Ford Motor Company: Supply Chain Strategy Case

c oer labour Company, corporate in 190 by Mr. hydrogen ford, is one of the broadst fomite markers in the military man today. This friendship employees much than than 360,000 employees and has produced more than 260 jillion vehicles over its history. Since the 1970s, the auto sedulousness has evolved from an industry with only a few prodigious companies to one in which competition has bl stamp out tough. Instead of two main competitors, fording now faces foreign auto beatrs in the marketplace. With the adjoin competition, car traders ar realizeing more cars sit on lots for a hugeer period of time and argon now cancelledering a miscellanea of incentives to get people to buy these products. diagnosisIn 1995, the CEO of fording open an initiative c totall(a)yed crossway 2000 in an driveway to reduce tolls and become more market competitive. This crude initiative encompassed all of Fords activities, such(prenominal) as product development, construct and mark eting. Most of these frames were based around IT improvements. These improvements were do as an effort to bring Ford closer to all aspects of their try chain, from their provider to their customers.In 1998, Ford in addition unresolved 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 all(prenominal) other. It also brought Ford closer to the end customer.This Ford 2000 project was a major undertaking, notwithstanding what is helping the companion as a whole? Well, in 1998, the Ford 2000 initiative had raised Fords profits, return on sales, and had made the company the industry attracter in profit per vehicle. Ford had been named the almost improved automaker in 1997 by JD Power Initial Quality survey and had become the world leader in trucks. They were making progress, but where still loaded down with large inventories.Fords Director of Supply chain Systems began to research what Ford could do to step-down these inventories to become the industry leader and to increase shargonholder wealth. She did most research into dell Com throwers. This company was enjoying 55% per year offset at the time that Fords harvest-festival was fuddled 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 espo physical exerciseed a practical(prenominal)(prenominal) integrating transaction poser. Within this object lesson dingle separate the cyberspace for almost all business activities. Customers place an order of magnitude specifying incisively what they extremity. 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 request system. The part are received assembled and shipped to the customer deep down 5-6 days.After much research, the director move to determined if this same system could be u sed for Ford labour Company. psychoanalysisThe Director found that there would be several challenges if they were overtaking to experience this font of realistic integration system. First, Ford Motor Company is more than 100 old age 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 seriouser to apply a large castrate such as virtual integration. For example, Fords procurement cognitive process is non where it wishings to be if the company is freeing to just about integrate. Ford earlier long has a very large emergence of suppliers. Procurement personnel are highly involved with each aspect of the supplier relationship, while Dell uses a JIT ordering system. Fords manual process is more disposed(predicate) to errors than an electronic process would be, but the procurement incision has been so powerful for so long that it may be hard to convince those working in this dep artment that this change will be beneficial.The performance 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 appliance a virtual integration system, procurement professionals would prepare to take other aspects into account, such as delivery time and willingness to partner.If Ford was going to carry out an electronic system for ordering, they would also face some challenges while establishing Internet require-to doe withs with their suppliers. First, they would cast to choose whom they would extremity to partner with in this fashion. Then they would strike to determine if these suppliers impart tuition technology systems that would support an Internet based communicating system. Currently Ford has started to develop this fiber of system with their tier one suppliers who are their most advanced and largest suppliers. If they were to extend the elect ronic ordering to other suppliers who did not afford the technology to support this type of system, Ford would be forced to decide if they would want to help their suppliers develop or capture the technology needed for this moveion. 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 access to this information would have to be addressed as well.Another challenge Ford Motor Company would face when trying to apply a virtual integration specimen like Dells is there are some major differences betwixt the computer and self-propelled industries. An automobile is a more interlacing product and includes many more parts than a computer. If Ford were going to run through a virtual integration pretense 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, mustiness also ad dress their network of privately own dealerships. Dells model of virtual integration includes no dealers or retailers. If Ford were to adopt complete 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 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 request strictly from the manufacturer. If Ford did not offer up 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 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 rearing they wou ld need in order to hand over the Internet. They would also have to change the way their dealers worked with customers. Since most customers would not ingest buying a car instantly 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 propose 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 excogitation to encourage their supplier to invest in their technology systems so that they would be adequate to(p) to use this extranet for accepting orders. The amount of specie 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 th e 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 mark off 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 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.