Ford Motor Company Answer

Ford Motor Company: Supply Chain Strategy

Assignment Questions: Each group to tackle only 1 question in depth. !5 minutes presentation (max incl. Q & A) in group sequence from Q1 to Q4. 1. What are the salient features of the Ford supply chain & it’s advantages ? 2. What advantages does Dell derive from virtual integration? How important are these advantages in the auto business? 3. What challenges does Ford face that are not also faced by Dell? How should Ford deal with these challenges? 4. If you were Teri Takai, what would you recommend to senior executives? To what degree should Ford emulate Dell’s business model?

Key to Dells' strategy is their policy of outsourcing all manufacture. Dell acts merely as the assembler and packager. The company is able to pick and choose from the range of industry leading components, allowing other manufacturers to make the investments in leading edge technology. The suppliers manufacture their essentially generic, products for many customers and therefore are economically independent of them and also have little difficulty in meeting the JIT (just in time) requirements of Dell. Ford has at one time, both notable similarities and striking differences in terms of their relationship with suppliers. Many Ford components such as tyres, windscreen wipers, and electrical components are sourced from large suppliers who supply the same components to other companies. These products are well suited to a closer integration of supply - virtual integration. On the other hand, a very large proportion of Ford components are custom made for Ford. Tier one suppliers of custom components such as body panels, seats and engine components are heavily dependent on Ford and other large carmakers. These suppliers second tier suppliers, who in turn also have suppliers. If virtual integration is to succeed with these components every company along the value chain right back to the raw materials would need to be involved. This would be a very difficult and

complex network to coordinate. Fords' history is a factor to be considered, their longevity and size in the industry gives them a tremendous degree of influence when compared with Dell, a relative newcomer to business and whilst a large buyer of components, not so influential on trends and technology. The disadvantage may be that this stature may make it hard to bring their very large organisation and supplier network along the road to virtual integration. The dealer network must be considered. The dealers carry a very limited range of products, which they hold in stock. If Ford decides to carry the Direct Model towards the end consumer they need to ask whether they need a dealer network and in what form. The possibility of disintermediation needs to be examined. Alternative forms, that use the existing network ay be viable, for example, the dealer might be used to postpone the final form until the point of customer order. This might be the fitting of audio equipment, air conditioning or interior trim customisation. This would enable more consumers to benefit from the vast possible range of options, as well as, at the same time reducing the factory lead-time for manufacture. Recommendations If Ford is to successfully emulate Dell then they are best able to do this in areas where they have similarities. The most notable congruency is in the area of supply of generic components. Here Ford should continue its process of building strategic relationships. Where components are of a more specialised nature then Ford should examine the relationships to ascertain whether bringing suppliers closer to the company will offer benefits to both parties. Ford should work on its' internal culture. Integration of supply chains on the scale practiced by Dell can only occur in an environment where information flows freely to all points of the supply network. As outlined in the case documents; Ford maintains a high degree of separation of the purchasing departments from marketing and production. Ford will not be able to provide focus up and downstream unless they themselves are committed to an open culture where logistics information is a part of the life blood of the company. The relationship with customers is more difficult. The dealer network will probably be averse to Ford moving towards direct sales, as it will threaten their livelihood. They can reap some of the benefits by introducing a web based ordering service for cars, allowing clients to specify the car that they want and then matching the requirement to the cars already in stock throughout the network. If a client prefers they could order a vehicle built to order and supplied to a local dealer. This will enable Ford to become closer to the needs of clients, seeing accurately what they want rather than what they buy because it is available. This compromise will give the company some benefits: *Information about customer wishes. *Opportunity to reduce both dealer stocks and Fords' stocks by avoiding duplication. *Delaying the final form of the product by increasing the range of dealer fitted items will enable Ford to simplify manufacture, whilst offering a greater degree of 'real customisation' to clients. *Delay of final form will increase dealer revenues, buying their enthusiasm and consent for the next stages of coordination.