Ford Motor Company: Supply Chain Strategy

Presentation By: GROUP 7

Ravindra Kumar
Rohit Anand
Saket
Saurav Singh

Q1. Will you buy car online? Consider the experiences that you have had in
buying a car. Compare this with experiences of buying computer online.
What do you think explains the differences?
In general , we will not prefer to buy car online, unless we are getting cost advantage (or) significant
price difference by buying online.

Comparison of Buying Experiences

Buying Buying Computer
Car
online
Purchasing decision
time

More time

Less time

Influence of
reference group

Significant

Less

Evaluation of
alternatives

Involves more time

and complex

Easy

Option of

Restricted

Extreme

Reasons for difference in buying experiences

Buying Car

Buying compute
online

Category of
product

High involvement
product, more of
luxury product,
Integral

Moderate
involvement or low
involvement
product, more of
necessity, Modular

Role of third party

High

Less

Ease of purchase

Less

High

Q2.What is virtual integration and what benefits Dell derives from

virtual integration? How important are these advantages in the auto
business?

Real time responsiveness and inventory management

Real-time updating of order status and the ability to check order status
regardless of where the order is in the fulfillment process provided Dell with
differentiating capabilities.
Inventory velocity
Forecasting
Dells direct relationship with customers are key to forecasting.
Dell has easy access to data useful for forecasting; most of the data are
already in Dells systems
In case of Ford, the dealers own most of the direct data about customer
demand.
Ford has a very base of individual customer unlike Dell that has a relatively
small number of institutional customers

Important in case of Auto Industry

Many components such as tyres, windscreen wipers, and electrical
components are sourced from large suppliers and are same for all
companies. These products are well suited to a closer integration of
supply - virtual integration.
Difficult in case of model specific component.
Being powerful and large company make it difficult to develop virtual
integration.

Q3.Compare the enterprise models of Dell & Ford. Do you think the
financial performances the two firms are linked to their enterprise
models?

Similarities
Customers frequently steered to PCs with high availability to balance supply
and demand
Suppliers maintain nearby ship points; delivery time 15 minutes to 1 hour
External logistics supplier used to manage inbound supply chain
Focused on strategic partnerships: suppliers down from 200 to 47
Differences
Suppliers own inventory until it is used in production
Demand forecasting is criticalchanges are shared immediately within Dell
and with supply base
Demand pull throughout value chaininformation for inventory
substitution

Financials
Only assembly facilities in case of Dell reducing cost of manufacturing set ups.
Inventory confined to suppliers in case of Dell reducing inventory cost.
No dealers cut down dealers margin.
Employees less in no. in case of Dell leading due to save on expenses.

Q4.What do you think is the ideal use of internet in the auto-business vis--vis
its use in PC industry (you may focus on marketing & distribution,
production & purchasing, after sales service, new product development)?
Ford must think about its relationships with suppliers, dealers and customers.
As supply chain systems staff members study the Dell model in particular, they
come to appreciate that virtual integration must include design not only of the
supply chain but also of fulfillment, forecasting, purchasing, and a variety of other
functions that had long been considered separately within the Ford hierarchy.
Needs to change how it is historically operated internally and how it has
interacted with important partner constituencies (including dealers)

Focus on digital advertisement

Online marketing surveys aimed at customers.
Online customer feedback centre.
Customer interactive forum
Enabling MIS.

Q5. What historical legacies and operational issues do you think

will affect Fords ability to move to a Built-to-order model?
Ford is 100 yrs old Founded 1903, Dell on the other hand was founded
15 years ago
Product variety
Necessitates the management of large number of individual
component inventories
Production capacity for individual components get set long in advance
and cannot be changed quickly

Process Complexity
A large number of suppliers
3 tiers of suppliers
Business was usually over the phone and fax
Ford a $150billion company enjoy a tremendous leverage over
its suppliers
Annual component price decrease and open book
Powerful independent dealer network
Unionized labor force

Q6. What practical challenges must Ford address as it tries to

establish internet linkages with its supply base and its customers?
Difficulties in establishing business to business linkages
Difficult to determine feasible and appropriate redesign of the process
Ford supplier network had many more layers and many more companies as compared
to Dell
New globe approach needed technology be used to overcome geographical constraints
on information flow
Lack of technology and technological sophistication that prevail in the supply chain,
especially at lower tiers
To create consistency in technology standards and processes in supplier network
At Dell, purchasing activities reported into product development organisation but at
Ford, purchasing organizationally independent of product development

Q7. Customer responsiveness initiatives that Ford took to

position the company favorably for success
Reduce the customer order to product delivery time to 15 days
Forecasting of customer demand from the dealers
Having regional mixing centers that optimize scheduled deliveries of
finished vehicles
Creating an experience for the customer in the showrooms that would
make him come back frequently
Superior selling service and more service outlets
Launched a public internet site by mid-1995

Q8. If you were Teri Takai what would you recommend to senior
executives? To what extent should Ford emulate Dells business
model.
If Ford is to successfully emulate Dell then they are best able to do this in areas
where they have similarities.
The most notable congruency is in the area of supply of generic components.
Here Ford should continue its process of building strategic relationships.
Where components are of a more specialised nature then Ford should examine
the relationships to ascertain whether bringing suppliers closer to the company
will offer benefits to both parties.

Ford should work on its' internal culture. Integration of supply chains on the
scale practiced by Dell can only occur in an environment where information
flows freely to all points of the supply network.

As outlined in the case documents; Ford maintains a high degree of separation

of the purchasing departments from marketing and production. Ford will not
be able to provide focus up and downstream unless they themselves are
committed to an open culture where logistics information is a part of the life
blood of the company.

The relationship with customers is more difficult. The dealer network will
probably be averse to Ford moving towards direct sales, as it will threaten their
livelihood. They can reap some of the benefits by introducing a web based
ordering service for cars, allowing clients to specify the car that they want and
then matching the requirement to the cars already in stock through out the
network. If a client prefers they could order a vehicle built to order and
supplied to a local dealer. This will enable Ford to become closer to the needs
of clients, seeing accurately what they want rather than what they buy because
it is available.

This compromise will give the company some benefits:

Information about customer wishes.
Opportunity to reduce both dealer stocks and Fords' stocks by
avoiding duplication.
Delaying the final form of the product by increasing the range of
dealer fitted items will enable Ford to simplify manufacture, whilst
offering a greater degree of 'real customisation' to clients.
Delay of final form will increase dealer revenues, buying their
enthusiasm and consent for the next stages of coordination.