Ford Motor Company is the second largest industrial corporation in the world, employing 370,000 people in 200 countries across the world with revenue over $144 billion.
The auto industry has become very competitive on a global level, forcing automobile companies to cut costs and stay competitive. In trying to remain competitive, Ford introduced a plan called Ford 2000. This was done to cut costs, streamline the organization and processes globally, and increase economies of scale.
The current issue concerning Ford is that it has seen companies much smaller achieve market capitalization much greater than Ford’s. Corporate staff began looking at other business models, such as Dell, to understand what Ford could be doing differently to increase shareholder value.
Staff were divided on the different views. Some believed that the new technology was needed and virtual integration, based on Dell’s business model, was essential for the continued success of Ford. Others were more cautious. They felt that the automotive industry and businesses like computer manufacturers were very different. Ford’s supplier network was much more complex.
A decision needs to be made on how Ford will use the current information technologies to interact with their suppliers. Issue Identification
1. Ford is not able to have a complete pull system as Ford’s Independent Dealerships and Suppliers have limited IT Capabilities. 2. Ford’s Complex Supply Chain.
3. Ford is unable to devise an accurate forecast as it does not have a direct connection with its end customers as dealerships were independently owned. Root Causes and Environmental Analysis
1. Ford, being one of the largest companies in the world, have the ability to keep up with the fast pace of technology. Ford’s suppliers and Car Dealerships are much smaller, therefore cannot keep up with the technological advances Ford is able to keep up with. Ford has independent car dealerships and 3 tiers of suppliers. With no information coming back from the dealerships, this makes it difficult to have the information flow back to the manufacturing facility and suppliers quick enough to maintain the pull system. 2. The final product that Ford is selling is much more complex than what Dell’s final product is. There is a much larger number of individual components required to build a car. Due to the amount of products required, along with the level of expertise, Ford has three tiers of suppliers. These suppliers were chosen on based on the cost of the product, the cost in the supply chain was not considered. The higher the number of companies used in the supply chain, the less likely there will be good information being passed on to the companies. This will lead to higher amounts of inventory, and increased costs. 3. With Ford having independent dealers, they are unable to speak directly and obtain feedback from their customers. The dealerships focused on being profitable in the short run. Alternatives
1. Keep the existing Supply Chain as is.
1. No changes necessary.
2. No costs incurred
1. Risk of not remaining competitive in the industry.
2. Possible loss of sales in the future.
2. Create a virtual integrated supply chain based on Dell’s model. All orders would be completed on the Ford Website. Suppliers would be required to update their technology in order for information to be shared seamlessly up and down the Supply chain. A full pull system would be able to be put in place.
1. A full pull system would be created.
2. Minimize overflow of inventory and increasing information sharing up and down the supply chain. 3. The number of suppliers would be reduced. Suppliers would be chosen on the ability to provide a quality product at a cost effective price. 4. Reduce Order-to-Delivery from 60 days to 15 days.
5. Direct contact with customers. Dealerships are eliminated from the supply chain. 1....
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