American car manufacturer, Ford Motor Company is contemplating its future with regards to implementing new technologies that will change the way it interacts with its supplier base.
Fords current supplier base is large and don’t align strategically with fords manufacturing process. Term Take, Director of Supply Chain Systems at Ford is investigating recommendations made by senior executives to model there supply chain after the Dell Model which involves vertical integration of its supply chain partners and processes.The purpose of this report is to identify what Ford should do to use emerging cosmologies to better interact with its suppliers and if the Dell model will work within their supply chain processes.
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Issues that need to be addressed are how will Ford understand forecasts based on new Ford 2000 projects, Fords current supplier base is to large and the purchasing structure is not being involved in aspects of product development that could potentially save costs.These concerns need to be addressed with the implementation of a pull method at their manufacturing facilities, corresponding with the Dell Model. Creating a website that allows consumers direct access to customization and products, using the website and information transfer to create an integrated supply chain that can inform suppliers of when to ship products as they are needed. These steps will help Ford move forward in this competitive industry as well as save carrying and inventory costs.Issue identification with Root Cause Analysis 1) Understanding forecasts with new Ford 2000 projects 2) Ford’s current supplier base is excessive 3) Purchasing structure within the Ford organization Understanding Forecasts with the new Ford 2000 Projects The first issue Ford must deal with is understanding what their forecast will e with the implementation of their new initiatives which are Ford Production System (FPS), Order to Delivery (ODD), and Ford Retail Network (FRR). The FPS project is working to make Fords manufacturing operations into a leaner system which Will in turn make it more responsive and efficient.
It will focus on pulling material through the manufacturing process in synchronized production with a continuous flow. A key element to the FPS project is the in- line vehicle sequencing (ELVIS) which ensures that vehicles are assembled in order sequence. By having vehicles in order sequence, F-rod will be able to tell appliers when and where components will be needed thereby reducing inventory and carrying costs. The Order to Delivery process is being put in place to reduce the time from when the customer orders the vehicle to delivery of the finished product.It currently takes 45 to 65 days; Fords goal is to reduce this to 1 5 days. Ford will use forecasting of customer demands from dealers, have a minimum of 15 days of vehicles in each assemble plants order bank, create “mixing centers” that work to optimize schedules and deliveries of finished vehicles, and finally it will create an order amendment recess which will allow consumers to change minor details without having to place a new order. Ford’s current supplier base is excessive Fords existing supply base is large and excessive and includes several thousand suppliers that provides production material to Ford plants.
Initially suppliers were picked based on low cost and no regard was taken towards effectively utilizing the supply chain. Ford realizing this issue began to decrease the number Of suppliers the company dealt with directly and created a tier system which would help Ford manage its supply chain. Tier 1 appliers manage relationships with a larger base of suppliers of components of subsystems which would be referred to as the Tier 2 suppliers. For made its expertise available to suppliers to improve their operational processes by using tools as Just-in-Time TIT) Inventory, Total Quality Management (TTS), and Statistical Process Control (SSP).Fords Tier 1 suppliers already had an established and developed IT capabilities which allowed them to interact with Ford via electronic data interchange but not all of them had the capability and Tier 2 suppliers substantially lacked IT infrastructure. Purchasing structure within the Ford organization Fords purchasing department was large but independent from the product development area of the company. Communication lacked between the two departments but the purchasing department was an integral part involved in price negotiation with product design.
Dell being vertically integrated allows all departments to work closely together and not be isolated resulting in a savings to the company. Environmental Factors Large number of suppliers 45-65 day Order to Delivery Lack of communication between departments 4 large competitors Market shifting to include new international competitors The need for Ford to change its stance on manufacturing and supply chain management is key to develop a leaner system and identify issues of bottle neck within core processes.By understanding where these bottlenecks are located in there process, Ford will be able to cut redundant processes that will help eliminate cost. The large number of suppliers within the supply chain causes the chain to be cumbersome and requires reduction to try and bring Dells methods into the supply chain structure.
The need for generic parts are bread among many suppliers that have built a relationship to provide a steady flow of products that cause heavy inventory and carrying costs.Order to delivery takes between 45 to 65 days, this is caused by not having all required parts at the time of assembly. This can lead to lose of customer confidence as well as lost sales, which affect profit. Reduction is required to also help reduce carrying costs as we lose critical assembly areas to hold vehicles that are waiting parts from suppliers.
Lack of communication, especially between the purchasing and product development departments increase purchasing costs as there is no direct consultations that may help purchasing reduce costs on specific product designs.This lack of communication needs to be addressed if Ford undertakes the Dell model, as Dell had vertical integration that had purchasing work with product development Alter natives Keep its existing supply chain Ford could potentially keep its existing supply chain with the push system and manufacture cars based on batched orders and capacity constraints to dealerships, this would save costs for Ford as there would be no restructuring or need to implement new technologies.If this is chosen, Fords IT infrastructure would eventually become obsolete and not provide a useful resource for the company to optimize itself to meet customer demands.
Recommendation Create a vertically integrated supply chain based on Dells model Create a website for direct purchases A pull system should be implemented completely. Create a vertically integrated supply chain based on Dell’s model Ford must create a vertically integrated supply chain based on Dells model to create a pull system that will manufacture vehicles as they are ordered.With the implementation of the FPS and ODD, this will make this decision easier as hose projects will help optimize the manufacturing process and bring it in line with Dells model.
By creating a vertically integrated supply chain, Ford will be able to share information with its suppliers to coordinate the flow of materials and goods into production facilities. This will help them reduce inventory and carrying costs at their facilities as well as being able to produce vehicles faster without having to wait for suppliers to send materials.Create a website for direct purchases By creating a website for customers to purchase vehicles, Ford will follow along with Dells model. This website will allow customer customization that won’t require the customer to be at a Ford dealership, it also provides access to all of Fords products with all possible alternatives that customers might not find at a Ford dealership.
All customer orders would be taken either via Ford’s web site or by phone and then built.A pull system should be implemented completely Ford should implement a pull system which will help identify what mainstream customers want and reducing the number of vehicle combinations that Ford would have to create. By having a pull system, the deed for vehicle purchase incentives fall be lower as consumers will be building a specialized vehicle for themselves. Manufacturing will be market driven with no constraints and scheduling will be driven by the customer to be built to their schedule.
This will help reduce Order to Delivery time because vehicles will be produced at customer demand rather than being based on allocation and capacity constraints at the dealership. Inventory will be reduced as customers will create their own vehicles and random vehicle combinations will not have to be sent to dealerships to cover Fords available inventory. Plantation Ford must create a website to be used as a pilot project within a certain area so that they are able to monitor and control its abilities.Reduce suppliers; create strategic partners that will help achieve a pull system Create a website that can be piloted in certain region close to a distribution center Identify areas that may require fine tuning within the website Roll out website customization across all regions Activate pull manufacturing with the website deployment so that they can used together Monitor and control With the implementation of the website, Ford will be able to monitor key reference indicators and take qualitative data to identify if the system is working properly.The website will be able to provide Ford with this data that can be used to monitor its effectiveness: How many cars sell through the website versus at dealer locations How many views per day are certain vehicles getting How many customization options are chosen With the pull system, Order to Delivery times should be reduced to meet the 1 5 day goal. By monitoring the time this process takes vs.
. The how the old system function will be a good indication that you are successful.