Ford’s Supply Chain

EXECUTIVE SUMMARY

Ford’s supply chain has proven very challenging. The present system being used ha s inefficient control of a large database and a vast and complex network of suppliers. The supply chain needs to be redesigned to be more cost effective and efficient. With careful analysis we recommend that Ford implement a partial virtual integration system similar to that adopted by Dell. This system will provide advantages seen from a tightly coordinated supply chain. Virtual integration will achieve both coordination and focus for Ford. This system would allow Ford to use information technology to interact in a more streamlined fashion with their customers and suppliers.

If this virtual integration system can be implemented alongside their current system this will allow Ford to better deal with problems that may arise without having to disrupt the whole system. This would give them a competitive advantage over their competition.

ISSUES IDENTIFICATION

The main issue faced by Ford Motor Co. is the large number of suppliers they deal with directly. Their suppliers are divided into tier one and tier two. Tier two suppliers directly supply tier one. Ford has thousands of suppliers that operate in a very complex network of business relationships. They also have a large number of dealerships located over a vast geographical area.

Compared to Dell who has roughly 50 suppliers and they sell directly to the customer (See Exhibit 1). The difficulty for Ford lies in the ability to streamline their suppliers and consumers within a single supply chain.

Second issue facing Ford is the inability of first tier suppliers to invest in new technology making it difficult for them to keep up with the demands at Ford. As a result there is gross miscommunication and inadequate coordination between suppliers which inevitably causes higher supply chain costs and longer lead times.

ENVIRONMENTAL AND ROOT CAUSE ANALYSIS

Ford Motor Company was the second largest industrial corporation in the world and a world leader in trucks earning substantial revenues and profits amassing 6.9 billion in sales and 3.9 % return on sales. At the time towards the end of 1998 this solid success was trending upward.

In order to increase their market share Ford aligned with Chrysler and General Motors to foster the Automotive Network Exchange (ANX) which aimed to create consistency in technology standards and processes in the supplier network so that suppliers would not have to manage different means of interaction with each auto manufacturer. This action would allow Ford to produce better quality cars more efficiently and reduce cycle times.

In the summer of 1998, Chrysler merged with Daimler-Benz and in early 1999 Ford acquired Sweden’s Volvo. All these actions have substantially increased Ford’s database of