The case 2-5 deals with the hurdles, implications and the extent of virtual integration in one of the world’s largest automobile manufacturing company. ‘Ford Motor Company: Supply Chain Strategy’ case focuses on the viability of implementing a supply chain strategy following Dell’s model.
There are several factors which affect how an auto industry is managed and the way important decisions in regard to the company are taken. Ford was established by a visionary Henry Ford in 1903 and it has been in business ever since. Its main competition till 1970’s was with General Motors and Chrysler. However with the entry of Japanese companies like Honda, Toyota and Nissan the firm faced stiffer competition with the auto market being overcapacitated. In 1995 Ford initiated the Ford 2000 plan aimed to restructure many of their key processes like Order to Delivery (OTD) and Ford Production System (FPS). They wanted to reduce the OTD from 60 or more to 15 or less days. FPS was created to convert the supply chain from a push type to a pull type. Ford aimed at reducing the number of suppliers which had grown to several thousands of different suppliers over the years as the company grew.
Rather than focusing on selecting suppliers based on costs they wanted to develop close long-term relations with the Tier 1 suppliers who in turn managed and handled Tier 2 and Tier 3 suppliers. The aim was to create a more cost effective supply chain. Ford provided its suppliers with its expertise and techniques to help them better manage their operations. Another important initiative taken by ford was the Ford Retail Network (FRN) to reduce competition among its dealerships in the same locality by having only one unified dealer who provides the best possible level of customer experience. The director of supply chain system, Takai has to take an informed and well thought decision if they should implement the Dell’s integrated supply chain or not.
Critique and analyze team 5.
We think that the overall presentation on Ford was good and a lot of information over and beyond the case was discussed and presented. Even then we feel that there were plenty of issues the team could have handled in a better manner. The first area they lacked was describing the specific initiatives by Ford like the Ford Retail Network (FRN), Ford Production System (FPS) and Order to Delivery (OTD) in more depth. Secondly they left the main issue quite open to debate and not specific in terms of the recommendations and the suggested course of action at different levels of the organization and how exactly to integrate the emerging technologies into its supply chain. If we were the presenting team we would have approached this case in a very different way.
An important part of analyzing any case is to elaborate on the alternatives the company has, delving the implications of each and exploring ways how best it can be implemented. Therefore we have enlisted the alternatives with a brief description of the pros and cons. Then we also go ahead and recommend the best alternative according to us and discuss the reasons behind it. Alternatives with their pros and cons: 1) Keep its existing supply chain a) Advantages: No major changes and additional costs involved. b) Disadvantages: Ford’s IT will eventually become obsolete. 2) Form a mix of online and offline operations and lay procedures to enable customization and ordering by customers over the internet but maintain physical dealerships as well. a) Advantages: Customization to clients, start of vertical integration, b) Disadvantages: Costly, time consuming, requires internal and external changes which are not easy to handle and integrate with other operations.
Team 4 Critique 4
3) Create a virtually integrated supply chain based on Dell’s model. Ford and all its suppliers would share information between their systems and the Internet to coordinate the flow of materials and production. All customer orders would be taken either via Ford’s web site or by phone and then built. A pull system would be implemented completely. a) Advantages: Customization to clients, start of vertical integration in the supply chain. b) Disadvantages: Ford’s traditional processes and production methods would have to be changed to take advantage of this new form of supply-chain management. Since it is a very costly and time consuming activity, the difference in the two industries makes it a risky option.
After more careful examination and review of the alternatives we came to the realization that the long term implication of the first and third option is the company going out of business. Keeping the existing supply chain would continue to deliver the same dismal results and declining profits for the company which eliminates option 1. The third option seems illogical when we take into account the fact that Ford is an automobile manufacturing company and Dell assembles customized computers for its customers via the internet, eliminating dealerships all across and relying on website for its sales will put it at a great disadvantage with other auto makers.
In spite of the recent loss of trust and quality issues with Toyota we will base our recommendations and critique comparing Toyota’s usage of information technology in making their process and operations lean. Toyota has been the forerunner in implementing many of the best practices in manufacturing industries like JIT (Just in Time), Kaizen, Poka-yoke, Jidoka and other techniques which are solely dependent on their ERP (Enterprise Resource Planning) system. Since the production at Ford is based on a predetermined schedule it is a push based system. One way to move from a push based system to move towards a pull based system is by producing at a uniform level by the use of IT modules enabling MIXED model sequencing
Team 4 Critique 5
(Appendix B shows an example of a car producer trying to plan for September sales forecast using batched production (not ﬂexible) versus mixed production (ﬂexible). So we would recommend Ford to extend its E-business strategy by partially implementing the Dell’s model of supply chain. The part of the Dell’s model which does not fit with Ford need to be discarded. The dealers would still play a role in the distribution since we saw in the classroom discussion how the buying experience of a car from a dealer cannot be substituted by something virtual like a 3d model on a computer or images and description online.
The IT systems should be centralized since its Tier 2 and Tier 3 suppliers might not be able to update their IT infrastructure as frequently as Ford. Suppliers can have access to central design database while Ford controls the access and functionality as per the requirements. The whole coordinated system would ensure a smooth flow of materials and reduced bottlenecks and enhance the efficiency of the supply chain giving a competitive edge to Ford. And lastly we feel that dealers can play a more involved role in forecasting customer demand and Ford should explore the option of outsourcing it to a firm which specializes in forecasting demand and can work with each dealer or network of dealers.
Evaluate participation and ways to improve
We believe that our team was more prepared and ready for this case following recommendations to improve from the previous case critique. We wrote down the questions for the team to ask but their time management was not the best which limited us. Even though we could not participate with the intensity we intended in the class, all members came up with insightful ideas and thought provoking comments. One way we could further improve our team performance is through having a team discussion prior to class on the case so we can focus on important issues more carefully and having a more clear idea of our expectations.
Appendix A: Glossary
• Lean production: doing more with less through a whole integrated system that eliminates waste and focus on continues improvements of operations that add value. • Just In Time: smoothing the ﬂow of material arrive just as it is needed. • Kaizen: a system for continuous improvement.
• Poka-yoke: A foolproof mechanism that prevents defects from occurring. • Jidoka: Authority to stop the production line.
Appendix B: Car producer forecast
Doubrava, K. (n.d.). Ohio University. Retrieved 04 12, 2010, from Oak and the world of the web: Ford Case analysis: oak.cats.ohiou.edu/~kd636398/esp/Ford_CaseAnalysis.doc Ed Davis, B. A. (200, 05 10). University of Virginia. Retrieved 04 14, 2010, from Ford’s EBusiness Strategy: http://faculty.darden.virginia.edu/gbus88500/documents/ford_ppts.pdf Lynda M Applegate, R. D. (2008). Corporate Information Strategy and Management: Text and Cases. McGraw-Hill/Irwin.
Roberta Russell, B. W. (2007). Operations management: creating value along the supply chain. Wiley.