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Ford Motor Company: Supply Chain Strategy Spencer Patterson Becky Tibbenham Tatiana Gonzalez David Windle Quinn Gooch

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Fords Model T

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The Blue Oval Trade Mark

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Ford Goes Global

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Lincoln Motor Company acquired in 1922

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Fords River Rouge Factory 15,767,708 square feet B-24 Bombers

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Henry Ford Dies in 1947

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Ford post WW II

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post WWII continued..

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Ford Expands its Foot Print

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Ford Turns 100

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12 Billion in Losses

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Matrix Analysis: Ford Motor Company

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Fords Market Position 14 Broad Narrow Market Positioning Low Cost Value - added Product Positioning

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ITs Strategic Impact 15 High Low Impact on Business ops LowHigh Impact on Strategy SupportTurnaround Strategic Factory

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Governance and Ownership 16 Community Alliance Corporation MarketHierarchyPartnership Ownership Governance

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Environment Enterprise Simple Comple x Stable/CertainDynamic/Uncertain IT Environment & Enterprise Organization Push system/ high inventory Pull system/Low inventory

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Where Systems Fall Interactions Coupling Loose Tight LinearComplex

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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?

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Auto Industry 20092008200720062005 US10.613.516.517.117.5 Europe15.816.61817.817.6 S. America4.24.34.13.22.7 Asia Pacific Africa 24.520.920.418.617.3 Industry Sales US Market Share 20092008200720062005 Ford15.3%14.2%14.6%16%17% GM19.722.123.424.125.8 Toyota16.716.415.914.913 Honda10.810.69.48.88.4

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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

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One Ford Objectives Formation of matched-pairs system Team product development personnel with those from purchasing Share a common cost objective and improve supply- base interface Identify a single product-development and purchasing contact for a particular commodity Boost profitability of suppliers Longer-term contracts with closer working relationship with select preferred suppliers

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Profitability/ Efficiency 2006Profit MarginAsset Turnover Ford-7.88%.56 Toyota6.52%.79 Dell6.46%2.4 2009Profit MarginAsset Turnover Ford2.30%.56 Toyota-2.13%.67 Dell2.71%1.76

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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

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What do you do when You want to buy a new car? You want to buy a new computer?

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Fords Model Suppliers Fords Plant/Site Operations Fords Dealers Customers

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Dells Model Suppliers Customers Dell

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Ford vs. Dell: Suppliers Ford (2000) Ford (2009) Dell (1998-2010) Suppliers30,0001,60030+ Manufacturing Plants 180903 Time to Delivery 45-60 daysGoal: 15 days7-10 days

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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

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Ford vs. Dell: Supplier Interaction Ford Tiered system Becoming lean Long-term relationship Dell 2-3 suppliers per part Benchmark-oriented

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Ford vs. Dell: Customers

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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

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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

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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

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IT Progression at Ford Public Internet Site WIPS Oracle Everest Discontinue Oracle mid-1995 May 1995 Nov 1999 Aug 2004

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Dell IT: Customer Market Internet Premier.Dell.com Dell.com Call Center IT ManagementTech Support

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

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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

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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.

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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)

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Case Questions Is the Dell model really relevant to Ford?

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Case Questions How closely should Ford emulate the Dell Model?