Ford Motor Supply Chain Strategy

Executive Summary

Ford Motor Company is looking at ways to improve supply chain management to meet the company-wide goals of improving “shareholder value and customer responsiveness.” In 1995, in an effort to reduce cost and increase efficiency, Ford developed a restructuring plan called Ford 2000 that was to focus on globalizing corporate organizations and taking advantage of the economies of scale in purchasing and manufacturing by consolidating the North America, European, and international automobile operations. Ford 2000 also called for a complete reengineering of several key company processes including Order to Delivery (OTD) and Ford Production System (FPS). One of the primary strategic goals of Ford 2000 was to decrease OTD from more than 60 days to within 15.

As director of Supply Chain Systems, I have decided to implement the Virtual Integration System as the new supply chain strategy of the company. The model will be based on Dell’s Direct Model supply chain system. Although there are several key differences between the companies, Dell’s direct business approach can be applied to every facet of Ford’s operation. Special care will need to be taken to address the unique dependency of our custom “tier- one” suppliers. A modification of the virtual integration system currently used by Dell could be applied to Ford’s dependent supplier base, while the management of lower tier suppliers of general or generic components would be more effectively suited by the standard procedures used by Dell.

List of issues with Impact Analysis

Immediate Issue:

In the early 1990’s, Ford started to decrease the 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.

Tier 1 suppliers do not have the capital to invest in...