Effectiveness of SCM Practices in Ford[/b]
Introduction
In this essay the effectiveness of Supply Chain Management processes is reviewed for Ford Motor Company. Ford is one of the largest automobile manufacturers. Ford started during late 1890s in the USA and operates in many countries across continents with established manufacturing units in France, UK, China, USA. The company has approximately 80 manufacturing plants across the globe (Ford, 2013a) operated by 370,000 people in many countries to generate sales and run Ford’s business in almost every country. To cite a few manufacturing units in different locations, carburetors and distribution systems are manufactured in Belfast, foundry production of engine components are produced in Leamington, England. Transmission systems are manufactured in Bordeaux, France and the final assembly from Valencia, Spain. Ford is able to leverage its operational ability through innovative production techniques and by developing and implementing robust supply chain strategies.
The automobile industry has grown constantly and has become more competitive in the last two decades. Ford has its main competitors within USA and also from other industrial nations such as Japan, Germany and South Korea. The automobile industry as a whole is under overcapacity as more developing countries are joining developed countries in recognizing wealth and job effects of automobile manufacturing. Manufacturing business firms have varying degree of market presence in different locations and they are influenced by local markets and consumers. Manufacturing industries are becoming global, hence there is a need to capture local markets and consolidate their presence.
Business Strategy of Ford
The business strategy of Ford is primarily driven by its goals of ‘One Ford Plan’ which strives to achieve on ‘build where we sell’. The guiding principles of Ford (Ford, 2012b) include:
One key strategy that Ford adopts is the change in its manufacturing strategy because the senior leadership of the company feels the cost of moving products across the world is not always feasible. In the year 2000, Ford took a number of initiatives to revamp its operations strategy that is intended to eliminate redundancies in processes at organizational level in order to realize huge economies of scale in purchasing and manufacturing. Ford has also teamed up with other automobile majors in USA such as Chrysler and General Motors to develop a network which aims to create consistency in processes and technology standards across in their supplier networks, this initiative is called the Automotive Network Exchange (ANX).
Ford’s Existing Supply Chain Processes
Ford in its quest to position the company favorably for success made a number of initiatives that are aimed towards integrating the enterprise along with suppliers and customers. The supply base of Ford during the 1980s was to pick suppliers on the basis of cost. This method had less regard to overall supply chain costs and this includes complexities in dealing with a large number of suppliers. However, from 1990s Ford began to actively decrease the number of suppliers that were dealt directly by the company. Instead of developing suppliers based on competition in terms of pricing for automobile components, the shift is made towards developing long term relationships with a set of suppliers who were able to provide the entire set of components for vehicles. They were called ‘tier 1’ suppliers and they in turn would maintain relationships with the next level of suppliers who would provide components for automobile machinery. They are called ‘tier 2’ suppliers and their relationships was maintained by tier 1 suppliers and so on. Ford also provided its expertise in supporting the operations for suppliers using standard techniques, such as just in time (JIT), inventory control, total quality management (TQM) and so on.
The supply chain in automotive industry is a very complicated because automobile production units depend on hundreds of suppliers and sub-suppliers to provide the components and materials to make the final product. The automobile industry also has close relations with electronics industry. Hence the supply chain processes are especially challenging to be managed effectively (Newton, 2013). The supply chain processes often result in problems for their production units. Some of the main issues include,
The company in its pursuit to overcome supply chain issues formulated a three pronged approach to manage suppliers effectively throughout the chain. The approaches include,
Ford’s supply chain strategy attempts to eliminate activities that add no value and use economies of scale to achieve optimal capacity utilization in its production (Murphy, 2007). Since Ford’s components are manufactured in different countries, in order to achieve supply chain efficiency there are a few competencies that are required for managing supply chain efficiently at the global level. The key competencies required (Hult, 2002) include,
Some of the other factors that play a major role in global supply chain include, the local labour rates, freight costs, currency exchange rate, customs duty chares, impact of local communities, WTO, and so on. These factors are considered while operating globally and the following suggestions are recommended.
Suggestions for Improvement
Ford already has an excellent reputation internationally. This coupled with its global presence can overcome issues in supply chain. The company can move to market driven manufacturing and supply, be more customer driven and respond to market demands quickly.
In conclusion, the supply chain processes followed in Ford Motor Company are examined. Ford has its manufacturing units in many countries and managing their supply chain is quite challenging. In automobile manufacturing, one process is dependent on the other. Hence there is a need for steady supply of components on time and every time. The issues and drawbacks in the Ford’s supply chain model while operating globally are highlighted. The essay also provides certain recommendations for improving effectiveness in their supply chain model.
References
1. Bonilla, Mario, Roshini , Giri, Ajay Jagtap, David Muit, Shavej Sayyad and Rogin Thomas (2008). Ford Motor Company: Supply Chain Strategy. [ONLINE] Available at:http://www.slideshare.net/ajayjagtap67/final-ford-presentation-3564011. [Last Accessed 24-Oct-2013].
2. Ford (2013a). Operations Worldwide. [ONLINE] Available at:http://corporate.ford.com/our-company/operations-worldwide?releaseId=1244755696954. [Last Accessed 24-Oct-2013].
3. Ford, (2012b). Supply Chain - Sustainability 2011/12. Ford Motor Company.
4. Hult, Thomas, (2002). Global Supply chain Management. International Business Center, Marketing and Supply Chain Management, Presentation by Michigan State University.
5. Murphy, Richard. W., (2007). Supply Chain Strategy - Ford Motor Company. Essay.
6. Newton, Jonathan, W., (2013). Ford Motor Company is enhancing sustainability management and performance across its supply chain through an innovative supplier partnership initiative. Inside Supply Management. 24 (3), pp.32
Introduction
In this essay the effectiveness of Supply Chain Management processes is reviewed for Ford Motor Company. Ford is one of the largest automobile manufacturers. Ford started during late 1890s in the USA and operates in many countries across continents with established manufacturing units in France, UK, China, USA. The company has approximately 80 manufacturing plants across the globe (Ford, 2013a) operated by 370,000 people in many countries to generate sales and run Ford’s business in almost every country. To cite a few manufacturing units in different locations, carburetors and distribution systems are manufactured in Belfast, foundry production of engine components are produced in Leamington, England. Transmission systems are manufactured in Bordeaux, France and the final assembly from Valencia, Spain. Ford is able to leverage its operational ability through innovative production techniques and by developing and implementing robust supply chain strategies.
The automobile industry has grown constantly and has become more competitive in the last two decades. Ford has its main competitors within USA and also from other industrial nations such as Japan, Germany and South Korea. The automobile industry as a whole is under overcapacity as more developing countries are joining developed countries in recognizing wealth and job effects of automobile manufacturing. Manufacturing business firms have varying degree of market presence in different locations and they are influenced by local markets and consumers. Manufacturing industries are becoming global, hence there is a need to capture local markets and consolidate their presence.
Business Strategy of Ford
The business strategy of Ford is primarily driven by its goals of ‘One Ford Plan’ which strives to achieve on ‘build where we sell’. The guiding principles of Ford (Ford, 2012b) include:
- Increase shareholder value
- Increase revenue by decreasing operating costs
- Identify challenges in SCM and solve them
- Improved customer satisfaction by being responsive
- Using IT in customer satisfaction
One key strategy that Ford adopts is the change in its manufacturing strategy because the senior leadership of the company feels the cost of moving products across the world is not always feasible. In the year 2000, Ford took a number of initiatives to revamp its operations strategy that is intended to eliminate redundancies in processes at organizational level in order to realize huge economies of scale in purchasing and manufacturing. Ford has also teamed up with other automobile majors in USA such as Chrysler and General Motors to develop a network which aims to create consistency in processes and technology standards across in their supplier networks, this initiative is called the Automotive Network Exchange (ANX).
Ford’s Existing Supply Chain Processes
Ford in its quest to position the company favorably for success made a number of initiatives that are aimed towards integrating the enterprise along with suppliers and customers. The supply base of Ford during the 1980s was to pick suppliers on the basis of cost. This method had less regard to overall supply chain costs and this includes complexities in dealing with a large number of suppliers. However, from 1990s Ford began to actively decrease the number of suppliers that were dealt directly by the company. Instead of developing suppliers based on competition in terms of pricing for automobile components, the shift is made towards developing long term relationships with a set of suppliers who were able to provide the entire set of components for vehicles. They were called ‘tier 1’ suppliers and they in turn would maintain relationships with the next level of suppliers who would provide components for automobile machinery. They are called ‘tier 2’ suppliers and their relationships was maintained by tier 1 suppliers and so on. Ford also provided its expertise in supporting the operations for suppliers using standard techniques, such as just in time (JIT), inventory control, total quality management (TQM) and so on.
The supply chain in automotive industry is a very complicated because automobile production units depend on hundreds of suppliers and sub-suppliers to provide the components and materials to make the final product. The automobile industry also has close relations with electronics industry. Hence the supply chain processes are especially challenging to be managed effectively (Newton, 2013). The supply chain processes often result in problems for their production units. Some of the main issues include,
- No control over end users. Ford always sells its products through its dealers and has no direct interaction with customers
- Dealers handle most of the customer information, and customer feedback and demand does not reach the company correctly and on time
- Since Ford has its operations worldwide, dealing with suppliers and sub-suppliers is extremely cumbersome and getting more complicated as business grows
- There are problems in communication, since suppliers communicate with other tier 2 suppliers and so on, Ford is not involved in all levels
- The volume of components is very big and since every step is dependent on the previous step there are always issues in sourcing, procurement and delivery
The company in its pursuit to overcome supply chain issues formulated a three pronged approach to manage suppliers effectively throughout the chain. The approaches include,
- Individual facilities: Training and capacity building programs for suppliers
- Corporate engagement: The initiative in this direction is to build a stronger relationship called Aligned Business Framework (ABF) which aims to improve the strength of the supply chain across the production lines
- Industry collaboration: This approach is towards developing tools for global supply chain partnerships and partnerships with other industry
Ford’s supply chain strategy attempts to eliminate activities that add no value and use economies of scale to achieve optimal capacity utilization in its production (Murphy, 2007). Since Ford’s components are manufactured in different countries, in order to achieve supply chain efficiency there are a few competencies that are required for managing supply chain efficiently at the global level. The key competencies required (Hult, 2002) include,
- Positioning: To guide global operations a selection of strategic and structural approaches are required.
- Integration: Integration explains the method of what has to be done and how that can be done creatively.
- Agility: Agility is the method or approach followed to achieve customer satisfaction at the global level.
- Measurement: Measurement refers to the monitoring of global operations
Some of the other factors that play a major role in global supply chain include, the local labour rates, freight costs, currency exchange rate, customs duty chares, impact of local communities, WTO, and so on. These factors are considered while operating globally and the following suggestions are recommended.
Suggestions for Improvement
- The company can be more flexible in responding to local markets. The use of dealers can be continued for distribution and sales, but the focus could be in improving their efficiencies
- Forecasting could be made more accurately. Customer data can be collected from dealers to forecast needs
- Enhance the capacity of dealers and suppliers at all levels, the use of IT can be promoted to improve efficiency and to avoid miscommunication and issus in coordination
- In the area of inventory management, the ownership can be shifted to suppliers
- Product customization can be allowed in both, online and offline
- Finally, Ford can start interacting with customers directly by looking into their feedback
Ford already has an excellent reputation internationally. This coupled with its global presence can overcome issues in supply chain. The company can move to market driven manufacturing and supply, be more customer driven and respond to market demands quickly.
In conclusion, the supply chain processes followed in Ford Motor Company are examined. Ford has its manufacturing units in many countries and managing their supply chain is quite challenging. In automobile manufacturing, one process is dependent on the other. Hence there is a need for steady supply of components on time and every time. The issues and drawbacks in the Ford’s supply chain model while operating globally are highlighted. The essay also provides certain recommendations for improving effectiveness in their supply chain model.
References
1. Bonilla, Mario, Roshini , Giri, Ajay Jagtap, David Muit, Shavej Sayyad and Rogin Thomas (2008). Ford Motor Company: Supply Chain Strategy. [ONLINE] Available at:http://www.slideshare.net/ajayjagtap67/final-ford-presentation-3564011. [Last Accessed 24-Oct-2013].
2. Ford (2013a). Operations Worldwide. [ONLINE] Available at:http://corporate.ford.com/our-company/operations-worldwide?releaseId=1244755696954. [Last Accessed 24-Oct-2013].
3. Ford, (2012b). Supply Chain - Sustainability 2011/12. Ford Motor Company.
4. Hult, Thomas, (2002). Global Supply chain Management. International Business Center, Marketing and Supply Chain Management, Presentation by Michigan State University.
5. Murphy, Richard. W., (2007). Supply Chain Strategy - Ford Motor Company. Essay.
6. Newton, Jonathan, W., (2013). Ford Motor Company is enhancing sustainability management and performance across its supply chain through an innovative supplier partnership initiative. Inside Supply Management. 24 (3), pp.32