Ford’s supply chain attractive factors :

1.)Ford’s Production systems.

2.)Synchronize Material flow.

3.)Reduce buffer stock.

4.)In - line vehicle sequencing.

5.)Ford’s Just In Time Inventory (JIT).

6.)Ford’s Total Quality Management (TQM).

7.)Plant Productivity.

8.)Supply Base stability.

9.)Lower dealer and company costs.

10.)Enhance material flow.

Issues in Ford’s Supply chain management :

Ford needs to address a couple of issues in trying to determine which information technology
strategy will work best for supplier interaction as well as with their current engineering
projects.

1) Ford’s current supplier base:

a.) Ford recently decreased their supplier base to have a closer and more long-term
relationship with fewer suppliers called ‘Tier 1’ suppliers. These suppliers provide Ford with
complete vehicle subsystems. The Tier 1 suppliers work with multiple Tier 2 suppliers who
provide the components that make up the vehicle subsystems.
b.) The Tier 1 suppliers do not have the capital to invest in the new technologies that Ford
seeks to get into. However, the Tier 1 suppliers do have fairly solid IT capabilities, but these
capabilities severely drop when dealing with the Tier 2 suppliers.

2) Purchasing organization:
a.) Ford’s purchasing department is independent of the product development area.
However, purchasing has a strong dominance over the product design price negotiations
because “a very slim reduction in purchasing cost could result in very significant savings” for
the company.
b.) Dell’s vertical integration has these areas working very closely together. Could Ford
also successfully merge these two areas?
3) Forecasting within the Ford 2000 projects:
a.) Two key initiatives under the Ford 2000 project are the Ford Production System (FPS)
and Order to Delivery (OTD). The FPS project was geared at making Ford manufacturing
operations leaner, more responsive, and more efficient by focusing on continuously flowing
material through using vehicle in-process storage units and proper assembly order sequence.
The OTD project was started to reduce the order time from 60+ days down to only 15.
b.) The accuracy of Ford’s forecasting is an integral step in being able to maintain the
continuous flow of materials from suppliers as well as being able to turn the vehicles around
within 15 days. This is the first time that Ford had ever involved the dealers with forecasting
the customer demand.

Recommendations

1.) In order for Ford to keep technologically advancing, they will need to keep their Tier 1
suppliers on track with them and develop direct links to Tier 2 suppliers. Ford should
invest in setting up a more web-based supply chain system that would allow the Tier 1
suppliers to use their strong IT capabilities without having to invest a lot of capital in
emerging technology and allow Tier 2 suppliers to access the system to input progress of
production as well as to take part in future designs.

There are several reasons why this web-based supply chain would be beneficial. First,
suppliers would be able to work off of a central design database in which Ford could control
their level of access. Price variable inputs could be independently established for each
supplier so as to not disclose the actual cost of the material. Due to an aggressive purchasing
strategy, Ford does not like to disclose cost of contracts between suppliers.

2.) Second, Ford would have more control in establishing the technological level that it would
like to operate at. Each supplier would have their access limited by functionality and need.
Ford would be able to update and modify the program with little or no program changes
needed on any of the supplier’s systems. Security of the system could be centralized and the
risk of proprietary information or software getting out would be minimized.

3.) Third, the initial investment for both sets of suppliers would be minimized. This could
lead to overall lower material prices and decrease the risk of losing valuable Tier 2 suppliers.
Currently, the working relationship with Tier 2 suppliers is in fact non-existent. If something
should happen with the Tier 1 supplier, Ford would essentially lose the relationship with all
of the Tier 2 suppliers working under that one supplier. Having a direct relationship with
each Tier 2 supplier would effectively create a more stable environment for that supplier
because they would not only have a relationship with the Tier 1 supplier but also directly with
Ford.