Operations & Productions Management Research Paper Part II

Submitted by: Linawan, Vladimir Jophil Sabarez BSLM 3A

Ford Motor Company Philippines (FMCP) is a Filipino Car manufacturing and a subsidiary of Ford Motor Company, focused on manufacturing automobiles for local and regional consumption, the first part of this paper pertained generally to the strategies and tactics of the company this part contains the evaluation of the company based from the data obtained in part I of this paper, with respect to the following: Product and Service design Strategic Capacity Process selection Quality Control

In summary of the previous data: Fords business strategy is embodied in our ONE Ford plan. ONE Ford expands on our Companys four-point business plan for achieving success globally. The four-point business plan consists of the following: Aggressively restructure to operate profitably at the current demand and changing model mix Accelerate development of new products our customers want and value Finance our plan and improve our balance sheet Work together effectively as one team Building on this plan, ONE Ford encourages focus, teamwork and a single global approach, aligning employee efforts toward a common definition of success. It emphasizes the importance of working together as one team to achieve automotive leadership, which is measured by the satisfaction of our customers, employees and essential business partners, such as our dealers, investors, suppliers, unions/councils and the communities in which we operate. We have defined a set of behaviors that are expected of all employees to support the ONE Ford plan.

The goal of ONE Ford is to create an exciting and viable company delivering profitable growth for all. We are focused on building: Great Products, a full family of vehicles small, medium and large; cars, utilities and trucks with best-in-class quality, fuel efficiency, safety and smart design Strong Business, based on a balanced portfolio of products and global presence; and Better World, accomplished through our sustainability strategy. Driven by strong results from Ford North America, we reported total Company full-year, pre-tax profit of $8 billion our third year in a row of $8 billion or more in pre-tax profits.1 Ford was the best-selling brand in the U.S., and the Ford Focus was the No. 1-selling vehicle nameplate in the world in 2012.2 Our financial turnaround has been based largely on our ability to deliver high-quality, innovative and desirable products everywhere we operate, in both mature and rapidly growing markets. To further our progress, we are continually improving quality and customer satisfaction and anticipating and responding to changes in customer demand. We have aligned our product development, manufacturing and marketing organizations worldwide to deliver the right products to the right markets as efficiently as possible. Regardless of vehicle or region, Fords global vehicles showcase our commitment to fuel efficiency. Technologies like EcoBoost, direct injection of gasoline or diesel fuel, sixspeed transmissions, and hybrid and plug-in hybrid powertrains deliver true power of choice to drivers everywhere.

Based on the foregoing this paper will now proceed to the evaluation of the overall strategy and tactics of the company based on Product and Service design, Strategic Capacity, Process selection and Quality Control.

Product and Service Design

The development of our new products starts with an understanding of the consumer: who they are, how they live and what they want in a vehicle. Next comes the identification of advanced technologies and breakthrough ideas by our Research Labs and our Advanced Product Strategy, Advanced Marketing and Advanced Design groups. These and other groups work within an annual planning process to assess the latest developments in technologies and consumer trends to identify the best new technologies and anticipate the needs and desires of the marketplace. Our product cycle plan defines timing for new or updated vehicles and the associated technology applications. Product development engineers, designers and product marketing teams work together to finalize a vehicle concept. Once the business case is approved, our vehicle programs are brought to market using our Global Product Development System, or GPDS. The GPDS, launched in 2005, merges the best product-creation methods from all of Ford Motor Companys global operations and is refreshed continually with the latest lessons learned as we develop new products. The GPDS provides a common set of milestones and metrics for the development of all vehicle programs across our regional business groups, which increases efficiency and quality. As a part of this system, and as part of our ONE Ford global integration process, we require all vehicles to meet specific competitive and performance targets at every milestone along the products development path. These targets consider a wide range of environmental performance criteria, such as fuel economy, recycled materials and substances of concern. For example, our product carbon dioxide emission-reduction goal, coupled with a commitment to class-leading fuel economy, has been translated into fuel economy targets for each new vehicle. Our targets aim to make our vehicles either leaders or among the leaders compared to competitor vehicles in the same segments. We develop these competitive vehicle attribute targets for every vehicle program, to deliver on key customer demands and Ford strategies, by using a range of consumer data, internal brand data and competitor vehicle data. Based on this process, we have committed that every all-new or redesigned vehicle

we introduce will be the best in class or among the best in class for fuel economy in its segment. We are following through on this commitment with vehicles introduced in both the U.S. and Europe, and we will continue to do so in future product launches. In addition, we have identified global leaders and attribute teams within Ford who coordinate the development of the global product attribute targets in key areas such as sustainable materials, recycling, materials of concern, vehicle interior air quality and vehicle lifecycle issues. These leaders coordinate the global implementation of our corporate sustainability strategies and support our ONE Ford strategy to harmonize product development across regions. We use a Design for Sustainability (DfS) approach to maximize the environmental, social and economic performance of our vehicles early on in the product conception and development process. Our Product Sustainability Index is our primary tool for incorporating DfS principles into our vehicles. The Ford Production System (FPS) is a continuously improving, lean, flexible and disciplined common global production system that encompasses a set of principles and processes to drive a lean manufacturing environment. Key elements of the system include effective work groups, zero waste/zero defects, aligning global capacity with global market demand, optimizing production throughput, and using total cost to drive performance. Each principle has a set of guidelines, or measurables, that help us to meet or exceed objectives. The measurables are deployed and tracked for every manufacturing location using the SQDCPME Scorecard, which keeps focus on the vital components of a sustainable business: Safety, Quality, Delivery, Cost, People, Maintenance and Environment. Overall the product and service design strategy of ford is very customer oriented, systematic, and values compliance with the regulation especially for environmental regulations following their sustainability design principle.

Strategic Capacity
With regards to strategic capacity here is the fords take At Ford, we promote long-term relationships with our suppliers and seek alignment with them on sustainability-related issues such as human rights and environmental responsibility. We work to ensure that Ford and our suppliers have management systems in place to mitigate potential risks, ensure continuity of supply and improve the overall sustainability of the complex global automotive supply chain. Our aim is to leverage our supply chain and our industry to make a positive impact in the markets in which we do business. We take a three-pronged approach to creating a sustainable supply chain and managing sustainability issues throughout our supply chain: Building strong relationships with suppliers and engaging strategic suppliers: Strong relationships improve our ability to encourage and influence the sustainability goals and management processes of our suppliers. We base supplier relationships on open communication, clear expectations and consistent requirements and processes. We have developed an Aligned Business Framework (ABF) with our most strategic suppliers, which helps us increase mutual profitability, improve quality, drive innovation and encourage shared commitment to sustainability goals. We work with our ABF suppliers at the corporate level to align and enhance approaches to a range of sustainability issues. Developing shared commitment and supplier capability: We seek to foster a shared commitment to sustainability throughout our supply chain and to help our suppliers build the capability they need to manage sustainability issues internally and throughout their own supply chains. We do this through dialogue and engagement, training, contract requirements, compliance assessments and, where necessary, remediation at individual factories.

Collaborating across the automotive industry: To influence and achieve lasting change at all levels of the automotive supply chain, we are leading work with our counterparts in the automotive industry to develop common approaches to a full range of sustainability issues. We do this work through the Automotive Industry Action Group and other industry and cross-industry initiatives.

Building strong relationships with suppliers is central to our ability to create a sustainable supply chain. Without strong relationships, we lessen our ability to influence the sustainability goals and management processes of our suppliers. We base our relationships with suppliers on open communication, clear expectations and consistent requirements and processes. And we work to maintain these relationships by: Deploying a single, global product-creation process that combines aggressive execution of product plans with minimal variances Enhancing process and part stability, commonality and reusability providing realtime performance data to our supply base Providing suppliers with greater access to senior Ford managers in small-group settings Improving order fulfilment Engaging suppliers in discussions about process stability, incoming quality and corporate responsibility Engaging Strategic Suppliers through Our Aligned Business Framework

In addition to the efforts we make to build relationships with all of our suppliers, we engage even more robustly with our most strategic suppliers, through our Aligned Business Framework (ABF). We introduced the ABF for our most strategic suppliers in 2005 to increase mutual profitability, improve quality, drive innovation and help us encourage shared commitment to sustainability goals. Through our ABF program, we help our Tier 1 suppliers develop the capability to manage their own supply chain sustainability issues. We sign bilateral agreements with our ABF suppliers that comprehensively and formally spell out business commitments. For example, ABF suppliers must commit to manage and assure proper working conditions and responsible environmental management in

their facilities and their supply chains. ABF suppliers must also adhere to our Global Terms and Conditions. Beyond the fact that it is the right thing to do, requiring suppliers to commit to these terms also reduces the risk of operational or reputational issues that could affect production and provides the basis for Ford to work with suppliers to ensure responsible behavior throughout the automotive supply chain. See the Building Shared Commitment and Capability throughout Our Supply Chain section for more on how we engage ABF suppliers on sustainability issues. Fords ABF Suppliers As of June 2012, the ABF network included 103 companies, including 78 production and 25 nonproduction suppliers from around the world. Minority- and women-owned suppliers make up more than 10 percent of the total. ABF Production Suppliers

Akebono Asahi Glass Co Ltd. Autoliv Automotive Lighting Autoneum BASF Benetler Automobiltechnik GmbH BorgWarner Bosch Brembo Brose Central Glass of America Continental Cooper Standard Dakkota* Dana Delphi Denso Detroit Manufacturing Systems* Diamond Electric Dicastal Wheel Diversified Machine Dupont Eisenwerk Bruel GmbH Faurecia FCC Adams LLC Federal Mogul

Flex-N-Gate* Foster GFT (Getrag/Ford JV) GKN Grupo Antolin* Hankook Hella Hitachi-Clarion HUSCO Automotive IAC Inalfa Inergy JCI Johnson Matthey Kautex Textron GmbH & Co.KG Key Safety Systems Kiekert KSPG Group Lear Linamar Magna MANN & HUMMEL Martinrea Maxion Wheels Michelin Mitsubishi Electric Corporation Muhr und Bender KG Neapco Nemak PPG Panasonic (Sanyo) Piston Automotive* Pirelli Prime Wheel* Ronal Samvardhana Motherson Sonavox Superior Takata Holdings Tenneco Thai Summit Thyssen Krupp Toyoda Gosei Trelleborg TRW

Umicore Valeo Visteon Webasto Yazaki ZF

ABF Non-Production Suppliers

Active Aero Aristeo Blue Hive Cisco Cross Country Automotive Services Devon Industrial Group* Durr EWI Worldwide Ewie* Federal Express Global Parts & Maintenance Gonzalez Production Systems* Imagination Kajima Overseas Asia Kuka MAG Automation Microsoft MSX International Penske Percepta Roush Team Detroit Uniworld Group* Waldbridge Zubi Advertising*

* indicates minority- or women-owned business enterprise supplier Overall the in terms of strategic capacity, Ford employs as its strategy is the preservation of a good supply chain for its manufacturing needs, in the tactical level it employs a good relationship with its supplier companies.

Process Selection
A. Ford Motor Company and its Ford Dealerships use an Assembly Line type of product flow. Now the Assembly Line was essentially invented at Ford Motor Company by Henry Ford himself, so this method of manufacturing has become quite widespread over the last 100 years. Ford Motor Company's products are assembled and manufactured in a linear sequence of operations. The vehicles move from one step to the next in a sequential manner from beginning until total completion. While Ford Motor Company has over 90 plants worldwide, it used to have a lot more. Over time Ford has closed many assembly plants due to many reasons. But at one point in time Ford's assembly plants could only produce one or two types of a vehicle and that was it. But now Flexible Manufacturing has come in to reduce underutilized assembly plants which previously ran on one or two shifts, with mega flexible assembly plant complexes that run on three shifts. These flexible assembly plants are capable of building up to ten different vehicles off of two different vehicle platforms. This allows Ford to adjust its production accordingly to current market demands. B. Make to Stock (MTS) and to a certain extent Make to Order (MTO)/Assemble to Order (ATO) is the consumer ordering process that Ford Motor Company and the Able Ford Dealership use. The inventory department takes into consideration the availability of each type of vehicle it orders and the sales history of that vehicle as well. This allows them to order the vehicle based on current market conditons. So if there is an extremely high demand for the Ford Focus then that means every Ford Dealership is clawing to get as many as possible, so not every Ford Dealership will be able to get as many as they want. While most Ford Dealerships, including Able Ford, would much rather use the Make to Stock process by just building vehicles according to the regular mix of what most people want, they are more than happy to use the Make to Order process as well. Despite thousands of hours of general sales data and history, there will always be a customer that comes into the dealership to purchase a speicifc vehicle with certain options that is

currently not in the inventory. So the inventory department will sit down with the customer and build the vehicle with the options they want, and within six to eight weeks they can take delivery on the vehicle they ordered. C. The particular cell that Ford Motor Company and its Ford Dealerships fall into is the Continuous and Assembly Line Flow cell, which is coupled with Make to Stock and Make to Order/Assemble to Order. D. The factors influencing Able Ford's inventory department process selection include taking into consideration the availability of each type of vehicle they want to order and the sales history of that vehicle as well. Depending on what the current market situation is will pretty much dictate what they can order and then have built. If there is no demand for a vehicle, the inventory department will simply not carry that vehicle, but that doesn't mean a vehicle can't be ordered if a customer wanting it, wishes to buy it. E. Ford Motor Company can adopt certain pieces to the mass customization methods. For example, years ago Ford only offered one type of mid-size utility vehicle, the very popular Ford Explorer. Throughout much of the 1990's and early 2000's Ford sold over 400,000 Explorers a year, but over time the Ford Explorer was no longer unqiue to the consumer, as everyone and their brother had one. Now Ford faced a dilema because consumers were beginning to migrate to other automakers that offered different types of mid-size utility vehicles which were different and unique. So Ford needed to continue to offer the Ford Explorer, as well as offer different types of utility vehicles, otherwise Ford would begin to lose its own customer base and market share. So through flexible manufacturing and advancing technology Ford is now able to offer (4) four different mid-size utility vehicles and they include the Ford Explorer, Edge, Flex, and Taurus X. These vehicles are beginning to share platforms, powertrains, transmissions, all-wheel drive systems, as well as many other components with each other. By sharing so many components that the consumer wouldn't even notice or care about, this allows Ford to utilize economies of

scale. By having mutliple vehicles share a common platform and common components, you utilize the same starting point and hard engineering, but offer a different vehicle body or "top hat." While these vehicles aren't individually customizable, Ford is now able to offer four different types of mid-size utility vehicles because each one appeals and caters to a different type of consumer.

Quality Control
Six Sigma at Ford has been in the works since 1999, when the company's former director of corporate deployment for Consumer Driven 6-Sigma sought an effective method to improve quality. Top management soon joined the cheering section, and Six Sigma efforts have been persistent ever since. Ford celebrates its 100th anniversary, and quality has been a pivotal factor since the beginning. In fact, Henry Ford introduced several principles and practices that are now considered the backbone of lean manufacturing. Since that time, Ford has tried its hand at total quality management, and now Six Sigma. With more than 200 Master Black Belts, 2,200 Black Belts and nearly 40,000 Green Belts worldwide, Ford is now looking to provide at least Green Belt training for almost all of its employees, whether it's for Six Sigma awareness or for actual Green Belt verification. Black Belt classroom training is one week per month for four months. This enables students to apply learned principles to their first project while they learn--one week of training and three weeks of implementation per month throughout the four-month period. Improvement projects are tackled using a team approach. The teams consist of a member of upper management, a Master Black Belt, a Black Belt and Green Belts in various fields of expertise. Each plays an integral role in the project's success.

Project Champion--A member of upper management who supports the project and removes any roadblocks for the Black Belt Master Black Belts--Train Black Belts and mentor them in their projects. They also show progress and successes to upper management. Black Belts--Implement Six Sigma projects and lead individuals on the improvement team in the right direction Green Belts--Learn some of the tools, help Black Belts with projects and do small projects of their own. Green Belts with expertise in different areas often participate on the same team.

Black Belts are asked to handle about two or three projects at a time. Black Belts choose their own projects and are asked to take on only those that have waste elimination savings and customer satisfaction improvement. "We want this year's Six Sigma projects to deliver half of the company's 'Things Gone Wrong' objective for the year," says Debbe Yeager, director of Consumer Driven 6-Sigma at Ford. Project teams involve as many people as they need to and always include a Project Champion, a Master Black Belt and a Black Belt. Many times, they work with Green Belts, who are experts on various aspects of the project, from financial analysis to part maintenance. The most effective way to measure a quality management system's effectiveness is by looking at the numbers. Since Six Sigma's inception, Ford has saved about $1 billion in waste elimination globally. Year-over-year savings worldwide was $359 million last year. Moreover, customer satisfaction has risen five percentage points in the company's internal customer satisfaction survey. Results like these don't happen overnight. Ford invested heavily up front to train its employees as Six Sigma Green Belts, Black Belts, Master Black Belts and Project Champions. The company also implemented a project-tracking system in which members of separate project teams can observe via an internal database what others are working on. Currently, Ford has approximately 3,000 Project Champions, and its Black Belts have closed more than 6,000 projects during the past three years.