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BACKGROUND: Teri Teri TakaiTakai- Director of Supply Chain Chain systems is in a dilemma dilemma whether to modify FORD’s existing supply chain or not
Suggested radical redesigning of FORD supply chain to Dells !irtual "ntegration Supply chain #odel •
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!d"antages# To To reduce working capital and in"entory in"entory o$solescence o %sing information to $lur the traditional $oundaries $etween o suppliers& manufacturer& dealers and $uyers Strong conceptual $lueprint for what Ford should attempt is o a"aila$le 'imitations# Considera$le Di(erences in auto $usiness and computer o manufacturing Complex supplier network with many layers and num$ers o
FORDS "nitiati$es to redesign its supply chain: •
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Supplier relationships changed from many & cost oriented approach to f ew& long term relationship approach to reduce reduce the supply chain complexity Concept of Tier-) and Tier-* Tier-* suppliers +mpro"ing supplier operations $y sharing expertise using ,+T& T.& S/C technologies Shifting towards leaner& pull $ased synchronised production Ford /roduction /roduction system to impro"e order schedule with suppliers there$y $u(er in"entory could $e reduced Reduction in Order to Deli"ery Time $y !ssociation with dealers in forecasting demand o 0a"ing at least )1 days of work-in-process in"entory to increase o manufacturing sta$ility Regional mixing centres to optimi2e deli"ery schedules of 3nished o goods Ro$ust order amendment process o Ford Retail 4etwork To To create superior selling experience experience o /ersonnel and ad"ertising cost sa"ings& in"entory e5ciencies due to o economies of scale To To compete with pu$licly-owned retail retail chains o
!irtual "ntegration $s% &'tended &nterprise: "ssues: Dell’s success depended on +nformation replacing in"entory in"entory o 6hereas in FORD& drop in +T Systems capa$ility $etween Tier-) Tier-) and Tier-* Tier-* suppliers leads to information asymmetry asymmetry $etween the suppliers "alue-we$ o /urchasing department independent of Organisation whereas in Dell all departments work closely together together
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Signi3cant di(erences in the enterprise model $etween Dell and Ford Dell has closely knit information7in"entory network FORD has fragmented model leading to ine5ciencies in supply chain Suppliers not owning in"entory until used in production may pro"e to $e a risky and costly a(air for FORD 'ag in sharing demand forecasting re"isions with supply $ase due to "ast network of suppliers +ncomplete information for in"entory su$stitution Demand pull in FORD’s supply chain Component complexity in FORD’s supply chain Company owned dealerships may $e positi"e in increasing market presence and share $ut this will increase the cash con"ersion cycle 8Operating cycle- Days /aya$les9 This is a cost disad"antage 'arge num$er of manufacturing facilities makes the coordination more di5cult as compared to only : manufacturing facilities in D;''
Reco((endations ) Suggestions for "(pro$e(ents: o
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Setting up a we$ $ased "alue-chain& reducing costs of in"estment in emerging +T Technologies for Tier-) and Tier-* suppliers Thus ownership of raw materials can $e shifted to suppliers $y proper information sharing of demand with suppliers Reducing this in"estment costs for tier-) supplier will not only impro"e long term relationships $ut also help FORD to gain le"erage in this supplier-dependent relationship This we$ $ased "alue-chain will help FORD in sharing designs with suppliers as D;'' did& thus reducing lead time from supplier side& also increasing in"entory "elocity Re-aligning purchase department with product de"elopment can in turn reduce costs and impro"e e5ciencies Segmentation through the extensi"e ford retail network will ena$le addressing speci3c needs of customers The 3ner segmentation makes FORD predict customers’ needs $etter
"t *ill (a+e sense for Ford to go *ith Dells !irtual "ntegration Strategy if they (a+e the necessary changes in their supply chain to address any pressing issues that arise fro( this change% Only then can Ford ha$e a supply chain *hich is e,cient and also responsi$e%
