Ford Motor Company:
Supply Chain Strategy
Spencer Patterson
Becky Tibbenham
Tatiana Gonzalez
David Windle
Quinn Gooch
Ford’s Model T
The Blue Oval Trade Mark
Ford Goes Global
Lincoln Motor Company acquired in
1922
Ford’s River Rouge Factory
15,767,708 square feet
B-24 Bombers
Henry Ford Dies in 1947
Ford post WW II
post WWII continued..
Ford Expands its Foot Print
Ford Turns 100
12 Billion in Losses
Matrix Analysis: Ford Motor Company
Ford’s Market Position
Broad
Market Positioning
Narrow
Low Cost
Value - added
Product Positioning
14
IT’s Strategic Impact
High
Factory
Impact on Business ops
Low
Strategic
Support
Low
Turnaround
High
Impact on Strategy
15
Governance and Ownership
Ownership
Community
Alliance
Corporation
Market
Hierarchy
Partnership
Governance
16
IT Environment & Enterprise Organization
Enterprise
Simple
Pull system/Low inventory
Push system/ high inventory
Comple
x
Stable/Certain
Environment
Dynamic/Uncertain
Where Systems Fall
Coupling
Loose
Tight
Linear
Interactions
Complex
Case Questions
• What advantages does Dell derive from virtual integration?
• How important are these advantages in the auto business?
• What challenges must Ford overcome that Dell does not face?
• Is the Dell model really relevant to Ford?
• How closely should Ford emulate the Dell Model?
Auto Industry
Industry Sales
2009
2008
2007
2006
2005
US
10.6
13.5
16.5
17.1
17.5
Europe
15.8
16.6
18
17.8
17.6
S. America
4.2
4.3
4.1
3.2
2.7
Asia Pacific
Africa
24.5
20.9
20.4
18.6
17.3
US Market Share
2009
2008
2007
2006
2005
Ford
15.3%
14.2%
14.6%
16%
17%
GM
19.7
22.1
23.4
24.1
25.8
Toyota
16.7
16.4
15.9
14.9
13
Honda
10.8
10.6
9.4
8.8
8.4
One Ford Strategy
• Formed in 2006
• Implemented by CEO Alan Mulally to better align the
auto maker’s global resources
• Main focus is to impact company’s purchasing
operations and its suppliers
• Simplify, standardize and reduce the number of vehicle
platforms and parts
• Simplify vehicle ordering from the customer’s
prospective
One Ford Objectives
Formation of
“matched-pairs”
system
Team product
development
personnel with those
from purchasing
Share a common
cost objective and
improve supplybase interface
Identify a single
product-development
and purchasing
contact for a
particular commodity
Boost profitability
of suppliers
Longer-term contracts
with closer working
relationship with
select preferred
suppliers
Profitability/ Efficiency
2006
Profit Margin
Asset Turnover
Ford
-7.88%
.56
Toyota
6.52%
.79
Dell
6.46%
2.4
2009
Profit Margin
Asset Turnover
Ford
2.30%
.56
Toyota
-2.13%
.67
Dell
2.71%
1.76
Looking Forward
• Conversion of assembly plants to small car production to
support consumer preferences
• Closing 3 Ford plans in 2010-2011 period
• Reduced Suppliers- Target suppliers: 750
– 2004: 3,300 suppliers
– 2009: 1,600 suppliers
– 2010: 1,500 suppliers
• Downsize/Consolidate dealerships
– Too many dealers at current and expected US Mkt
share
What do you do when…
• You want to buy a new car?
• You want to buy a new computer?
Ford’s Model
Suppliers
Ford’s Plant/Site
Operations
Ford’s Dealers
Customers
Dell’s Model
Suppliers
Dell
Customers
Ford vs. Dell: Suppliers
Suppliers
Manufacturing
Plants
Time to
Delivery
Ford
Ford
Dell
(2000)
(2009)
(1998-2010)
30,000
1,600
30+
180
90
3
45-60 days
Goal: 15 days
7-10 days
Ford Supply Chain Profile (2008)
– Suppliers located in 60+ Countries
– Suppliers in Emerging Markets 36
– Supplier Manufacturing Sites 5,500+
– Parts currently being manufactured130,000
– Total Global Purchasing $90+ billion
Ford vs. Dell: Supplier Interaction
• Ford
– Tiered system
– Becoming lean
– Long-term relationship
• Dell
– 2-3 suppliers per part
– Benchmark-oriented
Ford vs. Dell: Customers
Ford (USA)
Dell (USA)
Fleet
Business
Retail
Retail
Ford vs. Dell: Selling to Customers
• Dell
– Customers order online
– Shipped directly to their home or office
• Ford
– Customers purchase through dealer
– Customers receive car at the dealer
Ford vs. Dell: Selling to Customers
• What does a Ford dealer do?
– Maintain inventory
– Test drives
– Trade-Ins
– Expertise
– Warranty service, recalls, maintenance
– Financing, Insurance, Warranties
Ford vs. Dell:
Customer Care After the Sale
• Dell:
– Warranty: 90 days to 5 years
– Business Customers: Online or On-site
Assistance
– Retail Customers: Phone or Locally
Contracted Service Providers
• Ford:
– Warranty: 3 to 5 years
– All customers served by dealerships
IT Progression at Ford
Public
Internet
Site
WIPS
mid-1995
May 1995
Oracle
“Everest”
Discontinue
Oracle
Nov 1999
Aug 2004
Dell IT: Customer Market
Internet
Call Center
Premier.Dell.com
IT Management
Dell.com
Tech Support
Dell: Supplier Market
• B2B interface
• Customer feedback provided to suppliers
– “Real-time window” into information systems
• Valuechain.dell.com
• CAPS
• PartMiner
Case Questions
• What advantages does Dell derive from
virtual integration?
•
•
•
•
•
Inventory Expense (Cost reduction)
Control of Supply Chain (VMI, EDI, EAM)
Efficient Processes (Pull System)
Aids Market Oriented Marketing (Customer is King)
Creates a competitive advantage
Case Questions
• How important are these advantages in
the auto business?
• In context of Lean production…very.
• Reduction in inventory and buffer.
• Carrying & Transportation costs are reduced (pull
system, accurate forecast, lot sizing, potential for mass
customization)
• As profit margins erode efficiency and
waste/redundancies must be eliminated.
Case Questions
• What challenges must Ford overcome that
Dell does not face?
• Aligning supply chain sophistication (EAM, XML, legacy
architects)
• Achieving Lean Sigma in quality control (Safety)
• Excellent design, quality and time (lead time)
• Size and scope of organization (suppliers, vendors,
networks, geography)
• Organizational Behavior (Leadership & Management,
decentralization)
Case Questions
• Is the Dell model really relevant to Ford?
Case Questions
• How closely should Ford emulate the Dell
Model?