1. Complexity Presented by: Colleen Roache Daniel Jensen Additional Team Members Memphis Chen Bass Fahmi Michael Loiacano Eugene Yohannan Nicole Hackett

2. “The usual antidotes to complexity miss their mark because they treat the problem on the factory floor rather than at the source: the product line.” What does this mean? 1.Management aware of complexity problems but unaware of the source 2.Management tackles complexity issues through operations instead of through product design.

3. Complexity at Ford When Complexity Makes Sense: Marginal revenue of Complexity > Marginal cost Marginal revenue of Complexity > Marginal cost Main Source of Complexity at Ford: Entrenched managerial assumptions Entrenched managerial assumptionsExamples:  Boring models will sell (Ford Five Hundred)  Horsepower over fuel efficiency  Strong brand names will sell despite design (Taurus)  Remain in our comfort zone because change is too risky

4. Complexity at Ford Sources of complexity at Ford Lack of shared parts/chassis Lack of shared parts/chassis Similar vehicle models Similar vehicle models Similar brands (Mercury) Similar brands (Mercury) Option packages per vehicle Option packages per vehicle

5. Complexity at Ford Ford’s excess complexity leaks over to dealerships in the form of higher inventory Dealer Relationship Lack of communication Lack of communication Work in unison with dealers to enhance sales and service Work in unison with dealers to enhance sales and service Create a network of quality dealers for the sale of widely purchased products – customers most direct experience with Ford is through its dealers Create a network of quality dealers for the sale of widely purchased products – customers most direct experience with Ford is through its dealers

6. Dealing with Complexity at Ford Two Step Approach 1. 1. Reduce excess complexity 2. 2. Keep out excess complexity

7. Dealing with Complexity at Ford Reduce Excess Complexity 1.Eliminate similar brands 2.Create a basic, standard package for each model that customers will accept  A/C, safety features, horsepower, handling capabilities, etc. 3.Create a limited amount of additional packages suited by customer demand  Power package with automatic transmission, more horsepower combined with more luxury items, etc.

8. Dealing with Complexity at Ford Keep Out Excess Complexity 1.Aggregate costs should be considered for new products or options, not just the physical cost 2.Limit new designs to specific parameters  New cars should use as many existing chassis and parts as possible 3.Further customization should be done at the dealer  Dealers stock add-ons parts and share revenues as well as costs 4.Commitment to review complexity every 12 months

9. Build to suit you Ford makes the car/truck in a basic format Ford makes the car/truck in a basic format Customer design and orders online Customer design and orders online Vehicle shipped to dealership from Ford Vehicle shipped to dealership from Ford Options shipped from suppliers Options shipped from suppliers Dealers assembly car Dealers assembly car

10. Questions???