Ford Motor Company: Supply Chain Strategy Case

hybridizing Motor Company, incorporated in 190 by Mr. Henry intersection, is one of the largest fomite markers in the world today. This company employees to a greater goal than 360,000 employees and has produced more than 260 million vehicles over its history. Since the 1970s, the auto perseverance has evolved from an industry with only a few large companies to one in which competition has become tough. Instead of twain main competitors, cut through now breasts foreign automakers in the marketplace. With the addd competition, car head teachers are seeing more cars sit on lots for a persistenter period of period and are now crack a variety of incentives to get people to buy these products.DiagnosisIn 1995, the CEO of hybridisation open up an initiative called interbreeding 2000 in an effort to reduce costs and become more market competitive. This unsanded initiative encompassed all of Fords activities, such as product development, manufacture and marketing. Most of t hese switchs were based around IT improvements. These improvements were through with(p) as an effort to bring Ford closer to all aspects of their furnish chain, from their supplier to their customers.In 1998, Ford also opened the first of its Ford Retail Networks. This project was started to help the dealers compete with the real competition, such as GM and Chrysler instead of each other. It also brought Ford closer to the end customer.This Ford 2000 project was a major undertaking, but what is helping the company as a whole? Well, in 1998, the Ford 2000 initiative had raised Fords net incomes, return on sales, and had made the company the industry leader in profit per vehicle. Ford had been named the most improved automaker in 1997 by JD Power Initial Quality depicted object and had become the world leader in trucks. They were making progress, but where still burdened with large inventories.Fords manager of Supply Chain Systems began to research what Ford could do to decreas e these inventories to become the industry leader and to increase shareholder wealth. She did any(prenominal) research into dingle Computers. This company was enjoying 55% per year reaping at the time that Fords growth was steady at about 6% a year. They were also seeing a 133% growth of their stocks while Ford was seeing at 33.4% growth.Dell had adopted a virtual(prenominal) desegregation subscriber line determine. Within this shape Dell uses the profit for almost all business activities. Customers place an rate specifying on the dot what they penury. This can be done over the Internet or over the phone. Dell then places an order for the components of this machine over an Internet based JIT monastic order system. The parts are received assembled and shipped to the customer at bottom 5-6 days.After much research, the director tried to determined if this same system could be used for Ford Motor Company.AnalysisThe Director found that there would be several challenges if t hey were going to go through this cause of virtual integration system. First, Ford Motor Company is more than 100 years old whereas Dell was opened in 1984. Since the company is so old and has been doing business the same way for a long period of time, it will be harder to implement a large change such as virtual integration. For example, Fords procurement process is not where it needs to be if the company is going to virtually integrate. Ford before long has a very large number of suppliers. Procurement personnel are highly involved with both aspect of the supplier relationship, while Dell uses a JIT ordering system. Fords manual process is more bright to errors than an electronic process would be, but the procurement department has been so powerful for so long that it may be hard to convince those working in this department that this change will be beneficial.The death penalty of an electronic ordering system could put some of these employees out of a job. These employees a re also choosing suppliers on the basis of cost only. If Ford was going to implement a virtual integration system, procurement professionals would give way to take other aspects into account, such as delivery time and willingness to partner.If Ford was going to implement an electronic system for ordering, they would also face some challenges while establishing Internet links with their suppliers. First, they would take a shit to choose whom they would want to partner with in this fashion. Then they would have to determine if these suppliers have reading technology systems that would buy at an Internet based communication system. Currently Ford has started to develop this type of system with their tier one suppliers who are their most advanced and largest suppliers. If they were to extend the electronic ordering to other suppliers who did not have the technology to support this type of system, Ford would be forced to decide if they would want to help their suppliers develop or r eceive the technology needed for this moveion. Other issues such as what type of information would be shared and the security system system they would use to make sure only those with the need to know would have access to this information would have to be addressed as well.Another challenge Ford Motor Company would face when trying to implement a virtual integration model like Dells is there are some major differences between the computer and automotive industries. An automobile is a more complex product and includes many a(prenominal) more parts than a computer. If Ford were going to implement a virtual integration model they would have to manage a larger number of component parts suppliers than Dell is managing, which would add costs.Ford, if pitiful towards virtual integration, must also address their network of privately owned dealerships. Dells model of virtual integration includes no dealers or retailers. If Ford were to adopt complete virtual integration, they would techni cally not have dealers. Having no dealers would not be possible for Ford. These dealerships are franchises that are owned legally by individuals. Also a person that is going to buy a car may not be receptive to ordering one off the Internet. Most people test-drive an automobile before they buy, which could not be done if cars were order strictly from the manufacturer. If Ford did not offer test-drives and other companies such as GM did, Ford would have a large disadvantage.ConclusionIn order to implement the type of virtual integration model that Dell rate of flowly employs, Ford would have to overcome some obstacles. These obstacles come from every aspect of their current supply chain. They would have to partner with suppliers and provide these suppliers the infrastructure and training they would need in order to go through over the Internet. They would also have to change the way their dealers worked with customers. Since most customers would not accept buying a car directly of f the Internet, Ford would have to implement other methods of changing this aspect of their supply chain.RecommendationsAlthough there are several differences between Ford and Dell, I do recommend that Ford implement some of Dells virtual integration model.I recommend that they set-up an extranet, or extend their current system so that they may use JIT ordering with their suppliers. They could use some sort of incentive plan to encourage their supplier to invest in their technology systems so that they would be able to use this extranet for accepting orders. The amount of cash Ford would save from the direct link they would have to their suppliers should supplement the investment they would have to make in developing an extranet.I also recommend that Ford make some changes in the way they interact with their customers. Ford could set-up some type of virtual showroom. This may encourage more customers to order direct from Ford instead of going to a dealer. They could also create an intranet, or enhance their current intranet, in which dealers could restrain the stock of other dealers for the vehicle a customer is looking for. If they could have this vehicle shipped from one dealer to the other it would not only reduce dealer inventory, but would also please the customer since the lead-time for them receiving their brand-new vehicle would be reduced.Although Ford may never be able to virtually integrate to the extent that Dell has, the company will be able to see cost savings from their integration efforts. Ford should be able to reduce dealer inventories and should be able to move towards a pull system of manufacture if they implement these changes.