Executive Summary
Upon studying Ford’s existing supply chain it is not hard to see the high level of complexity within. This level of complexity blended with other internal and external factors have made Ford realize they need to explore solutions to deal with the supply chain challenges leading to cost and the reality they are facing and may continue to face in the future. The majority of issues in Ford’s present chain result from inefficient control of their large supplier base and the complexity of their supplier network in addition to inability to communicate to server their end customers. Ford has realized the urgent need to change their supply chain in order to be more cost effective and more profitable for its shareholders. Since Dell and Ford are two different types of markets, one is in the computer manufacturing/distribution business and the other is in the automobile business, it does not seem right for Ford to implement the exact “virtual integration model” deployed by Dell. The fact the car buyer usually wants to touch and feel the car before they make a purchase of a car would put Ford at risk of losing their customers to the competitors. On the other hand when customers buy computers on-line they don’t have to worry about touching and testing the computers and they require a better price than the other retail avenues to buy computers. Some other considerations in this case are the consideration of the buying frequency of cars versus computers and financing requirements for a car versus a computer. Another consideration would be the number of suppliers to support Ford manufacturing versus Dell’s computer manufacturing. Although the model deployed by Dell seems to be a stretch there are certain aspects of the model Ford can fully adopt or partial implement to place them in a better position to grow and realize more profit for the shareholders.
Issue Identification
Ford has a need come up with a solution to the below issues to try to determine which information technology strategy will work best for their supplier interaction as well as with their current engineering designs and projects. 1) Ford’s current supplier base:
a. Ford has recently decreased their supplier base to have a better long-term relationship and closer relationship with fewer suppliers called ‘Tier 1’ suppliers. The Tier 1 suppliers provide Ford with complete vehicle sub-systems. The Tier 1 suppliers work with multiple Tier 2 suppliers who provide the components that make up the vehicle sub-systems.
b. The Tier 1 suppliers do not have the capital to invest in the new technologies that Ford seeks to get into. However, the Tier 1 suppliers do have fairly solid IT capabilities, but these capabilities severely drop when dealing with the Tier 2 suppliers. Ford has also made it expertise available to support the Tier 1 suppliers through tools like Just-in-Time inventory, Total Quality Management and Statistical Process Control. 2) Purchasing organization:
a. Ford’s purchasing department is independent of the product development area. However, purchasing has a strong dominance over the product design price negotiations because “a very slim reduction in purchasing cost could result in very significant savings” for the company.
b. Dell’s vertical integration has these areas working very closely together. Could Ford also successfully merge these two areas to get reach a common goal? 3) Forecasting within the Ford 2000 projects:
a. Two key initiatives under the Ford 2000 project are the Ford Production System (FPS) and Order to Delivery (OTD). The FPS project was geared at steering Ford manufacturing operations to be leaner, more responsive, and more efficient. This would be promoted by focusing on continuously flowing material through using vehicle in-process storage units and proper assembly order sequence. The OTD project was started to reduce the order time from the present
