Analysis of Ford Motor Company HBR Case from the logistics point of view. The logistic drivers are included.

2. Ford Motor Company:
Supply Chain Strategy
Group 7, Section B
Name PGDM No
Anand S 14016
Nikita Lalwani 14089
Rohit Shettar 14124
Rony Francis 14126
Tony Sebastian 14171
Submitted to: Prof. Rajendra Todalbagi

3. Overview
 Based in Dearborn, Michigan.
 Second largest industrial corporation in the world.
 Revenues of more than 144 billion dollars.
 About 370,000 employees.
 Operations spanned 200 countries.
 Since Henry Ford had incorporated in 1903, the company had produced
over 260 million vehicles.

4. Automotive Industry
 Big Three U.S. automakers—General motors (GM), Ford, and
Chrysler
 Foreign-based auto manufactures
 (i.e. Toyota and Honda)
 Facing increasing overcapacity
 Advantage in the industry was fast becoming global

5. Ford 2000
 Product development consolidated into five Vehicle Centers (VCs)
Each responsible for the development of vehicles in a particular
consumer market segment
 Making processes and products globally common
Eliminate redundancies
Realize economy of scales

6. Ford’s New Global Approach
 Technology was employed to overcome constraints usually imposed
by geography.
 Teams on different continents needed to be able to work together as
if they were in the same building.
 In every reengineering project, information technology (IT) was
critical
Deployed to enhance material flows and reduce inventories
Substituting information for inventory

7. EXISTING SUPPLY BASE
 Beginning in 1990s
 Shifted towards longer-term relationships with capable suppliers
 Tier 1, Tier 2 & below suppliers.
 Assist suppliers in improving JIT, TQM & SPC.
 Ford expected yearly price reduction from these suppliers.
 Tier 1 well developed IT capabilities, including Electronic Data Interchange.

8. Order to Delivery
 The purpose of OTD:
 Reduce to 15 days from 45 to 65 days
 Pilot studies in 1997 and 1998 identified bottlenecks
throughout Ford’s supply chain:
 Marketing
 Material planning
 Vehicle production
 Transportation processes

9. Implementation of OTD
 Ongoing forecasting of customer demand from dealers
 A minimum of 15 days of vehicles in each assembly
plant’s order bank to increase manufacturing stability
 Regional “mixing centers” that optimize schedules and
deliveries of finished vehicles via rail transportation
 A robust order amendment process
o to allow vehicles to be amended for minor color and
trim variations without the need to submit new orders

10. Comparison - Ford vs Dell
 Costs of developing web capabilities
 Problems of connecting to suppliers and other external parties who
tend to be less technologically advanced than the Ford
 Difficulties in implementing a true build-to-order model for so complex
product as an automobile
order
delivery
order
Suppliers Manufacturer Distribution
Channel
Customers
CustomersSuppliers Dell
Direct Model
Traditional Model

11. Logistical Drivers
Facilities
 FRN
 VCs
Inventory
 JIT
Transportation
 Railways

12. Cross –Functional Drivers
Information
 FPS
Sourcing
 Materials procurements
Pricing
 Fixed pricing

13. 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)

14. Recommendations
 Ford to extend its Virtual-business strategy by partially implementing the
Dell’s model of supply chain.
 Shift the ownership of raw materials to suppliers
 Allow customization both offline and online
 Collect customer data from dealers to
Segment customers
Contacting local dealers to forecast demand

15.  Sharing design with the supplier to speed time to market
 Involving supplier in R&D
 Switch from push to pull strategy
 Develop a support network through which spare parts
can be exchanged and delivered in a short time.
Continued…

16. Thank you!