Ford Motor Company: Supply Chain strategy

Submitted to Dr.JAGADEESH R

Group Number-8
Members AKHIL MEHTA (13066) DAVIS N S (13079) HARI VIGNESH M (13084) K V SATYANARAYANA RAJU (13087) NEHA U PATIL (13089) SIJU S G (13112)

Company and Industry Background

Based in Dearborn, Michigan, Second largest industrial corporation in the world Revenues of more than 144 billion About 370,000 employees Operations spanned 200 countries. 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 Since Henry Ford had incorporated in 1903, the company had produced over 260 million vehicles.

Industry Grew more Competitive

Big Three U.S. automakersGeneral motors (GM), Ford, and Chrysler Foreign-based auto manufactures

(Toyota and Honda)

Facing increasing overcapacity Advantage in the industry was fast becoming global

Dell and Ford Compared

Traditional Model
order

Suppliers

Manufacturer

Distribution Channel
delivery

Customers

Direct Model
order

Suppliers

Dell

Customers

delivery

Enterprise Model Comparison

Dell Operating Principles Ford Breakthrough Objectives/Key Initiatives

Customer Intimacy

Demand to Delivery Ford Retail Network

Demand Pull

Ford Production System Order to Delivery Supply Chain Mgmt. Leadership

Velocity

Order to Delivery Ford Product Development System

Virtual Integration

Fixed to Variable Cost Shift Modular Assemble Extended Enterprise

Ford improves quality

Product development consolidated into five Vehicle Centers (VCs) merging its North American, European, and international automotive operations into a single global organization reengineering globalizing Eliminate redundancies Realize economy of scales

Fords New Global Approach

Technology was employed to overcome constraints usually imposed by geography Teams on different continents needed to be able to work together as if they were in the same building In every reengineering project, information technology (IT) was critical
deployed to enhance material flows and reduce inventories substituting information for inventory

Creating Consistency
Ford teamed with Chrysler and General Motors to work on the Automotive Network Exchange (ANX) Why important? Network aimed to create consistency in technology standards and processes in the supplier network Suppliers: Pressed to lower costs Interaction would be the same

Fords Existing Supply Chain and Customer Responsiveness Initiatives

Existing Supply Base

Suppliers were picked primarily on the basis of cost, little regard was given to overall supply chain costs complexity of dealing with such a large network of suppliers. Shifted toward longer-term relationships with a subset: tier 1 tier 2 below suppliers. Ford made its expertise available: just-in-time (JIT) inventory total quality management (TQM) statistical process control (SPC)

Moving from Push to Pull

Process Dealer network Dealer ordering Push Orders based on Allocations and Capacity constraints Longer (60 + days) Pull Orders based on customer demand

Order to delivery times

Shorter (15 days or less)

Inventory

High with low turnover Independent dealerships, negotiations with company

Low with rapid turnover Company-controlled dealerships (Ford Retail Network)

Dealership model

One Important Part of FPS was Synchronous Material Flow (SMF)

Ford defined as a process or system that produces a continuous flow of material and products driven by a fixed, sequenced, and leveled vehicle schedule, utilizing flexibility and lean manufacturing concepts.
One key to SMF was In-Line Vehicle Sequencing (ILVS): used vehicle in-process storage devices (such as banks and ASRSs) and computer software to assure that vehicles were assembled in order sequence

Order to Delivery
The purpose of OTD:
reduce to 15 days from 45 to 65 days Pilot studies in 1997 and 1998 identified bottlenecks throughout Fords supply chain: Marketing material planning

vehicle production
transportation processes

Fords Approach to Implementing an Improved OTD Process

Ongoing forecasting of customer demand from dealers A minimum of 15 days of vehicles in each assembly plants order bank to increase manufacturing stability Regional mixing centers that optimize schedules and deliveries of finished vehicles via rail transportation A robust order amendment process to allow vehicles to be amended for minor color and trim variations without the need to submit new orders

Enterprise Model Comparison

Dell Operating Principles Ford Breakthrough Objectives/Key Initiatives
Customers Customers order delivery OT D FPDS Bill of Material DTD Outbound Logistics Commodity Suppliers Component Suppliers Plan/Site Operations Inbound Logistics Suppliers Supply chain Leadership

Dealers

Ford Retail Network

Sales R&D Assembly

Order Mgmt

FP S FP S CFOP

Recommendations
Collaborating across the automotive industries. Partial implementation of virtual integration direct business model. Vertical integration. Alternative solutions Design a mixture of online and offline operations. Create a virtually integrated supply chain based on Dells model

Thank You