Assessment 2: Ford Motor Company Table of Contents 1. 2. 3. 4. 5. 6. 7. Introduction ................................................................................................................... 2 Company and industry background ...............................................................................

2 Ford Motor Companys supply chain challenges ........................................................... 3 Ford Motor Companys supply chain initiatives ............................................................ 4 The use of supply chain management technology at Ford Motor Company ................ 7 Conclusion ...................................................................................................................... 7 Reference ....................................................................................................................... 7

1|

Assessment 2: Ford Motor Company 1. Introduction

Supply chain management is definitely an important area for a number of companies to facilitate their business performance and competitive advantage. Thus, technologies are extensively adopted so as to enhance supply chain efciency and competitiveness. Technologies have gradually crept into supply chain management, starting from electronic order processing, computerised shipping and shipment tracking, in addition to advanced automated systems. New supply chain management technologies, for example RFID (radio frequency identication), can enable effective integration and collaboration throughout supply chain networks. On the other hand, failures can occur in the deployment of supply chain management technologies owning to various reasons such as poor alignment with business strategies, inflexibility for the business environment, and so on (Cohen and Roussel, 2005; Ross, 2011). As a result, the aim of this report is to critically analyse the successes and failures of Ford Motor Company in the use of emerging supply chain management technology as strategy for achieving competitive advantage in the market place. As indicated by Fords Sustainability Report 2011/12, the supply chain contained 4,400 manufacturing sites, 130,000 types of manufacturing parts, and around 1 million employees in over 60 countries (Ford, 2012). This leads to significant challenges for Ford Motor Company to effectively manage its supply chain network. The report is divided into five parts which consist of introduction, company and industry background, the companys supply chain challenges, the companys supply chain initiatives with an emphasis on Six Sigma for supply chain management, the use of supply chain management technology at Ford Motor Company, in addition to conclusion 2. Company and industry background

Ford Motor Company is a large American manufacturer and developer of automobiles and commercial vehicles. It was incorporated by Henry Ford in 1903. The company was actually a pioneer in developing and using assembly lines. So, it was able to introduce mass production 2|

Assessment 2: Ford Motor Company of automobiles to the United States (FordDirect, 2013; Geyer, 2011). By 1920s, Ford Motor Company expanded its automobile empire and became one of the major manufacturers of vehicles not only in the United States but also throughout the world. The operations have spanned around 200 countries with the revenues in excess of 136 billion US dollars and over 200,000 employees, as of 2011. Even though the company has obtained large revenues; it has experienced a stage of decline and lost much of its appeal in recent years caused by a number of reasons (FordDirect, 2013; Hockfield, 2010). In early 20th century, Ford, General Motors (GM), and Chrysler, which were referred to as Big Three, principally dominated the global automotive market. However, since 2008, Toyota has become the worlds largest automaker (Bunkley, 2009). The traditional approach of western automakers focuses on mass production which was expected to decrease manufacturing costs while Japanese automakers, especially Toyota, have adopted effective supply chain principles to achieve lower manufacturing costs and shorter lead times with smaller volumes (Wee and Wu, 2009). In view of that, it became necessary for Ford Motor Company to develop effective approaches and strategies to regain its high profits and its position in the market. Clearly, Ford Motor Company competes in the automotive industry. The industry has indeed grown more competitive over the past decades to a great extent, due to not only the expansion of Japanese and Korean manufactures but also the global financial crisis. The competition for advantage in the automotive industry has become global. The whole industry has accordingly faced the need to continuingly improve quality, decrease cycle times, and reduce costs of developing and manufacturing automobiles. Hence, Ford and other larger manufacturers have searched for possible ways to take benefit of being large and global. 3. Ford Motor Companys supply chain challenges

As aforementioned, Ford Motor Company has faced several challenges in its operation and supply chain management. Collaboration of all activities in the supply chain network has not been easy for the company, resulting in a range of problems. Such problems have commonly arisen from uncertainty in demand forecasting, supplier relationships, inventory 3|

Assessment 2: Ford Motor Company management, quality of raw materials, technology development, and so forth. The automotive industry has just recently gained its momentum after more than three years of the recession that led to a substantial contraction in the quantity of automobiles and commercial vehicles sold not only in in the United States but also around the world. Today, the sales numbers have resumed to high levels. This has reflected the dynamic demand for automobiles and commercial vehicles. The companies that compete in the industry including Ford Motor Company often experience crises in managing complex supply chains that feature a number of suppliers and thousands of parts. 4. Ford Motor Companys supply chain initiatives

In 1995, Ford Motor Company has developed a plan, called Ford 2000, to restructure its operations into a single global corporation. This plan has aimed to eliminate process redundancies and to gain large economies of scale in purchasing and manufacturing. Process redundancies were eliminated by making processes and products worldwide common. Activities of product development were integrated into five vehicle centres or VCs. Each VC was responsible for developing vehicles in a specific consumer market segment. More reengineering projects have been also initiated with key goals of reducing cycle times and costs, for example Ford Production System (FPS), Order to Delivery (OTD) and so on (Smith, 2007). Ford Motor Company has furthermore adopted several lean and Six Sigma initiatives to improve its supply chain management in the context of developing and operating a centralised logistics network, streamlining operations of suppliers and carriers for enhanced performance and accountability, and providing the company with real time supply chain visibility. In fact, Six Sigma can be referred as a well-structured management strategy to facilitate the reduction of process variation and waste (Cudney and Kestle, 2011). The company has indeed developed Six Sigma since the beginning of 2000. The development was largely brought about by consumer driven demand and initiative by Fords corporate directors. The company did not just employ Six Sigma as a means of changing quality; it also 4|

Assessment 2: Ford Motor Company changed the way to conduct its supply chain management and business operations. This was based on the goal of being the worlds leader of consumer driven products and services. It was found that, through the use of Six Sigma, the company was able to achieve major cost reduction. Ford Motor Company has ultimately had a savings of over $1 billion in global waste exclusion. The company has so far been able to have an annual savings of over $359 million US dollars. As a result of Six Sigma, an increase in customer satisfaction has been additionally experienced. It was estimated that overall customer satisfaction has increased by 5 percent (Paton, 2013; Smith, 2013). Even though the company achieved substantial improvements, particularly in financial context; a long period of time was spent in building up Six Sigma supply chain. The company initially focused on the training of its staff in respect of Six Sigma initiatives. The employees were regarded as being in different classes until those employees were fully trained. These classes took account of green belt, black belt, master black belt, and the project champion. The company moreover incorporated a project with regard to tracking system. This tracking system allows for other members within the team or outside of the team to view the projects being worked on. This could contribute teams to stay competitive and become at the forefront of company development. As part of its training and development of Six Sigma initiatives, Ford Motor Company has partnered with a large logistics company, called Penske, so as to achieve its three main objectives which consisted of centralising its logistics network, improving supplier and carrier performance, and offering real time responsibility for logistics and finance, as aforementioned (Penske, 2013, Smith, 2013). Penske has been a key in the development of an aggressive logistics program. Penske has basically offered a single point of contact system for all of logistics of Ford Motor Company. By this partnership plant and corporate management, the company was able to fully view their weak points and strengths. Penske subsequently developed a baseline of up to date operations and develop solutions. One of the solutions developed was to build a new logistics system that set up Penske Logistics as to perform Fords core functions. As being the centre of Fords logistics, Penske has implemented a supply chain network design optimisation. The network design 5|

Assessment 2: Ford Motor Company optimisation has focuses on utilising an efficient materials strategy for inbound products. This is achieved by the implementation of an origin distribution centre. Penske has also utilised carrier and premium freight management. This management has enabled carrier and logistic companies to be managed, while simultaneously decreasing freight costs. Moreover, by integrating updated information technology systems, Ford Motor Company has had the ability to develop real time visibility of its supply chain including schedules, orders, and shipments. By implementing an improved finance management, the company has also been able to improve payment on freight bills, claim processing, and resolve issues in relation to its supply chain (Penske, 2013; University of San Francisco, 2013). To lower the costs, Ford Motor Company has adopted an accountability program into its supply chain management and operation. Prior to the use of this program, the company often allowed for half full freight containers to be shipped to individual warehouses. The company regularly shipped many half empty containers to the same warehouse in order to fulfil the original order. The company was also responsible for shipping multiple items to a warehouse that only need one item or none at all. For that reason, the accountability program has been developed in an attempt to increase efficiency of shipments. The program has placed responsibility on individuals for ordering of parts. By offering a single logistics centre, the company has been able to reduce the space of shipments and to better control the location of shipments. The accountability program has also increased the companys manufacturing bidding process, while simultaneously reducing costs (University of San Francisco, 2013). The Six Sigma initiatives in the supply chain at Ford Motor Company have successfully given rise to improvement in a centralised network, reductions in inventory, enhancement of shipments, improvements in procedures of delivery, as well as increases in cost savings. In addition, by the implementation of internet based systems, the company has been able to streamline performance. Briefly, in order to better track shipments, all drivers have been required to carry PDA scanners and to update information via electronic log systems. This has allowed for better tracking and accountability of deliveries and shipments.

6|

Assessment 2: Ford Motor Company Doing so has created a lean supply chain that has worked more efficient and been able to track its orders in real time (Penske, 2013; University of San Francisco, 2013). 5. The use of supply chain management technology at Ford Motor Company

6.

Conclusion

7.

Reference

Bunkley, N. (2009), Toyota ahead of GM in 2008 sales, The New York Times, January 21, 2009. Cohen, S. & Roussel, J. (2005). Strategic Supply Chain Management. The United States: McGraw-Hill. Cudney, E.A. & Kestle, R. (2011). Implementing Lean Six Sigma Throughout the Supply Chain: The Comprehensive and Transparent Case Study, New York: Taylor & Francis Group Ross, D. F. (2011) Introduction to Supply Chain Management Technologies, 2 nd Ed. The United States: CRC Press

7|

Assessment 2: Ford Motor Company Smith, C. G. (2007). Ford, Regaining Their Competitive Edge: A study of the strategic management processes for operational success. The United States: iUniverse, Wee, H.M. & Wu, S. (2009). Lean supply chain and its effect on product cost and quality: a case study on Ford Motor Company, Supply Chain Management: An International Journal, Vol. 14(5), pp.335 341 Paton, S. (2013) Consumer driven Six Sigma saves Ford $300 million. Viewed; April 8, 2013, http://www.qualitydigest.com/sept01/html/ford.html Penske (2013) Ford Motor Company: Six Sigma Initiatives streamline operations. Viewed; April 8, 2013, http://www.penskelogistics.com/casestudies/ford2.html Smith, K. (2013) Six Sigma at Ford revisited. Viewed; April 8, 2013,

http://www.qualitydigest.com/june03/articles/02_article.shtml University of San Francisco (2013) Six Sigma helps drive Ford Motor Companys supply chain management. Viewed; April 8, 2013, http://www.usanfranonline.com/six-sigma-helps-driveford-motor-companys-supply-chain-management/

http://www.docstoc.com/docs/129479932/Supply-Chain-Management---DOC

8|