INTRODUCTIONFord Motor Company was founded by Henry Ford in 1903, in Dearborn, Michigan. It is one of three leading automotive manufacturing companies in United Sates and grew to reach revenue of more than $144 billion with 370,000 employees and operation spanned 200 countries. In the 1970s, the automobile market for the major auto-makers, General Motors (GM), Ford and Chrysler was crunched by competition from foreign manufacturers such as Toyota and Honda. The automakers faced the need to continue to improve quality and reduce cycle time while dramatically lowering the developing cost and looking for ways to take advantage of their size and global presence since the industry was fast becoming global. One element that helps them in achieving this is to become the biggest automaker and Ford has announced to acquire Swedens Volvo. There was a need to change in accordance to fast technology changes in order to have advantage over other automakers.Fords Director of supply chain system intended to change to virtual integration model in Ford supply chain and has used Dell as the benchmark for the change. However, there are difference in Dell and Ford operation and network system that need to be taken into consideration.

FORD 2000Ford has come up with restructuring and reengineering plan by merging its North American, European and International automotive operation into a single global organization called Ford 2000. This is done in order to reduce the cost and globalizing corporate organizations and processes. By globalizing the processes Ford intended to eliminate organizational and process redundancies and realize huge economies of scale in manufacturing and purchasing. This new global approach required new technology in order to overcome the geographical constraints in information flow. Teams from different continents needed to be able to communicate with each other easily and all information need to be spread easily and received by all parties. Since the internet technology has grown very fast, Ford 2000 made it possible to achieve. They also intended to expand the process to the suppliers to enhance materials flow and reduce inventories. They also worked together with Chrysler on Automotive Network Exchange (ANX) with the aim to create consistency in technology standards and processes in suppliers network in making good interaction between all automakers in the same means.

SUPPLY CHAIN MANAGEMENTPreviously, Ford has thousands of suppliers that supply all the materials to them. All these suppliers were chose based on the lowest price offered. But then Ford begins to reduce the number of suppliers by building longer-term relationships with subset of very strong suppliers who could provide the entire vehicle sub-systems. Ford also made its expertise available in dealing with the suppliers in order to improve their operation via Just in Time inventory, Total Quality Management and Statistical Process Control. By this close and longer relationship, Ford expected reducing in price every year. By using Dell as benchmark, the supply chain system team has found out that there are different in its nature and complexity of supply base. One of the differences was the purchasing activities. Dells purchasing activities happen in the product development organization which mean centralized while for Ford it is decentralized activity as the purchased was made in accordance to product development. All purchasing is made during each product development. One of Ford 2000 initiative was Ford Production System. FPS is integrated system that aimed at making Ford manufacturing operations learner, more responsive and more efficient. One important part is Synchronous Material Flow which is a system that produces a continuous flow of material and product driven by fixed, sequenced and leveled vehicle schedule, utilizing flexibility and lean manufacturing concepts. One of the important things is that the system will assure that all vehicles were assembled in order sequence. By so, Ford can tell what material to order at exactly when and where needed days in advance and the buffer stocks could be dramatically reduced. But this can only be effective if all sequenced assembly could be kept level and if it was well forecasted.Other than the system, Ford also initiates Order to Delivery with the purpose to reduce to 15 days of the delivery finished products. This method helps Ford in identified bottlenecks throughout Ford supply chain, including its marketing, material planning, and vehicle production and transportation process. This approach relied on several elements such as ongoing forecasting of customer demand from dealers and secondly a minimum of 15 days of vehicles in each assembly plants order bank to increase manufacturing stability, gaps in order bank are filled based on historical buying patterns provided by dealers. Furthermore, regional mixing centers that optimize schedules and deliveries of finished vehicles via rail transportation and lastly a robust order amendment process to allow vehicles to be amended for minor color and trim variation without having to submit new order. This Order to Delivery is meant to create a lean, flexible and predictable process that enable Ford to provide customers the right products in the right place at the right time. By doing this it can helps Ford to provide better quality, higher customer satisfaction, improved customers selection, better plant productivity, stability for its supply base and lowering the company cost.Ford also launched Ford Retail Network to take advantage of the changing face of retail vehicle distribution systems in North America. It has two primary goal, first to be a test bed for best practice in distribution throughout the dealer network and secondly to create alternate distribution channel to compete with retail chain. This is accomplished by buying the dealers in local market so that the dealers were in competition against the real market rather than to each other. In conclusion to all of the above, Ford has prepare themselves in order to adapt to the technology changes. With all of the system introduced Ford can examine whether they can switch from current practice to virtual integration like Dell is doing. They need to examine whether the changes is suitable for them and help in reducing the cost or not. Whether the changes would bring benefit to them or otherwise, all aspects of the changes need to be taken into consideration in order to ensure the changes is the right thing to do.

QUESTIONS & ANSWERSQuestion 1What historical legacies affect Fords ability to move to Bill to Order (BTO) model?From this case study, it can be seen that Ford was established long time ago in 1903 whereas Dell was not as old as Ford is now. The older the company, the more difficult it is to reform the company. For Ford, there were thousands of supplier networks in complex business relationship. The case study shows the differences between Dell and Ford. As Ford deal with bigger assets, higher number of employees and manufacturing facilities in the world, this would be a challenge for Ford to move to virtual integration system. Inventories for Ford are more complex rather than Dells. There are more numbers of individual component inventories for Ford. Production capacity for individual components gets set long in advance and cannot be changed quickly. The manufacturing process in Ford is more complex since they have large number or suppliers eventually 3-tiers of suppliers and the business with the suppliers is either done through phone or meetings.

Question 2What is virtual integration and what are the benefits Dell derives from virtual integration?In virtual integration, physical assets are replaced by information where manufacturing continues to be controlled by the companys planning department through providing logistics management and forecasts for demand and receipts. In this, company no longer delivers finished goods to the customer instead the goods are completed by one partner and then go to the warehousing partner who sends the product to the customers as orders come in. One of the biggest advantages is that virtual integration allows partners to be located far apart from each other, and they do not have to be in the same building. This reduces production problems related to communications, coordination and control.For Dell, virtual integration gets them real updated or order status and gives them the ability to check the order status regardless of where the order is. Through this, forecasting will be easy. Since Dell has easy access to the data, they can predict the customer demand. As Dell has a relatively small number of institutional customers, virtual integration makes their business easy.

Question 3What practical challenges must Ford address as it tries to establish internet linkages with its supply base?One of the major challenges Ford will face is that this plan is costly as Ford do not have sufficient technological advantage. They need to align all the data in a network connecting companys suppliers which covers the areas of quality, manufacturing, product development, purchasing, marketing and customer service. As Ford suppliers are based on tiers, it is a big challenge to unite all their suppliers network in one connection. It is time consuming as well.Ford had derived a multi-tiered system of supply. This shows that Ford has a complex network of suppliers to deal with and much of their supplier base does not have IT knowledge or capabilities. This can be a draw back for Ford as virtually integrated supply chains require considerable IT capabilities for information sharing.Question 4How might Ford move toward a BTO model in a way that makes sense in the auto industry context?Ford can move toward BTO model by partially implementing the virtual integration system implemented by Dell where they can discard the part that does not fit with their supply chain. Ford need to centralized and share their IT system with their suppliers since Tier 2 and 3 suppliers might not be able to update their IT as often as Ford. This can help to coordinate smooth flow of the material and avoid bottlenecks and enhance efficiency of the supply chain. Dealer can play an important role in car distribution process since it can help customers to make a better choice rather than customer dealing online with the 3d model and description. With the help from the dealer, customers can clear their doubts and confusion directly. This will not only reduce overhead and inventory carrying cost but open new market segment and attract clients who love online shopping.

Bibliography

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