Ford Motor Company:

Supply Chain Strategy

Spencer Patterson
Becky Tibbenham
Tatiana Gonzalez
David Windle
Quinn Gooch

Fords Model T

The Blue Oval Trade Mark

Ford Goes Global

Lincoln Motor Company acquired in 1922

Fords River Rouge Factory

15,767,708 square feet

B-24 Bombers

Henry Ford Dies in 1947

Ford post WW II

post WWII continued..

Ford Expands its Foot Print

Ford Turns 100

12 Billion in Losses

Matrix Analysis: Ford Motor Company

Fords Market Position

Broad
Market
Positioning
Narrow

Low Cost
Value - added
Product Positioning
14

ITs Strategic Impact

High
Factory

Impact on
Business ops

Low

Strategi
c

Support

Low

Turnarou
nd

High

Impact on Strategy
15

Ownership

Governance and Ownership

Community

Alliance

Corporation

Market

Hierarchy

Partnership

Governance
16

IT Environment & Enterprise Organization

Enterprise

Simpl
e

Compl
ex

Pull system/Low
inventory
Push system/ high
inventory

Stable/Certa
in

Environmen
t

Dynamic/Uncert
ain

Where Systems Fall

Coupling

Loose

Tight
Linear

Interactions

Complex

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?

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

One Ford Strategy

Formed in 2006
Implemented by CEO Alan Mulally to better align the
auto makers global resources
Main focus is to impact companys purchasing
operations and its suppliers
Simplify, standardize and reduce the number of vehicle
platforms and parts
Simplify vehicle ordering from the customers prospective

One Ford Objectives

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

Looking Forward
Conversion of assembly plants to small car production to
support consumer preferences
Closing 3 Ford plans in 2010-2011 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

What do you do when

You want to buy a new car?

You want to buy a new computer?

Fords Model
Suppliers
Fords
Plant/Site
Operations
Fords
Dealers
Customers

Dells Model
Suppliers

Dell

Customers

Ford vs. Dell: Suppliers

Ford
(2000)
Suppliers
30,000
Manufacturi
180
ng Plants
Time to
45-60 days
Delivery

Ford
(2009)

Dell

1,600

(19982010)
30+

90

Goal: 15
days

7-10 days

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

Ford vs. Dell: Supplier Interaction

Ford

Tiered system
Becoming lean
Long-term relationship

Dell

2-3 suppliers per part

Benchmark-oriented

Ford vs. Dell: Customers

Ford (USA)

Dell (USA)

Fleet
Retail

Business
Retail

Ford vs. Dell: Selling to Customers

Dell

Customers order online

Shipped directly to their home or office

Ford

Customers purchase through dealer

Customers receive car at the dealer

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

Ford vs. Dell:

Customer Care After the Sale
Dell:

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

995

IT Progression at Ford

May
1995

Nov
1999

Aug
2004

Dell IT: Customer Market

Dell: Supplier Market

B2B interface
Customer feedback provided to suppliers
Real-time window into information systems
Valuechain.dell.com
CAPS
PartMiner

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

Case Questions
How important are these advantages in
the auto business?

In context of Lean productionvery.

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.

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)

Case Questions
Is the Dell model really relevant to Ford?

Case Questions
How closely should Ford emulate the Dell
Model?