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Ford vs Dell Case Study -By Yasser Hammoud

Ford vs Dell Case Study -By Yasser Hammoud

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Published by y-hammoud
Ford vs Dell case study
Ford vs Dell case study

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Published by: y-hammoud on Jan 28, 2012
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07/30/2013

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Part 1: Executive SummaryAfter carefully analyzing Ford’s existing supply chain I immediately became aware of its highlycomplex nature. This high level of complexity combined with other internal and external factorshave pushed Ford to search for solutions in order to overcome the costly supply chain challengesthat they are facing and may continue to face in the future. Ford’s major difficulty in their  present system is: the inefficient control of their large data base and complex network of suppliers, the existence of independent distributors and their inability to communicate and servetheir customers directly.Realizing an urgent need to modify their supply chain in order to make it more cost effective andmore profitable, and after careful analysis of the whole situation, I have recommended the partialimplementation and execution of the virtual integration direct business model that has been used by Dell. Through this model, Ford will use the emerging information technologies and internet aswell as new ideas from high tech industries in order to interact and transact with their suppliersand end users. Furthermore, Ford can boost its sales by providing better customer service and byhaving faster communication between suppliers, manufacturers, and customers in the valuechain.This proposed system will have to run concurrently with the existing supply chain so that Fordwill cover both market segments at the same time. Since Dell and Ford are two different types of industries, one is in computer manufacturing and the other is in auto industry, it does not seemright for Ford to implement exactly the same "virtual integration model" as Dell. In fact, if Fordimplements the full direct business model alone and abolished its existing supply chain then Fordwill certainly run into a high risk of losing their business to competitors due to the fact thatcustomers want to test and feel the car before they buy it for a large amount of money. On theother hand, when customers buy computers on line they don’t have to worry about touching andtesting the computer, all they require is a better price than the retail shops and the product’s specsare according to their needs.Ford should set up a special department in order to handle this new business process. Investmentin new high tech equipments is required as well as training should be provided before the new project’s kick off date. Suppliers’ computers should be linked to Ford’s master computer network and customers should be made aware of this new shopping experience for buying anautomobile.To measure the performance of this model, Ford should schedule periodical review andevaluation meetings. Recommendations for improvements should be noted along the way inorder to be evaluated. The improvement of customer service and shareholder value should be themain aim of the whole project. At this time it’s hard to anticipate its success or failure, but byinvesting time and effort into it I will be confident of its success if not in the short term it willdefinitely in the long run.Yasser HammoudSupply Chain Student (PMAC)
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Part 2: ISSUESPart 2.1: Fundamental Issue
 Nature: StrategicTiming: long term
The fundamental issue for Ford is the management and control of their large data base of their  business partners, particularly suppliers and sub-suppliers. Unlike Dell which has only about 50suppliers, Ford has several thousand suppliers and operates in a more complex network of  business relationships. To produce a single product, Dell needs less than hundred parts whereasFord needs several thousands. In addition to such large data base of suppliers, Ford also has alarge number of dealership networks who are widely spread in large geographical areas aroundthe world. Managing both suppliers and customers in a single efficient supply chain had always been a challenge for Ford who is constantly looking for new ways to better control and managetheir supply chain operations in a more productive and cost effective way.Part 3: Sub-Issues
 Nature: strategic Timing: short term/long term
1. Lack of up to date IT infrastructure:The inability of Ford’s first and lower level tier suppliers to keep up to date with IT technologythat is need by Ford to stay up to speed in managing their production operations as intended is amajor bottleneck within the supply chain. The lack of proper IT technology could result inmiscommunication and lack of coordination between the supply partners and the outcome could be a higher order lead times, higher cost and operational hassle.2. Lack of direct control of end users:
 Nature: strategic Timing: short term
Due to the use of independent dealership networks to sell their products, Ford lacked control ontheir product end users. Such lack of control combined with dealer markups had negativelyimpacted their ability to directly control their customer service experience. Part 4: ENVIROMENTAL AND ROOT CAUSE ANALYSISPart 4.1 Quantitative and qualitative analysisWith over 370,000 employees worldwide and revenue of more than $144 billions, Ford Motor Company has been classified as the world’s second largest industrial corporation. Ford wasestablished by a visionary Henry Ford in 1903 and it has been in business ever since. Ford’s core business is the production and distribution of cars and trucks. In addition to that, Ford earnedsubstantial revenues and profits from its financial subsidiaries that operated mainly in NorthAmerica with limited operations in Europe and everywhere else. In its 1997 financial statement,Ford reported close to $ 7 billion in net income and a 5 year average revenue growth rate of %6.These positive financial statement figures were an indication of Ford’s strong market andfinancial positions. Its main competition till 1970’s was with General Motors and Chrysler.However with the entry of Japanese companies like Honda, Toyota and Nissan the firm facedstiffer competition with the auto market being over-capacitated. In order to take advantage of 
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their global presence and deal with the increasing global competition, Ford along with GeneralMotors and Chrysler saw an urgent need to consolidate their industry and started merging withother automakers around the globe. Such swift action had enabled these giant firms to achieve better quality products at a reduced cycle time and lower costs due to the economies of scale.After merging with Daimler-Benz, Ford’s data base of suppliers has increased substantially in both home and abroad. Having this huge number of suppliers has made their supply chain morecomplex, expensive to run and difficult to manage. In order to deal with the supply chain issuesand better manage their suppliers and improve their production processes and ultimatelylowering their cost, Ford in 1995 initiated the Ford 2000 plan which aimed at restructuring manyof their key processes like Order to Delivery (OTD) and Ford Production System (FPS). Theywanted to reduce the OTD from 60 or more to 15 or less days. FPS was created to convert thesupply chain from a push type to a pull type. Ford aimed at reducing the number of supplierswhich had grown to several thousands of different suppliers over the years as the company grew.Rather than focusing on selecting suppliers based on costs they wanted to develop close long-term relations with the Tier 1 suppliers who in turn managed and handled Tier 2 and Tier 3suppliers. The aim was to create a more cost effective supply chain. Ford provided its supplierswith its expertise and techniques to help them better manage their operations. Another importantinitiative taken by ford was the Ford Retail Network (FRN) to reduce competition among itsdealerships in the same locality by having only one unified dealer who provides the best possiblelevel of customer experience. The director of supply chain system, Takai has to take an informedand well thought decision if they should implement the Dell’s integrated supply chain or not.Part 5: ALTERNATIVES AND OPTIONS
 Part 5.1: Alternative 1
Design a mixture of online and offline operations and form procedures toenable customization and ordering by customers over the internet butmaintain physical dealerships as well.
 Advantages:
a)
Customization to customers, start a supply chain vertical integrationbusiness model.
b)
Open new market segment and attract clients who like onlineshopping.
c)
Reduction in overhead and inventory carrying costs.
d)
Direct control on customer service experience.
Disadvantages:
a)
Costly, time consuming, requires internal and external changes whichare not easy to handle and integrate with other operations.
b)
Independent dealers will complain due to internal competition.
c)
Suppliers’ inability to keep up to speed with Fords modern ITtechnology.
 Part 5.2: Alternative 2
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