CASE STUDY: HENRY FORD

Almost from the start, Henry Ford envisioned a totally self – sufficient industrial empire. In River Rouge, just southwest of Detroit, Ford developed a huge manufacturing complex that included an inland port and an intricate network of rail and road transportation. Fords objective was control. To achieve this goal, he set out to develop the world’s first complex vertically integrated firm.

To ensure reliable supply of materials Ford invested in coal mines, iron-ore deposits, timberlands, glass factories and even land to grow soya beans used to manufacture paint. Ford’s commitment to self – sufficiency extended to buying 2.5 million acres in Brazil to develop a rubber plantation he called Fordlandia.

Ford’s desire for control went beyond material and components. To Transport materials to River Rouge and finished product to dealers he invested in railroads, trucks, and both Great Lakes and ocean vessels. The idea was to control all aspects of inventory moving from a network of over forty manufacturing, service, and assembly plants throughout the United States, Canada, Australia, New Zealand, the United Kingdom, and South Africa to dealers throughout the globe.

This was clearly one of the most ambitious vertical integration schemes, and Ford found he needed help. At the peak of Ford’s vertical extension the firm faced economic, regulatory, and labor union barriers that eventually required products and services to be provided by a network of independent suppliers. The key to effective marketing was finally found by developing a strong network of independent dealers. As time passed, Ford discovered that specialized firms could perform most essential work as well as or better than his own bureaucracy. In fact, these specialists often outperformed Ford’s own units with respect to quality & cost. Entrepreneurial firms soon became contributors to Ford’s network. Over time, the Ford stategy shifted from ownership-based control to one of orchestrating channel relationships. The financial resources at Ford were shifted to developing and maintaining core manufacturing competencies. Ford found out that in the final analysis, no firm can be self – sufficient.

(Case Study referred from Logistical Management by D. Bowerzox , D Closs)