1. Ford Motor Company: Supply Chain Strategy
Spencer Patterson
Becky Tibbenham
Tatiana Gonzalez
David Windle
Quinn Gooch

2. Ford’s Model T

3. The Blue Oval Trade Mark

4. Ford Goes Global

5. Lincoln Motor Company acquired in 1922

6. Ford’s River Rouge Factory
15,767,708 square feet
B-24 Bombers

7. Henry Ford Dies in 1947

8. Ford post WW II

9. post WWII continued..

10. Ford Expands its Foot Print

11. Ford Turns 100

12. 12 Billion in Losses

13. Matrix Analysis: Ford Motor Company

14. Ford’s Market Position
Broad
Narrow
Market Positioning
Low Cost Value - added
Product Positioning

15. IT’s Strategic Impact High Low Impact on Business ops Low High
Factory
Impact on Business ops
Strategic
Support
Turnaround
Low High
Impact on Strategy

16. Governance and Ownership
Community
Alliance
Corporation
Market
Hierarchy
Partnership
Ownership
Governance

17. IT Environment & Enterprise Organization
Simple
Enterprise
Pull system/Low inventory
Push system/ high inventory
Complex
Stable/Certain
Environment
Dynamic/Uncertain

18. Where Systems Fall
Loose
Coupling
Tight
Linear
Interactions
Complex

19. Case Questions
What advantages does Dell derive from virtual integration?
How important are these advantages in the auto business?
What challenges must Ford overcome that Dell does not face?
Is the Dell model really relevant to Ford?
How closely should Ford emulate the Dell Model?

20. Auto Industry Industry Sales 2009 2008 2007 2006 2005 US 10.6 13.5
16.5
17.1
17.5
Europe
15.8
16.6 18
17.8
17.6
S. America
4.2
4.3
4.1
3.2
2.7
Asia Pacific Africa
24.5
20.9
20.4
18.6
17.3
US Market Share
2009
2008
2007
2006
2005
Ford
15.3%
14.2%
14.6%
16%
17% GM
19.7
22.1
23.4
24.1
25.8
Toyota
16.7
16.4
15.9
14.9 13
Honda
10.8
10.6
9.4
8.8
8.4

21. One Ford Strategy Formed in 2006
Implemented by CEO Alan Mulally to better align the auto maker’s global resources
Main focus is to impact company’s purchasing operations and its suppliers
Simplify, standardize and reduce the number of vehicle platforms and parts
Simplify vehicle ordering from the customer’s prospective

23. One Ford Objectives Formation of “matched-pairs” system
Team product development personnel with those from purchasing
Share a common cost objective and improve supply-base interface
Identify a single product-development and purchasing contact for a particular commodity
Boost profitability of suppliers
Longer-term contracts with closer working relationship with select preferred suppliers

24. Profitability/ Efficiency
2006
Profit Margin
Asset Turnover
Ford
-7.88%
.56
Toyota
6.52%
.79
Dell
6.46%
2.4
2009
Profit Margin
Asset Turnover
Ford
2.30%
.56
Toyota
-2.13%
.67
Dell
2.71%
1.76

25. Looking Forward
Conversion of assembly plants to small car production to support consumer preferences
Closing 3 Ford plans in period
Reduced Suppliers- Target suppliers: 750
2004: 3,300 suppliers
2009: 1,600 suppliers
2010: 1,500 suppliers
Downsize/Consolidate dealerships
Too many dealers at current and expected US Mkt share

26. What do you do when… You want to buy a new car?
You want to buy a new computer?
For a new car: Go to the Internet for information, and then to the dealer to actually purchase the car.
For a new computer: Go to the Internet or a store like Best Buy for information, and then compare prices online. Then purchase it at the cheapest place.
TRANSITION: Now let’s look at how the companies actually go from the beginner supplier to the customer

27. Ford’s Plant/Site Operations
Ford’s Model
Suppliers
Ford’s Plant/Site Operations
Ford’s Dealers
Customers

28. Dell’s Model Suppliers Dell Customers
Now let’s piece these three main components and look at the comparisons for Dell v. Ford. So let’s compare the way they interact with suppliers, internally as a company, and selling to the customers

29. Ford vs. Dell: Suppliers
( )
Suppliers
30,000
1,600
30+
Manufacturing Plants
180 90 3
Time to Delivery
45-60 days
Goal: 15 days
7-10 days
Ford obviously has challenges that Dell does not, just because of the sheer size and complexity of their organization.
Tatiana will talk later about how the IT specifically affects the supplier relationship at both Ford and Dell.
FORD’S GOAL IS TO HAVE ONLY 750 suppliers (from their Aligned Business Framework plan). The No. 2 U.S. automaker, whose purchasing budget runs to about $90 billion annually, said it wants to work with a smaller number of healthier suppliers and plans to reduce its supply base to 750 companies in the long term.
In 2000, Ford had daily movement of $140 million of material from 5,000 suppliers to 46 manufacturing and assembly plants, and then on to 7,000 dealers in North America

30. Ford Supply Chain Profile (2008)
Suppliers located in 60+ Countries
Suppliers in Emerging Markets 36
Supplier Manufacturing Sites 5,500+
Parts currently being manufactured130,000
Total Global Purchasing $90+ billion

31. Ford vs. Dell: Supplier Interaction
Tiered system
Becoming lean
Long-term relationship
Dell
2-3 suppliers per part
Benchmark-oriented

32. Ford vs. Dell: Customers
Primary business only (car sales and computer sales): Does not include the financial services sector of Ford (financing or the capitalization of operating leases for the fleet vehicles) nor does it include Dell’s server sales
30% fleet, 70% retail for Ford … Dell is 85-90% business, and 10-15% individual customer
Businesses usually order in large quantities, and as with computers, they tend to buy more expensive. (In 2002, the average selling price was $200 more than the industry average because of the average company’s order of a fully loaded computer)

33. Ford vs. Dell: Selling to Customers
Customers order online
Shipped directly to their home or office
Ford
Customers purchase through dealer
Customers receive car at the dealer
Dell’s ability to buy a new computer online reduces the costs of order management and customer care, as well as reducing the number of errors and returns. Much of their success is built upon the ability to eliminate middlemen (though they do currently sell in Best Buy, Walmart, Staples… but the overhead is not nearly the amount of Ford’s)

34. Ford vs. Dell: Selling to Customers
What does a Ford dealer do?
Maintain inventory
Test drives
Trade-Ins
Expertise
Warranty service, recalls, maintenance
Financing, Insurance, Warranties
Expertise: They know what is available and the features for the various cars

35. Ford vs. Dell: Customer Care After the Sale
Warranty: 90 days to 5 years
Business Customers: Online or On-site Assistance
Retail Customers: Phone or Locally Contracted Service Providers
Ford:
Warranty: 3 to 5 years
All customers served by dealerships

36. IT Progression at Ford Public Internet Site WIPS Oracle “Everest”
Discontinue Oracle
1995-program developed with Logica for procuring 100,000 parts worth $40 billion  facilitated sourcing, purchase decision support system, and ability to apply “what-if” scenarios
1999: for procuring items from 30,000 suppliers for Ford’s $80 billion in purchasing, supposed to save $500 million annually
2004: went back to system that was developed in-house (WIPS?)
mid-1995
May 1995
Nov 1999
Aug 2004

37. Dell IT: Customer Market
Internet
Premier.Dell.com
Dell.com
Call Center
IT Management
Tech Support
Ford uses site for info while dell uses it for transactions

38. Dell: Supplier Market B2B interface
Customer feedback provided to suppliers
“Real-time window” into information systems
Valuechain.dell.com
CAPS
PartMiner
Programs that are used for supply management
:indeed, the on-line real-time sharing of information on orders and productivity throughout the entire supply chain offers clear cost advantages as well as flexibility: despite the fact that inventory is low, both Dell and the suppliers rarely miss out on sales opportunities because of inventory limitations.”

39. Case Questions
What advantages does Dell derive from virtual integration?
Inventory Expense (Cost reduction)
Control of Supply Chain (VMI, EDI, EAM)
Efficient Processes (Pull System)
Aids Market Oriented Marketing (Customer is King)
Creates a competitive advantage
Programs that are used for supply management
:indeed, the on-line real-time sharing of information on orders and productivity throughout the entire supply chain offers clear cost advantages as well as flexibility: despite the fact that inventory is low, both Dell and the suppliers rarely miss out on sales opportunities because of inventory limitations.”

40. Case Questions
How important are these advantages in the auto business?
In context of Lean production…very.
Reduction in inventory and buffer.
Carrying & Transportation costs are reduced (pull system, accurate forecast, lot sizing, potential for mass customization)
As profit margins erode efficiency and waste/redundancies must be eliminated.
Programs that are used for supply management
:indeed, the on-line real-time sharing of information on orders and productivity throughout the entire supply chain offers clear cost advantages as well as flexibility: despite the fact that inventory is low, both Dell and the suppliers rarely miss out on sales opportunities because of inventory limitations.”

41. Case Questions
What challenges must Ford overcome that Dell does not face?
Aligning supply chain sophistication (EAM, XML, legacy architects)
Achieving Lean Sigma in quality control (Safety)
Excellent design, quality and time (lead time)
Size and scope of organization (suppliers, vendors, networks, geography)
Organizational Behavior (Leadership & Management, decentralization)
Programs that are used for supply management
:indeed, the on-line real-time sharing of information on orders and productivity throughout the entire supply chain offers clear cost advantages as well as flexibility: despite the fact that inventory is low, both Dell and the suppliers rarely miss out on sales opportunities because of inventory limitations.”

42. Case Questions Is the Dell model really relevant to Ford?
Programs that are used for supply management
:indeed, the on-line real-time sharing of information on orders and productivity throughout the entire supply chain offers clear cost advantages as well as flexibility: despite the fact that inventory is low, both Dell and the suppliers rarely miss out on sales opportunities because of inventory limitations.”

43. Case Questions How closely should Ford emulate the Dell Model?
Programs that are used for supply management
:indeed, the on-line real-time sharing of information on orders and productivity throughout the entire supply chain offers clear cost advantages as well as flexibility: despite the fact that inventory is low, both Dell and the suppliers rarely miss out on sales opportunities because of inventory limitations.”