FORD MOTOR COMPANY: SUPPLY CHAIN STRATEGY

Teri Takai, the director of supply chain systems, had set aside this time on her calendar to contemplate recommendations to senior executives. The question they’d asked was widely agreed to be extremely important to Ford’s future: How should the company use emerging information technologies (i.e. Internet technologies) and ideas from new high-tech industries to change the way it interacted with suppliers? Members of her team had different views on the subject.

Some argued that the new technology made it inevitable that entirely new business models would prevail and that Ford needed to radically redesign its supply chain and other activities or risk being left behind. This group favored “virtual integration,” modeling the Ford supply chain on that of companies, such as Dell, which had aggressively used technology to reduce working capital and exposure to inventory obsolescence. Proponents of this approach argued that although the auto business was very complex both for historical reasons and because of the inherent complexity of the automotive product, there was no reason such business models could not provide a conceptual blueprint for what Ford should attempt.

Another group was more cautious, believing that the difference between the auto business and relatively newer businesses such as computer manufacturing were important and substantive. Some noted, for example, that relative to Dell the Ford supplier network had many more layers and many more companies and that Ford’s purchasing organization historically had played a more prominent and independent role than had Dell’s. These difference and others posed complications when examined closely, and it was difficult to determine the appropriate and feasible scope for redesign of the process.

As she read through the documents provided by her team, she thought