error-ridden procurement processes. Upon investigation, these troublesome issues appear to be well addressed by the...