Operation Management

Ford Motor Company face many challenges in implementing a virtual supply chain that Dell did not have to face. Some of which include:

- product complexity and rigid supplier networks

- communication channels and procurement procedures (such as the typical phone and fax).

- manual ordering and accounting procedures.

- a lack the money to invest into internet technology, leaving little incentive to upgrade.

- historical dealer retailing and traditional consumer buying habits.

All of these challenges inhibit the full scale implementation of virtual integration.

CRITERIA:

In order to judge whether or not a good decision about implementing a new virtual integrated system has been made in this case, we would look at the potential outcome. The questions we would like to have answered are: Is it possible to successfully implement the virtual system and maintain our supplier relationships and help them to a successful integration? Can Ford reduce their OTD (order to delivery time) to 15 days effectively and keep it that way? Will customers be provided with the right products at the right time and in the right place? Can Ford reduce our costs and waste and move towards a more pull orientated supply chain then the push orientated situation Ford are currently in?

ANALYSIS:

Ford remains plagued with prolonged Order to Deliver (OTD) time periods, congested inventories and error-ridden procurement processes. Upon investigation, these troublesome issues appear to be well addressed by the radically new direct business model of the Dell Computer Corporation. Dell differentiates itself through the utilization of virtual integration, an efficient and effective direct business model facilitated by electronic business providing Build to Order (BTO) products directly to customers. The process begins with the customer specifying exactly which features are to be included in the desired computer. Dell then buys components from several different suppliers via...