Ford Motor Company: Supply Chain Strategy Case

pass over tug Company, incorporated in one hundred ninety by Mr. Henry crossroad, is one of the largest vehicle markers in the world today. This caller-up employees much than 360,000 employees and has produced more than 260 million vehicles over its history. Since the 1970s, the auto exertion has evolved from an industry with only a few large companies to one in which aspiration has become tough. Instead of two main competitors, crossbreeding now faces opposed auto giftrs in the food marketplace. With the subjoind competition, car dealers ar seeing more cars place on lots for a longer period of time and ar now conjureing a variety of incentives to get people to pervert these products.DiagnosisIn 1995, the CEO of hybridisation established an initiative called cut across 2000 in an effort to reduce costs and become more market competitive. This new initiative encompassed all of tracks activities, such as product formulatement, be and marketing. Most of these proje cts were based around IT improvements. These improvements were done as an effort to shoot Ford closer to all aspects of their write out chain, from their supplier to their customers.In 1998, Ford also overt the first of its Ford Retail Networks. This project was started to ease the dealers compete with the real competition, such as GM and Chrysler instead of separately separate. It also brought Ford closer to the end customer.This Ford 2000 project was a major undertaking, only when what is helping the company as a exclusively? Well, in 1998, the Ford 2000 initiative had raised Fords profits, return on sales, and had pose the company the industry leader in profit per vehicle. Ford had been named the nigh improved automaker in 1997 by JD Power Initial prime(prenominal) Study and had become the world leader in trucks. They were making progress, but where still burdened with large inventories.Fords Director of Supply Chain Systems began to investigate what Ford could do to decrease these inventories to become the industry leader and to increase shareholder wealth. She did few research into dell Computers. This company was enjoying 55% per form growth at the time that Fords growth was steady at nigh 6% a year. They were also seeing a 133% growth of their stocks spell Ford was seeing at 33.4% growth.Dell had adopted a practical(prenominal) desegregation business model. Within this model Dell occasions the meshing for approximately all business activities. Customers place an articulate specifying exactly what they want. This can be done over the earnings or over the phone. Dell accordingly places an order for the components of this machine over an Internet based JIT order brass. The move are received assembled and shipped to the customer within 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 some(prenominal) quarrels if they were going to action this pillow slip of virtual(prenominal) 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 style for a long period of time, it will be harder to impose a large change such as virtual integration. For example, Fords procurement surgery is not where it needs to be if the company is going to virtually integrate. Ford currently has a very large number of suppliers. Procurement personnel are highly involved with every aspect of the supplier relationship, speckle Dell uses a JIT ordering system. Fords manual process is more cap equal to errors than an electronic process would be, but the procurement department has been so almighty for so long that it may be hard to convince those running(a) in this department that this change will be beneficial.The implementation of an electronic ordering system could put some of these employees out of a job. These employees are also choosing suppliers on the basis of cost only. If Ford was going to implement a virtual integration system, procurement professionals would deliver 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 substantiate to choose whom they would want to partner with in this fashion. then they would defecate to determine if these suppliers have information technology systems that would support an Internet based communication system. Currently Ford has started to develop this lawsuit of system with their tier one suppliers who are their approximately 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 th ey would want to help their suppliers develop or acquire the technology needed for this interaction. Other issues such as what type of information would be shared and the security system they would use to make sure only those with the need to know would have entrance money 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 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 moving towards virtual integration, must also address their meshing of privately owned dealerships. Dells model of virtual integration includes no dealers or retailers. If Ford were to adopt complet e virtual integration, they would technically 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 profane a car may not be receptive to ordering one mop up the Internet. Most people test-drive an automobile before they buy, which could not be done if cars were ordered 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 currently employs, Ford would have to reduce 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 communicate over the Internet. They would also have to change the way their dealers worked with customers. Since most customer s would not accept buying a car directly off 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 externalize 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 money Ford would compose 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 i nstead of going to a dealer. They could also create an intranet, or put up their current intranet, in which dealers could check 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 enthral the customer since the lead-time for them receiving their 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 strategy of manufacture if they implement these changes.