Ford is considering adopting Dell's supply chain model to improve productivity and reduce costs. Currently, Ford has a complex supply chain with long lead times. Adopting Dell's virtual integration model could help Ford simplify its supply chain and increase information sharing with suppliers. However, there are also risks to consider like how Ford's large, global operations may be difficult to align with Dell's model.

1. Mario Bonilla, Roshini Giri, Ajay Jagtap, David Muir, Shavej Sayyad, Rogin Thomas Ford Motor Company: Supply Chain Strategy

2. “ To provide sustainable transportation that is affordable in every sense of the word: socially, environmentally and economically.” Ford Motor Company’s Vision

3. Short Term: Hybrids Clean diesel engines Flexible-fuel ethanol vehicles Turbocharged direct injection system It will be available in half a million Ford, Lincoln and Mercury vehicles annually in North America during the next five years. Long Term: Plug-in-hybrids Fuel cells Hydrogen internal combustion engines Other advanced technologies n laboratories and test fleets around the world The company operates as a globally integrated worldwide team with four key priorities Corporate Goals

4. In transforming Ford’s vision into reality, strategic directions are set out as follows: Integrate with customers, with supply base, and internally Change from old sequential process Share information in real time over the web. Drive the excess cost out of supply chain Transform information flow from cascade method to parallel by Integrating the supplier tiers. Align IT with Ford’s Goals Strategic Direction

6. Threat of New Entrants The automobile industry is a business of Economies of Scale. Access to distribution channels. Bargaining Power of Suppliers The automobile industry has one of the largest and most complex suppliers chain. With globalization, suppliers offer are not a barrier. Bargaining Power of Buyers Buyers enjoy large selection with a large range of price options Sell and exchange used cars is giving more power to the buyers Threat of Substitutes The demand continues growing globally Substitutes cover a very small portion of the demand Rivalry Automobile industry : one of the most competitive industries. Globalization is changing the supply chain and the demand of customers. Porter’s Competitive Forces

7. Who? Ford motors, was the second largest industrial corporation in the world Revenue of more than $114 billion, about 370,000 employees and operations in about 200 countries. Fords core business is the design and manufacture of automobiles for sale on the consumer market. What? Ford is considering Dell’s model as an example: In order to be competitive to reach high levels of productivity and low cost. For the improvement and simplification of supply chain. Where? Complexity of Ford’s supply chain integration requires: Changes in fundamental operations Push and Pull models in Ford’s business functions such as design, marketing, supply and dealer network. When? Determination of short, mid and long term Supply Chain implementation improvements Why? In order to keep Ford’s productivity and lean supply chain cost This will simplify the supply chain, reduce the cost and increase productivity. Five W’s

8. Ford has one of the largest supply chain infrastructure networks in about 200 countries Ford has competition from big foreign companies like Toyota, Honda Access to distribution channels is not a major problem for Ford. Auto industry is a buyer’s market where customers have choices Globalization is changing the supply chain and the demand of customers Productivity will be a competitive advantage for Ford Organization Phase Summary

10. Value Chain Analysis General Administration –It should use high level of information system to make strategic and routine decisions. HR Management – Strong management with continuous evaluation process. Healthy relation with labor union. Technology and Systems – use the high-tech information technology to integrate suppliers. Procurement – Minimize dependence on a single supplier. Leveraged strong buyer power into timely, low-cost, and high quality of raw materials. Strong long lasting relationships with suppliers and efficient inventory management. Inbound Logistics Efficient inbound warehousing system Quality inspection at supplier level Operations High level of automation. Outbound Logistics Reduce delivery time Increase efficiency of finished product warehousing Marketing and Sales Develop Quality Increase brand loyalty Increase demand creation Service High level of service to after sales customers Margin Margin Primary Activities Support Activities

11. Threats affected to historical “legacies” of Ford’s ability to move to Dell’s Enterprise model. Process Complexity A large number of suppliers 3 tiers of suppliers Business was usually over the phone and fax Lack of technology and technological sophistication in lower tiers of the supply chain Managing Risks Ford must think about its relationships with supplier and customers. Virtual Integration Looking at the way Ford has historically operated internally and how it has interacted with important partner constituencies Risk Analysis

13. SWOT Analysis Strengths Weaknesses Second largest industrial corporation in the world, with revenues of $144 billion+ Strong history, founded in 1903 Most improved auto maker in 1997 Topped Initial Quality Survey for US automakers (behind Japan’s Big 3) Most profit per vehicle of all US automakers Strong Tier 1 supplier relationships, with knowledge sharing Already strong internet presence Overcapacity (estimated at 20 million vehicles) IT knowledge decreased in lower tiers of supply chain Highly independent purchasing department Push system with high inventory Order to delivery time of 45 to 65 days Relatively low margin on car sales when compared to financing business Poor demand forecasting Opportunities Threats Industry consolidation (Ford’s purchase of Volvo, for example) Increasing global presence Ford 2000 restructuring plan Re-engineering projects (Ford Production System, Order to Delivery) Increasing internet presence Ford retail network (Ford dealers no longer competing with each other in a specific region) Potential move to Dell’s supply chain method (Virtualized Integration) Increasing foreign competition (Toyota, Honda, Nissan, for example) Developing and industrialized nations focus on manufacturing their own automobiles for export The complexity of Ford’s operations may not support Dell’s methods Increasingly, companies with fewer physical assets have seen greater market capitalization than Ford

15. Establish full direct model such as Dell. Continue using auto dealers for distribution and sales and focus in improving efficiencies with suppliers. Continue improving cycle times to allow a PULL model instead of a PUSH in the market. Alternatives

16. Alternatives

17. Force Field Analysis

18. Continue using auto dealers for distribution and sales and focus in improving efficiencies with suppliers. Create more strategic and structural IT alignment within the organization. Involves increasing the communication between IT and the business, interconnecting business and IT planning and aligning organizational structure to support the recommended changes. Recommendations