PowerPoint Template

3,158 views
2,944 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
3,158
On SlideShare
0
From Embeds
0
Number of Embeds
6
Actions
Shares
0
Downloads
40
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

PowerPoint Template

  1. 1. Jean Mayer Executive Director, Asia Pacific and Africa Purchasing & Global Purchasing Systems "The information contained herein is FORD PROPRIETARY information and may include FORD CONFIDENTIAL information as defined in Ford's Global Information Standard II. Reproduction of this document, disclosure of the information, and use for any purpose other than the conduct of business with Ford is expressly prohibited." Expectations for Emerging Market Sourcing
  2. 2. Discussion Topics <ul><li>Global Sourcing Opportunities </li></ul><ul><li>Global Sourcing Challenges </li></ul><ul><li>Corporate Social Responsibility </li></ul><ul><li>Summary </li></ul>
  3. 3. Global Markets Provide Significant Opportunities for Production and Services <ul><li>Production </li></ul><ul><li>Increasingly able to achieve world-class quality </li></ul><ul><li>Significant landed cost savings </li></ul><ul><li>Trend to more complex components/assemblies </li></ul><ul><li>Competitive environment, necessary for survival </li></ul><ul><li>Services </li></ul><ul><li>Quality as good or better than in high-cost markets </li></ul><ul><li>Savings versus high-cost markets </li></ul><ul><li>Companies also use low cost markets for improvements in speed – “follow the sun” approach </li></ul>
  4. 4. Emerging Markets will Represent 86% of Vehicle Sales Growth During the Next Decade 59 Mils. Growth in the Global Automotive Industry VEHICLE SALES BY REGION NOW
  5. 5. Auto Parts Industry is Growing as well – Driven to a Large Extent by Auto Industry Growth Source: China Auto Industry Yearbook (1996-2000); China Auto Market (2000); China association of automobile manufacturers; ISI; BCG interviews and analysis Production value ($Bils.) EXAMPLE: CHINA China auto parts production CAGR: 7% <ul><li>EXPORT MARKET </li></ul><ul><li>Supplier quality becoming world class (Toyota, GM and others are already sourcing from China) </li></ul><ul><li>Export Market is 14% of total </li></ul><ul><li>Primary growth is in basic commodities </li></ul><ul><li>Primary driver is cost advantage </li></ul><ul><ul><li>Lower labor rates </li></ul></ul><ul><ul><li>Scale efficiencies </li></ul></ul><ul><ul><li>Government incentives </li></ul></ul>PRODUCTION
  6. 6. Automotive OEMs are Utilizing Emerging Markets to Drive Lower Costs <ul><li>Most OEMs have a significant presence in Emerging Markets – for local market requirements and increasingly for export production </li></ul><ul><li>A larger percentage of overall cost structures are influenced by Emerging Markets – driving down benchmark costs </li></ul><ul><li>Survival is dependent upon achieving benchmark costs </li></ul>PRODUCTION Entire value chain must contribute – customers expect lower costs to pass through the chain
  7. 7. In Addition to Manufacturing, Emerging Markets are also Driving Lower Costs for Business Services Increasing Complexity SOURCE: McKinsey Global Institute paper “Offshoring: Is it a Win-Win Game?”; “The Global Razor’s Edge” Fast Company v79 F 2004. BUSINESS SERVICES <ul><li>Microsoft </li></ul><ul><li>General Electric </li></ul><ul><li>GM, Toyota </li></ul><ul><li>Plastech </li></ul><ul><li>American Express </li></ul><ul><li>Morgan Stanley Dean Witter </li></ul><ul><li>ABN-AMRO </li></ul><ul><li>AOL </li></ul><ul><li>IBM, Intel </li></ul><ul><li>GE, EDS, Accenture </li></ul><ul><li>Ford, GM, DCX </li></ul><ul><li>Oracle, Dell, Microsoft, IBM </li></ul><ul><li>Ford </li></ul><ul><li>Capital One </li></ul><ul><li>Delta Air Lines, Lehman Bros. </li></ul><ul><li>American Express </li></ul><ul><li>IBM </li></ul><ul><li>Oracle </li></ul><ul><li>Ford </li></ul>COMPANIES (Examples) <ul><li>Engineering </li></ul><ul><li>New product design and testing </li></ul><ul><li>Research services </li></ul><ul><li>Customer analysis </li></ul><ul><li>Portfolio analysis </li></ul><ul><li>Finance/Accounting </li></ul><ul><li>IT </li></ul><ul><li>Human resources </li></ul><ul><li>Procurement </li></ul><ul><li>Call centers </li></ul><ul><li>On-line customer service </li></ul><ul><li>Telemarketing </li></ul><ul><li>Collections </li></ul><ul><li>Basic data entry </li></ul><ul><li>Transaction processing </li></ul><ul><li>Document management </li></ul>DESCRIPTION R&D Knowledge Services Corporate Functions Customer Contact Back Office SUPPORT SERVICES
  8. 8. Benefits for Business Services Go Beyond Cost Savings Other Benefits <ul><li>Companies can realize a number of benefits, in addition to cost savings. For example: </li></ul><ul><ul><li>Speed/Timeliness – can utilize a “follow the sun approach” due to time differences </li></ul></ul><ul><ul><li>Quality/Service Level Improvements – Improve quality of staff (education/skill level) or up staffing levels to improve service </li></ul></ul>SOURCE: 2003 A.T. Kearney Automotive Industry Executive Survey; Aberdeen Group “The Global Sourcing Benchmarking Report”; McKinsey Global Institute paper “Offshoring: Is it a Win-Win Game?” Quality Additional Capacity None Service Quality Improvement Expanded Skills and Capabilities Other 31% 2% 15% 21% 26% 5% Productivity Improvement Not as Good as the Original Services Better than the Original Services 11% 14% 75% As Good as the Original Services Cost Original cost base Offshore location cost New cost base Without re-engineering Additional savings through re-engineering BUSINESS SERVICES 100 45-65 35-40
  9. 9. Many Industry Observers Believe the Benefits (for Production and Services) are Sustainable <ul><li>Annual cost reductions in LCC markets have consistently exceeded those in mature markets due to: </li></ul><ul><ul><li>Expanding scale </li></ul></ul><ul><ul><li>Deepening relationships with suppliers </li></ul></ul><ul><ul><li>Competitive environment </li></ul></ul><ul><li>Wage rate growth in China and India will be limited by the large number of under-employed </li></ul><ul><ul><li>China has 800 million people living in the country </li></ul></ul><ul><ul><li>India has 25 million English-speaking, educated workers, expected to expand every year </li></ul></ul><ul><li>Labor rate differential is so large, gap is expected to remain substantial for the foreseeable future </li></ul>SOURCE: Boston Consulting Group Report “Capturing Global Advantage” 2004.
  10. 10. Discussion Topics <ul><li>Global Sourcing Opportunities </li></ul><ul><li>Global Sourcing Challenges </li></ul><ul><li>Corporate Social Responsibility </li></ul><ul><li>Summary </li></ul>
  11. 11. Capabilities are Improving, Challenges Still Exist Quality and Logistics Social Responsibility Supplier Readiness and Viability Cost Competitiveness <ul><li>Some products still not cost competitive for exports </li></ul><ul><li>Not all suppliers capable of producing to global quality standards – although quality levels are increasing </li></ul><ul><li>Some suppliers lack supply chain management capability </li></ul><ul><li>Health and safety issues; minimum wages – misinterpretation of work laws; differences in level of environmental regulation and compliance </li></ul><ul><li>Suppliers underestimate the support required for Ford – may over promise </li></ul><ul><li>Lack of consistent specifications </li></ul><ul><li>Many state-owned firms have weak balance sheets and may not survive </li></ul>Personnel and Logistics Culture Lack of Data and Experience <ul><li>Lack of historical data </li></ul><ul><li>Lack of team member experience leads to ‘home run’ timing </li></ul><ul><li>Need for personnel with deep technical/functional knowledge, i.e., North American or European network, and an understanding of the local market </li></ul><ul><li>Need to overcome internal resistance </li></ul><ul><li>Even with local fluent English-speakers, takes time to communicate and understand meaning and intent </li></ul>
  12. 12. Ford Learnings <ul><li>Begin by procuring components and services that are readily available </li></ul><ul><li>Find suppliers able to meet demands of traditional markets and have capability to grow </li></ul><ul><li>Concentrate sourcing efforts on same commodities and suppliers </li></ul><ul><li>Work with these selected suppliers to improve their capabilities – we don’t have the capacity to do this across all suppliers </li></ul><ul><li>Dedicated sourcing offices with strong cross-functional team required to ensure success </li></ul>While substantial opportunities exist, it is critical to choose and to develop Suppliers judiciously
  13. 13. Emerging Market Sourcing Vision and Principles <ul><li>KEY SOURCING PRINCIPLES </li></ul><ul><li>Supplier Data – Suppliers need to provide transparent material cost data, quality assessment, and social responsibility assessment </li></ul><ul><li>Sourcing Approach – Supplier and component sourcing approaches and recommendations are developed by a cross-functional, cross-brand group </li></ul><ul><li>Social Responsibility – Social Responsibility will be a critical consideration in all new sourcing decisions, along with competitiveness assessments (commercial, manufacturing, quality) </li></ul>VISION: a single supply base for a given region to support local and export production, at world class levels in terms of quality and cost, following the Human Rights Code of Conduct
  14. 14. Discussion Topics <ul><li>Global Sourcing Opportunities </li></ul><ul><li>Global Sourcing Challenges </li></ul><ul><li>Corporate Social Responsibility </li></ul><ul><li>Summary </li></ul>
  15. 15. <ul><li>Supports and is consistent with Ford’s Business Principles </li></ul><ul><li>Operational benefits realized by improving environmental and working conditions performance – lower energy cost, less waste, increased productivity, improved safety, decreased turnover, and training cost </li></ul><ul><li>Brand Risk Management – can’t rely on regulation and enforcement of environmental and labor laws in emerging markets </li></ul>Corporate Social Responsibility – Why It Is Important “ We won’t be targeting the governments anymore, we will be going at the global corporations and recognized brands.” – John Passacantando, Executive Director , Greenpeace amnesty international
  16. 16. Corporate Social Responsibility – Ford’s Expectations <ul><li>Environmental Protection </li></ul><ul><ul><li>Our Production Part Approval Process (PPAP) requires conformance to the Restricted Substance Management Standard </li></ul></ul><ul><ul><li>Third party ISO14001 certification is a requirement for production suppliers and designated non-production suppliers </li></ul></ul><ul><ul><li>Working Conditions </li></ul></ul><ul><ul><li>Ensure that those making Ford products and components, or providing services, are treated with dignity and respect </li></ul></ul><ul><ul><li>Global Terms and Conditions (GTCs) stipulate: </li></ul></ul><ul><ul><ul><li>Absolute prohibition of child labor (under 15), forced labor, and physical disciplinary abuse </li></ul></ul></ul><ul><ul><ul><li>Full compliance with all applicable laws – including minimum age, compensation, work hours, health and safety protections </li></ul></ul></ul>Find Ford’s Social Responsibility and Environment Guide on Ford Supplier Portal (https://fsp.ford.com/)
  17. 17. Discussion Topics <ul><li>Global Sourcing Opportunities </li></ul><ul><li>Global Sourcing Challenges </li></ul><ul><li>Corporate Social Responsibility </li></ul><ul><li>Summary </li></ul>
  18. 18. Summary <ul><li>Emerging Market sourcing opportunities exist for both local production as well as for export of parts </li></ul><ul><li>Ford is developing a competitive supply base in terms of cost, quality, delivery and social responsibility – concentrating on the same suppliers and commodities to move up the learning curve as quickly as possible </li></ul><ul><li>Suppliers must drive cost improvements through the value chain – drive to benchmark costs </li></ul><ul><li>Corporate Social Responsibility is a critical expectation that has to be managed through the supply chain </li></ul>

×