...standard supply chain cycle and deliver goods directly from the manufacturer to the customer. • turn its inventory over 60 times a year • introduced new products without having to clear out old inventory in the channel • minimize the rapid depreciation costs that mark the PC industry • operated on a negative cash conversion cycle – by receiving payment from its customers before it paid its suppliers for components • build strong, stable relationships with the large corporations and other organizations who are its core customers 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...
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...Ford Motor Company Table of Contents Executive Summary 3 Introduction 4 Issue Identification 5 - 7 Environment and Root Cause Analysis 8 - 9 Alternatives and Options 10-11 Recommendations 12 Implementation 13-14 Monitor and Control 15 Conclusion 16 Ford Motor Company Executive Summary As director of Supply Chain Systems, Teri Takai recommends implementing virtual integration strategies from companies like Dell to portions of Ford’s supply chain strategy. Although there are several key differences between the companies, the restructuring plans of Ford 2000 have set a viable foundation to implement Dell’s virtual integration strategy in inventory management, customer service and support and suppliers’ management. The redesign of the process must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that historically been considered independently within the Ford hierarchy. Teri believes that implementing virtual integration by building on Ford’s key initiatives and projects including Ford Production Systems (FPS), Order to Delivery (OTD) and Ford Retail Network (FRN) that are currently underway will make their supply chain run more smoothly with less bottlenecking, reduced inventory, and better overall...
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...As director of Supply Chain Systems, Teri Takai recommends implementing virtual integration strategies from companies like Dell to portions of Ford’s supply chain strategy. Although there are several key differences between the companies, the restructuring plans of Ford 2000 have set a viable foundation to implement Dell’s virtual integration strategy in inventory management, customer service and support and suppliers’ management. The redesign of the process must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that historically been considered independently within the Ford hierarchy. Teri believes that implementing virtual integration by building on Ford’s key initiatives and projects including Ford Production Systems (FPS), Order to Delivery (OTD) and Ford Retail Network (FRN) that are currently underway will make their supply chain run more smoothly with less bottlenecking, reduced inventory, and better overall performance. Managers could overcome the complex and inaccurate manual process of forecasting and procuring parts which would result in reduced OTD lessen costs and enhance customer satisfaction. Further improved Supply Chain management will improve Supply Chain responsiveness and increase shareholder value to keep investors interested in the company. ------------------------------------------------- Introduction Due to increase in market competition, supply chain superiority of...
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...Ford Motor Company Case Study Executive Summary The Ford motor company has been a progressive leader throughout the history of the company. In order maintain this leadership, it has had to adapt to the ever changing business environment and market conditions. With the emergence of new information technologies and ideas from new high-tech industries, it must evaluate how these tools can be utilized to further the business. Recently, virtual integration has been proven very successful to companies like Dell and Cisco. However, this approach is best suited for companies that have very few layers of suppliers as well as more centralized production. The Ford motor company cannot simply change their entire supply chain to fit this model. That being said, some of these theories and practices can still be incorporated into Ford’s current supply chain. These must be calculated changes, involving various departments within Ford’s organization, collaborating with their most valued and dynamic suppliers. With Ford already moving somewhat toward this direction with suppliers who provide complete subsystems for their automobiles, further changes in these areas should prove feasible with limited risk. Issues • Determining whether or not to incorporate the virtual integration model used by other recently successful firms such as Cisco and Dell • Uncertainty on how to utilize emerging information technologies to interact with suppliers • Many...
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...business that the Ford Motor Company has excelled in since 1903. Ford can never be virtually integrated like Dell but the Ford Company can adopt some of Dell’s concepts of virtual integration to strive for excellence in supply chain management. As Director of Supply Chain Systems, I am convinced that Ford can implement portions of Dell’s Virtual Integration strategy even though the Ford Company differs in many respects from Dell. A modification of the virtual integration system that Dell uses should be applied to Ford’s supplier base, distribution system, dealerships, and divisions. Issue Identification Ford must find ways to improve their supply chain management to compete in a global market and continue to retain its market share in an increasingly competitive, saturated and over capacitated US market. Ford must act now or risk losing market share. The main issue Ford must deal with is decreasing the volume and complexity of its supplier base as it is plagued with costly inefficiencies. Secondly, Ford must get closer to its customers to better understand their needs and wants and to create better forecasting of demand. Teri Takai must decide within a week if Ford should model its supply chain strategy close to Dell’s Virtual Integration. Environment and Root Cause Analysis The Ford Motor Company is the 2nd largest industrial corporation in the world with revenues of $144 billion. Ford employs over 370,000 employees and has operations in 200 countries. What Ford does best is...
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...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...
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...director of Supply Chain Systems, I have decided to implement portions of the new supply chain strategy of Virtual Integration and strategies from companies like Dell. Although there are several key differences between the companies, Dell’s virtual integration strategy can be applied to Ford’s supply chain operation. A modification of the virtual integration system currently used by Dell could be applied to Ford’s dependent supplier base, distribution system, dealerships and divisions. Special care will need to be taken to address the unique dependency of our custom Tier 1 supplier. The management of lower tier suppliers of general or generic components would be more effectively suited by the standard procedures used by Dell. If we at Ford could find a solution to the obstacles of virtual integration, it could make our supply chain run smoothly with less bottlenecking, inventory, and better overall performance. Managers could overcome the complex and error-prone manual process of forecasting and procuring parts which would result in reduced OTD lessen costs and enhance customer satisfaction. ISSUE IDENTIFICATION Senior Executives have asked how Ford should use the emerging information technologies and ideas from new high-tech industries to change the way we interact with Suppliers. We must find ways to improve the Supply Chain management and to increase shareholder value and Supply Chain responsiveness. Specifically we are looking at how Dell manages their Supply Chain...
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...Summary Ford is one of the leading companies in the auto industry. The director of Supply Chain Systems at Ford was put in a tough position to make recommendations with regards to the company’s supply chain strategy. There are two groups within Ford that have two different opinions on how Ford should be using emerging information technologies and ideas from high tech industries, such as Dell, to change the way it interacts with suppliers. The first group argued that Ford should adopt Dell’s business model to improve efficiency and increase profits. This group emphasizes that Ford’s virtual integration should be the blueprint for what ford should attempt. On the other end, the second group believes that Ford and Dell operate in two different industries and it is not feasible to adopt Dell’s business model. This case study will demonstrate the toot causes of the problem and will present the reason why Ford should pursue with the mixed approach. Some of the solutions in the mixed approach are based on Dell’s business model, while the rest are not. These solutions are costly and time consuming, but Ford will eventually harvest the benefits of this approach. Issue Identification Teri Takai, Director of Supply Chain Systems, is about to make critical recommendations to senior executives on Ford’s usage of emerging information technologies and ideas from high tech industries to alter the methods Ford interacted...
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...FORD MOTOR COMPANY’S | SUPPLY CHAIN STRATEGY | | | 11/13/2012 | *The Virtual Integration Model Analysis at Ford Motor Company, to Companies like Dell* EXECUTIVE SUMMARY As director of Supply Chain Systems, I have decided to implement portions of the new supply chain strategy of Virtual Integration and strategies from companies like Dell. Although there are several key differences between the companies, Dell’s virtual integration strategy can be applied to Ford’s supply chain operation. A modification of the virtual integration system currently used by Dell could be applied to Ford’s dependent supplier base, distribution system, dealerships and divisions. Special care will need to be taken to address the unique dependency of our custom Tier 1 supplier. The management of lower tier suppliers of general or generic components would be more effectively suited by the standard procedures used by Dell. In order to adopt the Dell Model we would: · Sell direct · Mass-produce customized products · Build to order · Substitute virtual integration with suppliers for vertical integration If we at Ford could find a solution to the obstacles of virtual integration, which I will explain in detail below. It could essentially make our supply chain run smoothly with less bottlenecking, inventory, and better overall performance. Managers could overcome the complex and error-prone manual process of forecasting and procuring parts which would result in reduced...
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...partnership relationship with suppliers, no design involvement from suppliers Ford has several thousand suppliers and operates in a more complex network. Well Dell has only about 50 suppliers. Meanwhile Ford needs several thousands of parts to produce a product while Dell needs less than hundred parts. Suppliers were picked primarily based on cost and little regard was given to overall supply chain cost. There are already lots of good component manufacturers out there. Ford should focus the field where it could create value such as introducing the best product in the market and set up partnership via key suppliers instead of developing the components or managing the component suppliers. With the partner relationship and involvement of suppliers in design phases, the key suppliers will feel more secure and will bring new design to Fords, will take initiative to manage JIT inventory, trouble shoot the quality issues on site and etc to ensure Win-Win. This will benefit Ford to reduce inventory, increase return on the asset and reduce the cycle time. Meanwhile Ford could put on more focus to the consumer to be able to forecast the demand accurately. • Supplier lack of up to date IT infrastructure: 1st Tier suppliers had well developed IT capabilities but not able to invest in new technologies at the Rate Ford itself could. And IT maturity decreased rapidly in lower tiers of the supply chain. While Ford need up to date IT infrastructure from suppliers to stay up to speed in managing...
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...Case 10: Ford: Supply Chain Strategy I. Introduction/Background Ford Motor Company is widely regarded as one of America’s premier automotive manufacturers and the second largest industrial corporation in the world, with operations in over 200 countries. Ford was established by Henry Ford in 1903, and is still standing strong today. Although Ford has significant revenues from its financial services, its core business is the design and manufacturing of motor vehicles. Due to overcapacity within the automobile industry, Ford developed a restructuring plan called Ford 2000 that focused on globalizing corporate organizations and taking advantage of economies of scale. Ford 2000 completely re-engineered several of Ford’s key processes including the Ford Production System (FPS) and Order to Delivery (OTD). FPS was created to convert Ford’s supply chain from a push strategy to a pull strategy. To increase supply chain efficiency, Ford aimed at reducing the number of suppliers that had accumulated over the years. Ford accomplished this by developing a closer, long term relationship with fewer suppliers referred to as “Tier 1” suppliers. These suppliers would provide complete vehicle subsystems for Ford. Tier 1 suppliers work closely with several Tier 2 suppliers who provide the components for the Tier 1 subsystems. Another initiative taken by Ford to improve their supply chain was the Ford Retail Network. This helped reduce competition among its dealership in the same region...
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...Ford Motor Company The Company Background Ford Motor Company is based in Dearborn, Michigan, and has become the second largest industrial corporation in the world. Since Henry Ford had incorporated in 1903, the company had produced over 260 million vehicles. Operating in approximately 200 countries, Ford employed 370,000 workers and obtained significant revenues and profits from its financial services subsidiaries, core business had remained the design and manufacture of automobiles for sale on the consumer market. Operations before SCM was introduced In the past, The Ford Company managed to maintain its position ahead of its competitors by vertically integrating itself as it owned or controlled virtually every aspect of its business. Hence, Ford was able to eliminate inefficient delivery process and control the raw materials for mass production. Ford's mass production which led to mass profits and the company was able to buy and control its resources, everything from the mines and plantations that provided iron ore, coal, and rubber. This helped Ford to track the source of the problem quickly if something went wrong with one of its supplier and fixed immediately so not to slow production. However, until the 1970s when Japanese car manufacturers enter the competition, Ford lost its market share. Since the industry became more competitive and Japanese car manufacturers had took the lead with its more cost and time effective method How did they develop SCM? Ford is taking the...
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...CASE STUDY Ford Motor Company Ford Motor Company, one of the world’s largest automotive manufacturers, has worked with Penske on several Six Sigma initiatives. As its lead logistics provider (LLP), Penske’s quality team of associates are trained in Six Sigma practices and work closely with Ford to streamline operations and create and maintain a more centralized logistics network. Together, they uncovered several areas for real cost savings as a result of reducing inbound carrier discrepancies, eliminating unnecessary premium costs and reducing shipment overages. Plus, Penske implemented accountability procedures and advanced logistics management technologies to gain more visibility of its overall supply network. Six Sigma initiatives streamline operations Penske Logistics began its relationship with Ford as lead logistics provider (LLP) for Ford’s assembly plant in Norfolk, Va. At the time, each of Ford’s 20 North American assembly plants managed its own logistics operations. A decentralized approach provided total control of logistics at the plant level, but presented costly redundancies in materials handling and transportation. Ford conducted studies to determine the benefits of transitioning the company’s decentralized logistic operations to a centralized approach. The decision was quickly apparent – centralization of the company’s logistics operations would increase both velocity and visibility throughout the network, as well as reduce supply chain costs. Shortly thereafter...
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...CASE STUDY Ford Motor Company Ford Motor Company, one of the world’s largest automotive manufacturers, has worked with Penske on several Six Sigma initiatives. As its lead logistics provider (LLP), Penske’s quality team of associates are trained in Six Sigma practices and work closely with Ford to streamline operations and create and maintain a more centralized logistics network. Together, they uncovered several areas for real cost savings as a result of reducing inbound carrier discrepancies, eliminating unnecessary premium costs and reducing shipment overages. Plus, Penske implemented accountability procedures and advanced logistics management technologies to gain more visibility of its overall supply network. Six Sigma initiatives streamline operations Penske Logistics began its relationship with Ford as lead logistics provider (LLP) for Ford’s assembly plant in Norfolk, Va. At the time, each of Ford’s 20 North American assembly plants managed its own logistics operations. A decentralized approach provided total control of logistics at the plant level, but presented costly redundancies in materials handling and transportation. Ford conducted studies to determine the benefits of transitioning the company’s decentralized logistic operations to a centralized approach. The decision was quickly apparent – centralization of the company’s logistics operations would increase both velocity and visibility throughout the network, as well as reduce supply chain costs. Shortly thereafter...
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...Environmental and Root Cause Analysis Advantages of Virtual Integration Integration of a virtual supply chain could bring about numerous benefits for Ford to refine their supply chain that would potentially make them more profitable and a leader in the industry for cost effective supply chain management. Since it is so competitive, any cost effective procedures could make their product more appealing to the end customer and to their suppliers to give them preferable terms and share information. The key advantage to virtual integration for Ford would be able to accurately forecast the amount of inventory they need. Dell currently operates with a limited amount of inventory on hand by only ordering exactly what they need. For example, Michael Dell explains in his interview that when they order, they will say “Tomorrow morning we need 8,562, and deliver them to door number seven by 7 A.M”. Currently, Ford uses the Order to Delivery initiative which aims at reducing lead times and by sharing the information with suppliers, they would speed up the entire process and deliver the end product faster and with a reduced cost base for the organization. Another big advantage of implementing virtual integration for Ford would be for its Ford Retail Network, where Ford aims to purchase each showroom and give a consistent design and reduce competition between dealerships that sell Ford automobiles. Having the ability to communicate with each other in real time by pooling and share resources...
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