Ford Motor Company: Supply Chain Strategy
Finding the Best Fit
The Ford Motor Company finds itself in a dynamic business environment where new technologies and practices offer the potential to alter in a significant way the landscape in which it operates. Henry Ford was in his time an innovator in offering 'cars for the masses'. He introduced to the car industry methods and systems innovative in their day. Ford needs once again to forge new paths to ensure future competitive advantage .
Executives at Ford have been considering the 'Direct Model' created by Dell Computer Corporation and finds that there is considerable appeal. Dell has been able to speed up inventory velocity such that there is only eleven days of inventory on hand. This has led to an inventory turnover rate of thirty times per annum . This achievement, termed by Michael Dell 'Virtual Integration' has been achieved by blurring the line between supplier, Dell and client, to the extent that third party service staff are often thought, by clients, to be Dell's own staff.
In order to see how congruent the Dell model is to Fords' business we need to examine the similarities and differences between the two companies. This will allow us to gain some insight as to whether virtual integration could work at Ford.
Ford Motor CompanyDell Computer Corporation
*Cars are consumer items.*Computers are a consumer item.
*Suppliers are often located close to manufacturing facilities.*Ford maintains close locational links with suppliers.
*Number of suppliers is small.*Ford is working to build relationships with a limited number of strategic suppliers.
*Ford's customers range from large corporations, to government institutions, to the consumer.*Dell's clients range from large corporations, to government institutions, to the consumer.
*Cars are personal in nature and many clients want to have close contact. A showroom is usually preferred.*Computers are generic in nature and do not need showrooms.
*Safety and reliability are major concerns.*Computers are not expected to be entirely reliable.
*A car is made up of generic (tyres, petrol caps) and custom (dashboards, body panels) parts.*Computers are made almost entirely of generic parts.
*Suppliers are often completely dependent on Ford*Suppliers are not entirely dependent upon Dell.
*Ford is large and may have limited manoeuvrability.*Dell is flexible and can rapidly respond to market or supplier pressure.
*Ford has a large dealer network, both independent and company owned.*Dell has no retail network, all sales are Direct.
*Ford has a vast range of products.*Dell has a limited range of products with a narrow palette of variations.
Analysis and Suggestions
Key to Dells' strategy is their policy of outsourcing all manufacture. Dell acts merely as the assembler and packager. The company is able to pick and choose from the range of industry leading components, allowing other manufacturers to make the investments in leading edge technology. The suppliers manufacture their, essentially generic, products for many customers and therefore are economically independent of them and also have little difficulty in meeting the JIT (just in time) requirements of Dell.
Ford has at one time, both notable similarities and striking differences in terms of their relationship with suppliers. Many Ford components such as tyres, windscreen wipers, and electrical components are sourced from large suppliers who supply the same components to other companies. These products are well suited to a closer integration of supply - virtual integration.
On the other hand, a very large proportion of Ford components are custom made for Ford. Tier one suppliers of custom components such as body panels, seats and engine components are heavily dependent on Ford and other large carmakers. These suppliers second tier suppliers, who in turn also have suppliers. If virtual...
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