Mario Bonilla, Roshini Giri, Ajay Jagtap, David Muir, Shavej Sayyad, Rogin Thomas

Ford Motor Company:

Supply Chain Strategy

“To provide sustainable transportation that is affordable in every sense of the word: socially, environmentally and economically.”

Ford Motor Company’s Ford Motor Company’s VisionVision

Short Term:◦ Hybrids◦ Clean diesel engines◦ Flexible-fuel ethanol vehicles◦ Turbocharged direct injection system◦ It will be available in half a million Ford,

Lincoln and Mercury vehicles annually in North America during the next five years.

Long Term:◦ Plug-in-hybrids◦ Fuel cells◦ Hydrogen internal combustion engines◦ Other advanced technologies n laboratories and test fleets around the

world◦ The company operates as a globally integrated worldwide team with four

key priorities

Corporate GoalsCorporate Goals

In transforming Ford’s vision into reality, strategic directions are set out as follows:

◦ Integrate with customers, with supply base, and internally◦ Change from old sequential process◦ Share information in real time over the web.◦ Drive the excess cost out of supply chain◦ Transform information flow from cascade method to

parallel by Integrating the supplier tiers.◦ Align IT with Ford’s Goals

Strategic DirectionStrategic Direction

Threat of New Entrants◦ The automobile industry is a business of Economies of Scale. ◦ Access to distribution channels.

Bargaining Power of Suppliers◦ The automobile industry has one of the largest and most complex suppliers chain.◦ With globalization, suppliers offer are not a barrier.

Bargaining Power of Buyers◦ Buyers enjoy large selection with a large range of price options ◦ Sell and exchange used cars is giving more power to the buyers

Threat of Substitutes◦ The demand continues growing globally◦ Substitutes cover a very small portion of the demand

Rivalry◦ Automobile industry : one of the most competitive industries. ◦ Globalization is changing the supply chain and the demand of customers.

Porter’s Competitive ForcesPorter’s Competitive Forces

Who? Ford motors, was the second largest industrial corporation in the world Revenue of more than $114 billion, about 370,000 employees and operations in about 200

countries. Fords core business is the design and manufacture of automobiles for sale on the consumer

market. What? Ford is considering Dell’s model as an example: In order to be competitive to reach high levels of productivity and low cost. For the improvement and simplification of supply chain. Where? Complexity of Ford’s supply chain integration requires: Changes in fundamental operations Push and Pull models in Ford’s business functions such as design, marketing, supply and

dealer network. When? Determination of short, mid and long term Supply Chain implementation improvements Why? In order to keep Ford’s productivity and lean supply chain cost This will simplify the supply chain, reduce the cost and increase productivity.

Five W’sFive W’s

Ford has one of the largest supply chain infrastructure networks in about 200 countries

Ford has competition from big foreign companies like Toyota, Honda

Access to distribution channels is not a major problem for Ford.

Auto industry is a buyer’s market where customers have choices

Globalization is changing the supply chain and the demand of customers

Productivity will be a competitive advantage for Ford

Organization Phase Organization Phase SummarySummary

Value Chain AnalysisValue Chain Analysis

General Administration –It should use high level of information system to make strategic and routine decisions.

HR Management – Strong management with continuous evaluation process.Healthy relation with labor union.Technology and Systems – use the high-tech information technology to integrate suppliers.Procurement – Minimize dependence on a single supplier. Leveraged strong buyer power into timely, low-cost, and high quality of raw materials. Strong long lasting relationships with suppliers and efficient inventory management.

Inbound Logistics•Efficient inbound warehousing system•Quality inspection at supplier level

OperationsHigh level of automation.

Outbound Logistics•Reduce delivery time•Increase efficiency of finished product warehousing

Marketing and Sales•Develop Quality•Increase brand loyalty•Increase demand creation

ServiceHigh level of service to after sales customers M

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Threats affected to historical “legacies” of Ford’s ability to move to Dell’s Enterprise model.

Process Complexity◦ A large number of suppliers◦ 3 tiers of suppliers◦ Business was usually over the phone and fax

Lack of technology and technological sophistication in lower tiers of the supply chain

Managing Risks Ford must think about its relationships with supplier and customers. Virtual Integration Looking at the way Ford has historically operated internally and how it has

interacted with important partner constituencies

Risk AnalysisRisk Analysis

SWOT AnalysisSWOT AnalysisStrengths Weaknesses

Second largest industrial corporation in the world, with revenues of $144 billion+Strong history, founded in 1903Most improved auto maker in 1997Topped Initial Quality Survey for US automakers (behind Japan’s Big 3)Most profit per vehicle of all US automakersStrong Tier 1 supplier relationships, with knowledge sharingAlready strong internet presence

Overcapacity (estimated at 20 million vehicles)IT knowledge decreased in lower tiers of supply chainHighly independent purchasing departmentPush system with high inventoryOrder to delivery time of 45 to 65 daysRelatively low margin on car sales when compared to financing businessPoor demand forecasting

Opportunities Threats

Industry consolidation (Ford’s purchase of Volvo, for example)Increasing global presenceFord 2000 restructuring planRe-engineering projects (Ford Production System, Order to Delivery)Increasing internet presenceFord retail network (Ford dealers no longer competing with each other in a specific region)Potential move to Dell’s supply chain method (Virtualized Integration)

Increasing foreign competition (Toyota, Honda, Nissan, for example)Developing and industrialized nations focus on manufacturing their own automobiles for exportThe complexity of Ford’s operations may not support Dell’s methodsIncreasingly, companies with fewer physical assets have seen greater market capitalization than Ford

Establish full direct model such as Dell.

Continue using auto dealers for distribution and sales and focus in improving efficiencies with suppliers.

Continue improving cycle times to allow a PULL model instead of a PUSH in the market.

AlternativesAlternatives

AlternativesAlternativesFINANCIAL IMPACT

1 - Negative Impact 2- Neutral Impact 5 - Positive Impact

. . ALTERNATIVES:

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1. Direct Model between Ford and customers

5 5 2 5 5 5 1 5 33

2. Improve Suppliers Supply Chain

5 5 5 5 5 5 5 5 40

3. Allow customer PULL rather than

PUSH requests

5 5 2 2 2 2 1 2 21

Force Field AnalysisForce Field Analysis

Continue using auto dealers for distribution and sales and focus in improving efficiencies with suppliers.

Create more strategic and structural IT alignment within the organization.

◦ Involves increasing the communication between IT and the business, interconnecting business and IT planning and aligning organizational structure to support the recommended changes.

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