ford strategies of supply chain case study
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This document discusses Ford Motor Company's vision to provide sustainable transportation that is affordable. It outlines Ford's short and long term corporate goals. The strategic directions to achieve Ford's vision include integrating with customers, suppliers and internally, changing from sequential to real-time information sharing, reducing supply chain costs, and aligning IT with goals. It also discusses the competitive forces in Ford's industry and compares Ford's current complex supply chain model to Dell's simpler single-tier model. Recommendations are provided on how Ford could apply some of Dell's approaches to improve its supply chain and customer service.
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ford strategies of supply chain case study
- 1. SUBMITTED BY PAVAN CHARAN TEJ (1226114108) MOTURU OOHA SREE ( 1226114127) SHARON SERA THARIYAN (1226214106) SHRUTHI SHANMUKHAN (1226114136) KHAN MOHAMMED NASEER (1226114117) POTNURI RAKESH (1226114128)
- 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 Long Term 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
- 5. Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitutes Rivalry Competitive Forces
- 6. 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. About industry
- 7. 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.
- 8. As the company had grown over the years, so had the supply base In the late 1980s: there were several thousand suppliers of production materials in a complex network of business relationships 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.
- 9. Ford 2000 initiative produced five major, corporationwide reengineering projects One was Ford Production System (FPS) Aimed at making Ford manufacturing operations: Leaner more responsive more efficient
- 10. Aspired to level production and move to a more pull-based system, with: synchronized production continuous flow Stability throughout the process
- 12. • Another key process Ford reengineering initiative was Order to Delivery. • The purpose of the OTD project was to reduce to 15 days the time from a customer’s order to delivery of the finished project. • A significant reduction versus the present performance of 45-65 days. • Pilot studies in 1997 & 1998 identified bottlenecks throughout Ford’s supply chain, including its marketing, material planning, vehicle production. • Ford’s approach to implement an improved OTD process relied on several elements: 1. Ongoing forecasting of customer demand from dealers. 2. A minimum of 15 days of vehicles in each assembly plant’s order bank to increase manufacturing stability. 3. Regional “mixing ccnters” that optimize schedules and deliveries of finished vehicles. 4. A robust order amendment process to allow vehicles to be amended for minor colour and trim variations. • The OTD vision was to create a lean, flexible and predictable process.
- 15. Recommendation on ford Retail Network • Allow product & car customization both online and offline • Collect customer data from dealers to – Segment customers – Accurately forecast demand by individually work with local dealers • Implement a support network where parts can be exchanged and delivered in a short time.
- 16. Push and pull originated in logistics and supply chain management. A push–pull system in business describes the movement of a product or information between two subjects. On markets the consumers usually "pull" the goods or information they demand for their needs, while the offers or suppliers "push" them toward the consumers. Push production is based on forecast demand and pull production is based on actual or consumed demand. PUSH – Node performs order planning for succeeding node. PULL – Succeeding node makes order request for preceding node. Preceding node reacts by producing the order, which involves all internal operations, and replenishes when finished.
- 17. CurrentIssuesof Ford • Wide spread supplier network • Lower tier suppliers : No access to IT infrastructure • Indirect control on end users • Forecasting Issues
- 18. Ford Dell Product complexity High: 30,000+ parts Low: 300+ Product cost and life span High / long term Low / shorter term No of suppliers / sub- suppliers Large (1000+) Multi tiers Small (50) single tier Distributors/ Dealers many None - direct to customers
- 20. How Dell appliedVI to their business In four main areas: •Organization Simplification •Reduce the working capital by outsourcing •Inventory Management •JIT via information management and flow •Build to order, reducing the cost of storing finished goods •Customer service and support •Finer customer segmentation, more tailored solutions •Faster response time •Supplier Collaboration •Information and feed back sharing •Product development, R&D
- 21. Dells VI Ford Possibility Organization Simplifying ✗ Inventory Management ✓ Customer Service and Support ✓ Suppliers management ✓ How VI could work in Ford •ALTERNATIVE I: Having a mixture of online and offline operations •ALTERNATIVE II : VIS
- 22. THANK YOU
Editor's Notes
- VI in the SCM context refer to the ability the for the company to apply IT to escalate information flow between supplier, manufacture, distribution and customer in the SC system, it highly decrease the time and cost sharing between suppliers, manufacturer and distribution while escalate faster processing time from customer order Today the vision for many manufacturers is to become virtual companies, owning only the brand and the customer. The design, system development, product sourcing, logistics, and even final assembly can all be outsourced to supply chain partners. Increasingly the goal is to replace physical assets with information in such a way that every member of this extended supply chain benefits. This forces the move from an environment of ‘hard wired integration’, where relationships are arms-length and adversarial, even across functional boundaries within the organization, to an environment based on ‘negotiated sourcing’, where non-core activities are outsourced and collaborative partnerships are the norm. Because we viewed the Internet as a central part of our IT strategy, we started to view the ownership of information differently, too. Rather than closely guarding our information databases, which took us years to develop, we used Internet browsers to essentially give that same information to our customers and suppliers – bringing them literally inside our business. This became the key to what I call a virtually integrated organization – an organization linked not by physical assets, but by information. By using the Internet to speed information from between companies, essentially eliminating inter-company boundaries, it would be possible to achieve precision and speed-to-market for products and services in ways not dreamed possible before. It would be the ultimate business system for a digital economy Vertical integration is history, the future will be about virtual organizations operating within virtual supply chains. Virtual integration, as opposed to traditional vertical "contractor-subcontractor" integration, represents the decomposition of the traditional company. Virtual integration is characterized by culturally different value-added relationships between manufacturers and suppliers. In the new world of virtual integration, no matter who signs the check, all the people are working together for a common cause. Vertical integration performs, virtual integration innovates
- How should Ford use Internet technologies to interact with suppliers To address this problem Ford must think about its relationships not only with suppliers but also with dealers and customers. As supply chain systems staff members study the Dell model in particular, they come to appreciate that “virtual integration” must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that had long been considered separately within the Ford hierarchy. The question is in fact explosive in its implications, because it inevitably leads to fundamental questions about the way Ford has historically operated internally and how it has interacted with important partner constituencies (including dealers)