MSIS-616 Case 3 Ford Motor Company: Supply Chain Strategy

Lucy Swain ID # 01291598

What historical factors affect Fords ability to move to a built to order (BTO) model?
Few of the historical factors affecting Fords ability to move to BTO are as follows: 1. Large number of suppliers: The fundamental issue for Ford is the management and control of their large database of their business partners, particularly suppliers and sub-suppliers. Unlike Dell, which has only about 50 suppliers, Ford has several thousand suppliers and operates in a more complex network of business relationships. Ford didnt had systematic plans for the supply of parts rather it has purchase cheaper parts on occasion of demands, resulting in complicated and diverse supply chains. Managing both suppliers and customers in a single efficient supply chain had always been a challenge for Ford.

2. Powerful Independent dealer network: In addition to large database of suppliers, Ford also has a large number of dealership networks that are widely spread in large geographical areas around the world. Due to the use of independent dealership networks to sell their products, Ford lacked control on their product end users. This has also created competition between each individual dealer as they work independently. Such lack of control, combined with dealer markups had negatively impacted their ability to build a BTO model. 3. Lack of up to date IT Infrastructure: Ford has a 3 tier of supplier network. Tier 1 suppliers provide Ford with complete vehicle subsystems. They wholly depend on these suppliers for components such as dashboards and drive trains, which are tailored to meet their specifications. Tier 1 depends on Tier 2 and 3 Suppliers for generic items. The inability of Fords first and lower level tier suppliers to keep up to date with IT technology that is need by Ford to stay up to speed in managing their

MSIS-616 Case 3 Ford Motor Company: Supply Chain Strategy

Lucy Swain ID # 01291598

production operations as intended is a major bottleneck within the supply chain. The lack of proper IT technology could result in miscommunication and lack of coordination between the supply partners and the outcome could be a higher order lead times, higher cost and operational hassle. 4. Push Model: Ford follows traditional Supply Chain Push Model. They produce enough products to meet the forecasted demand and sell, sent them to the dealerships for sales and push these products to the consumer. In this model production capacity for individual components get set long in advance and cannot be changed quickly to follow the BTO model. 5. Lack of proper communication channels & direct contact with end users: Communication channels and procurement procedures are bound within the limits of traditional phone and fax methods, which is a very error prone process. This lead to limited flexibility for ordering and limited responsiveness. Direct communication link to the customers does not exist where as Independent dealerships interact with the consumer and then the orders are sent through the supply chain. Without live data and proper means of communications its difficult for Ford to establish the BTO model resulting in delayed purchasing functions.

MSIS-616 Case 3 Ford Motor Company: Supply Chain Strategy

Lucy Swain ID # 01291598

What practical challenges must Ford address as it tries to establish Internet linkages with its supply base?
Few of the practical challenges that Ford must address are as follows: 1. Organization restructuring & heavy initial cost: Ford Motor Company is a very large and complex organization, with revenues of more than $144 billion and 3,70,000 employees. So, to establish Internet linkages within the supply base of such a complex organization will require complete restructuring of the company, investment in new high tech equipment and would require professional training resulting to a heavy initial cost and at the same time return on investment for this significant outlay may not be positive which can lead to significant loss. 2. Lack of technology & technological sophistication at lower tiers: Despite of heavy investment in technology, a similar risk exists in the possibility that vendors will not be able to invest in new technology at the rate Ford itself could. Also, the understanding and modernity of technology decrease drastically at the lower levels of supply chain. Ford would be forced to decide if they would want to help their suppliers develop or acquire the technology needed for this interaction or look for new potentially IT advanced suppliers. 3. Business to Business Linkage & its security: Ford supplier base is placed globally with each supplier having its own operating nature. To bring all of them to a uniform layer and share information between suppliers to maintain business continuity at an efficient way is a challenging task. This calls for other issues such as what type of information would be shared and the security system they should use to make sure only those with the need to know would have access to this information.