Ford Case
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Executive Summary
Fords existing supply chain is extremely complex. The major difficulty in Fords present system includes the inefficient control of its large database and complex network of suppliers. Another obstacle they are facing is the existence of independent distributors which results in the inability to sell direct to the end customer. The supply chain must become more cost effective to reap higher profits. I have recommended the partial implementation and execution of the virtual integration direct business model. This model has been successfully used by Dell within the information technology industry. It would be beneficial for Ford to utilize the capability of information technologies and internet opportunities. This advance in technology will allow Ford to increase its sales and increase the communication between its manufacturers, suppliers and customers. Because the information technology industry and automobile industry are different in many ways, Ford should not implement the exact virtual integration model. If Ford were to implement the full direct business model they would surely lose customers because most people will not spend a large amount of money on a vehicle before taking it for a test drive which would be required if buying online. People are concerned with cost but they also want to tangibly feel the product before making a decision to buy. This is a sharp contrast to what Dells customers want when buying a computer online. A consumer buying a computer online is primarily focused on finding particular specifications for a better price than what is offered in retail stores.
To measure the performance of this model, Ford should schedule periodical review and evaluation meetings. Recommendations for improvements should be noted along the way in order to be evaluated. The improvement of customer service and shareholder value should be the main aim of the whole project.
Issues
The fundamental issue for Ford is the management and control of their large data base of suppliers and sub-suppliers. Unlike Dell that has approximately 50 suppliers, Ford has several thousand suppliers and therefore has a more complex supply chain. To produce a single product, Dell needs less than a hundred parts; whereas Ford requires several thousand parts to make an automobile. In addition to such a large data base of suppliers, Ford also has a large number of dealership networks who are geographically located worldwide. Managing both suppliers and customers in a single efficient supply chain had always been a challenge for Ford who is constantly looking for new ways to better control and manage their supply chain operations in a more productive and cost effective way.
Another issue that Ford is facing is their out of date information technology infrastructure. The inability of Fords first and lower level tier suppliers to keep up-to-date with IT technology, which is needed to manage their production operations, is creating a bottleneck within the supply chain. Miscommunication and lack of coordination between the members of the supply chain is a result of the outdated information technology infrastructure. This breakdown in communication can lead to increased order lead times and increased costs.
Finally, Ford faces a lack of direct control of its end users. They use independent dealership networks to sell their products. Such lack of control combined with dealer markups had negatively impacted their ability to directly control their customer service experience.
Environmental and Root Cause Analysis
Ford merged with Daimler-Benz due to an increasingly competitive market. However, this merger increased the number of suppliers that they are dealing with. The supply chain became more complex, expensive, and difficult to manage. In 1995 Ford started the Ford 2000 plan to help deal with supply chain issues, improve their production processes and lower their costs. This system was created to create a pull type of supply chain. Ford also looked to reduce the number of suppliers they had. Ford wanted to create a more effective supply chain. They also developed the Ford Retail Network (FRN) that was created to reduce competition among their dealerships that were located in the same geography by having only one supply chain.
Options
One option for Ford is to create a mixture of online and offline operations and perform procedures to enable customization and ordering by customers online. It is essential to keep the physical dealerships. This partial virtual integration strategy has many advantages including tapping into new market segments, attracting new clients, reducing overhead and inventory carrying