Ford Virtual Integration Via Dell

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Issue Identification
Ford continues to face increased completion from foreign competitors while operating in an industry that is experiencing significant over-capacity. In the face of the challenges presented to us, we must determine if Ford should embrace the direct business model which utilizes “virtual integration” that has driven Dell to become a clear leader in their industry. Further, if we chose to utilize “virtual integration” based on the Dell model, we will need to develop and implement significant changes in the some of our most fundamental supply chain operations. In addition, we must determine how Ford should utilize emerging information technology to transform the way we interact with supply chain members. While progress in this area will be integral should Ford choose to pursue “virtual integration”, it is also a stand-alone issue even if Ford does not choose to pursue the “virtual integration” approach to supply chain management.

It is imperative our decisions regarding these issues align with Ford’s key strategic objectives of placing emphasis on shareholder value and customer responsiveness.

Systemic Issues
“One Best Way”: (Tactical / Short Term) – There are members of our organization who are of the belief there is one “one best way” to approach supply chain design and management regardless of the type of business, industry, or level of complexity associated with the supply chain. This opens Ford to risk of refining our supply chain functions and practices in ways that don’t optimize our ability to achieve our strategic objectives. Information Technology Growth: (Tactical / Mid-Term) – As part of the “Ford 2000” initiative, there was general agreement that information technology would be deployed to dramatically enhance material flows and reduce inventories or “substitute information for inventory”. Ford’s growth in this area has significantly outpaced that of our supply partners with the magnitude of this issue increasing greatly in the lower tiers of the supply chain. This capability gap limits Ford’s ability to leverage the perceived gains information technology would bring to the supply chain. Product Complexity (Strategic / Long-Term) – Worldwide, Ford currently offers over 70 models of cars and trucks and with “trim levels” and interior / exterior colour selections taken into account that number increases to over 14,350 without even taking into account the single option factor. While we have made great strides in rationalizing our model offerings, this complexity still presents a great challenge to us when we attempt to satisfy consumer wants with vehicles that have been pre-produced. Supplier Complexity (Strategic / Long-Term) – To spite Ford’s efforts, and its positive results, in reducing the number of suppliers it directly dealt is still extremely large. This complexity increases significantly when looking beyond Tier 1 which is required in order to maintain a true supply chain orientation. This issue is in part, driven by product complexity, the large number of components required to manufacture a vehicle, and Ford’s worldwide operations. This extremely large number of supplier complicates supply chain communication, coordination, and can slow supplier responsiveness. Relationship With Supply Chain Partners (Strategic / Long-Term) – To spite Ford’s recent move to forming longer-term relationships with suppliers and sharing management improvement techniques such as JIT, TQM, and SPC with them, overall Ford has bad history with some suppliers. This, coupled with Ford’s expectation of lower pricing each year from all suppliers, has led to distrust and there are many outstanding issues with suppliers. This is environment does not foster cooperation or help build a more integrated supply chain. Internal Relationships (Strategic / Long-Term) – Ford has over 360,000 employees worldwide and an extremely powerful and independent dealer network we have relationship issues with. Our...
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