Essay on Ford Case Supply Chain Strategy

Ford Motor Company
SCMP Designation – Module 1: Supply Chain Management
Student: Javier Acosta

Table of Content Page Executive Summary 3
Issue Identification 4
Environmental and Root Cause Analysis 5
Alternatives and Options 6
Recommendation and Implementation 7
Monitor and Control 8

Executive Summary
Henry Ford incorporated Ford Motor Company in 1903. Since then, Ford’s main focus has been on automobile design and manufacturing. The company had produced over 260 million vehicles since its incorporation. Up until 1970, the only competition Ford had was from General Motors and Chrysler. However, since the 1970’s, foreign competition (mostly from Toyota and Honda) became more important and eventually leading to overcapacity within the industry. As result of more and more industrial nations entering the automobile business, the automobile industry reached an estimated 20 million vehicles in overcapacity.

Ford’s current supply chain is very complicated and there are numerous external factors that have contributed to the search for solutions to move past the costly supply chain challenges the company has been dealing with in recent years. Currently, their main challenge is to properly manage their large database of suppliers, and their inability to communicate and provide direct service to their customer base. As there is an a need to improve their supply chain, making it more cost effective and profitable, I recommended to implement a partial “Virtual Integration” to Ford Supply chain following Dell’s model. Although there are several main differences between the two companies, parts of Dell’s virtual integration strategy can be applied to Ford’s supply chain to improve operations. By applying this concept, Ford will be able to interact and perform online transactions with their suppliers and customers. This solution will allow Ford to increase its sales by gaining customer satisfaction and by providing rapid communication with their suppliers, manufacturers, and customers, but also keeping current client that enjoy buying from dealerships.

Issue Identification
The strategic issue Ford is facing at the moment the lack of management and control of their own suppliers and their inability to better manage and control their direct customer service. In contrast to Dell, which has a small amount of suppliers, Ford has thousand suppliers with many layers (tiers). In addition to that, Dell requires less than hundred parts to produce their product and they have fewer manufacturing facilities and employees, while Ford requires thousands of parts to produce their product and have numerous manufacturing facilities and over 370,000 employees.

Environmental and Root Cause Analysis
Ford Motor Company has over 370,000 employees worldwide. They generate annual revenue of around $150 billion. Ford’s core business is the production and distribution of cars and trucks. In addition to that, Ford earned substantial revenues and profits from its financial subsidiaries that operated mainly in North America with limited operations in Europe and everywhere else. In its 1997 financial statement, Ford reported close to $ 7 billion in net income and a 5-year average revenue growth rate of 6%. These positive financial statement figures were an indication of Ford’s strong market and financial positions. Its main competition till 1970’s was with General Motors and Chrysler. However with the entry of Japanese companies like Honda and Toyota the firm faced stiffer competition with the auto market being over-capacitated. In order to take advantage of their global presence and deal

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