Ford Motor Company: Supply Chain Strategy Essay

The Ford Engine Company discovers itself within a dynamic organization environment in which new systems and techniques offer the potential to alter in a significant method the panorama in which this operates. Holly Ford is at his time an head in offering ‘cars for the masses’. He brought to the car industry methods and systems ground breaking in their day. Ford requirements once again to forge new paths to ensure future competitive advantage.

Management at Ford have been taking into consideration the ‘Direct Model’ created by simply Dell Pc Corporation and finds that there is considerable appeal. Dell has been able to increase inventory velocity such that there may be only 12 days of inventory on hand. This has led to an inventory turnover price of 30 times each year. This success, termed by Michael Dell ‘Virtual Integration’ has been attained by blurring the line between supplier, Dell and client, to the extent that third party service staff in many cases are thought, simply by clients, being Dell’s own staff. In order to see how consonant the Dell model is to Fords’ organization we need to examine the comparison between the two companies.

This permits us to find some perception as to whether digital integration may work at Kia. Ford Motor unit CompanyDell Computer Corporation Commonalities *Cars are consumer products. *Computers really are a consumer item. *Suppliers are often located close to manufacturing facilities. *Ford preserves close locational links with suppliers. *Number of suppliers can be small. *Ford is working to build associations with a limited number of tactical suppliers. *Ford’s customers range between large corporations, to federal government institutions, to the consumer. *Dell’s clients range from large corporations, to government institutions, to the consumer. Differences *Cars happen to be personal in nature and several clients want close contact.

A display room is usually favored. *Computers are generic in nature and do not need showrooms. *Safety and reliability will be major concerns. *Computers are certainly not expected to become entirely trustworthy. *A car is made up of universal (tyres, petrol caps) and custom (dashboards, body panels) parts. *Computers are made nearly entirely of generic parts. *Suppliers tend to be completely dependent on Ford*Suppliers are generally not entirely based mostly on Dell. *Ford is significant and may have got limited manoeuvrability. *Dell can be flexible and can rapidly interact to market or supplier pressure. *Ford contains a large seller network, both independent and company owned. *Dell has no retail network, all sales are Direct. *Ford has a vast range of products. *Dell includes a limited product selection with a filter palette of variations. Examination and Ideas Key to Dells’ strategy is definitely their insurance plan of outsourcing techniques all production.

Dell acts simply as the assembler and packager. The business is able to pick and choose from the variety of industry leading components, enabling other producers to make the purchases of leading edge technology. The suppliers manufacture their particular, essentially generic, products for most customers and therefore are economically self-employed of them or have little difficulty in meeting the JIT (just in time) requirements of Dell. Honda has at one time, both notable similarities and striking variations in terms with their relationship with suppliers. Various Ford parts such as tyres, windscreen wipers, and electrical components are procured from huge suppliers who also supply the same components to other companies.

These items are well suited to a closer the usage of source – digital integration. However, a very significant proportion of Ford elements are custom for Ford. Tier a single suppliers of custom parts such as body panels, chairs and engine components will be heavily determined by Ford and also other large carmakers. These suppliers second rate suppliers, whom in turn likewise have suppliers.

In the event that virtual integration is to succeed with these types of components every company along the value cycle right back towards the raw materials would have to be involved. This would be a very tough and complicated network to coordinate. Fords’ history can be described as factor being considered, their very own longevity and size in the industry gives all of them a tremendous level of influence when compared with Dell, a family member newcomer to business and whilst a large buyer of components, not influential on trends and technology.

Drawback may be that this stature will make it hard to bring their very large organisation and supplier network along the street to online integration. The dealer network must be considered. The traders carry an extremely limited range of products, which they keep in stock. If Honda decides to handle the Immediate Model towards end client they need to question whether they need a dealer network and in what form. Associated with disintermediation must be examined.

Alternate forms, apply the existing network ay always be viable, for instance , the dealer might be utilized to postpone the ultimate form before the point of client order. This could be the fitting of audio tools, air conditioning or perhaps interior lean customisation. This could enable even more consumers to benefit from the huge possible array of options, and also, at the same time minimizing the factory lead-time for produce. Recommendation If Ford is usually to successfully imitate Dell then they are best capable of do this in areas where they have similarities.

The most notable congruency with the area of availability of generic elements. Here Ford should continue its process of building tactical relationships. Wherever components happen to be of a more specialised characteristics then Ford should look at the human relationships to ascertain whether bringing suppliers closer to the corporation will offer benefits to both parties. Ford ought to work on its’ internal tradition. Integration of supply organizations on the size practiced by Dell can only occur in an environment where info flows openly to all points of the supply network.

As outlined in the case files; Ford keeps a high amount of separation of the purchasing departments from advertising production. Kia will not be able to provide target up and downstream except if they are committed to an open culture in which logistics details is a section of the life bloodstream of the firm. The relationship with customers is somewhat more difficult. The dealer network will probably be averse to Ford moving to direct sales, mainly because it will jeopardize their sustenance.

They can experience some of the benefits by presenting a web based ordering assistance for cars, allowing consumers to stipulate the car that they want and after that matching the necessity to the cars currently in stock through out the network. When a client wants they can order a car or truck built to purchase and delivered to a community dealer. This will enable Honda to become closer to the needs of clients, seeing accurately what they want rather than what they get because it is offered.

This give up will give the business some benefits: *Information about customer would like. *Opportunity to reduce both dealer stocks and Fords’ stocks and shares by steering clear of duplication. *Delaying the final type of the product by simply increasing the product range of supplier fitted items will enable Ford to simplify produce, whilst offering a greater degree of ‘real customisation’ to customers. *Delay of ultimate form raises dealer earnings, buying their enthusiasm and consent for the next stages of coordination. Epilogue Since this case was written, Ford offers, in collaboration with Basic Motors and Daimler The chrysler established a joint venture, now called Covisint. It is envisioned as a global business-to-business supplier exchange.

Their purpose is always to share details with suppliers Each of the companions has combined their E-business initiatives to ensure that suppliers would be able to develop devices to deal with just one system instead of. The expected benefits are: *Increased numbers of collaboration *Lower costs for all members in the supply chain *More efficient business methods GM is currently piloting a build to order program for its B razil ‘Celta’ model. They are able to try this because they have the support of dealers who will be sharing the fee savings with GM referrals Austin, Robert D. 99. Ford Electric motor Company: Supply Chain Strategy.

In Huff Wade Schneberger. New York: McGraw-Hill. Joan Magretta. The Power of Virtual Integration: An Interview With Dell Computer’s Michael Dell.

Harvard Business Assessment, March – April 1998, pp. 73 – 84. Covisint web site< http://www.covisint.com/about/history >[Accessed: The fall of 2nd, 2002] Ibid. US Reports. com internet site< http://www.usnews.com/usnews/biztech/articles/020401/1industry.b1.htm >[Accessed The fall of 2nd, 2002]