SCM 303 Introduction to Supply Chain Management: Ford Motor Company: An All-Wheel Drive Supply Chain

Ford Motor Company: An All-Wheel Drive Supply Chain

By: Anas Aldasouqi & Yilin E

Ford Motor Company is one of the world’s greatest automotive manufacturers with over 350,000 employees, operated in 200 countries and with sales reaching $160 billion. In 2013 Ford ranked 6^th place globally in terms of market value; standing at a value of $51.8 billion. They also led the US market in sales just last April ’14, and experienced a 7.4% increase from last year. Ford Currently maintains 15.3% of the US market and 7.9% of the European market. In china, which currently has a demand of about 20 million vehicles per year, Ford has seen a 60% increase in sales this year. It appears Ford remains on the incline and is currently on the offence; and what is their secret? Their supply chain strategy, which without, they would have possibly died out in 2008.

As an automaker, Ford works with hundreds of suppliers, whom provide different parts and materials of automobiles in order to combine and make the final products. Therefore, Ford has a very complicated supply chain and tends to create its own sustainable supply chain management which brings a positive impact in the markets. There are three methods to achieve this goal; the first one is to build strong relationships with suppliers and engage strategic suppliers. Having open communications and clear expectations, Ford can encourage and influence its suppliers to achieve its sustainability goals. The second method is to develop shared commitment and supplier capability. Ford helps their suppliers to build the capability and train workers, which can also encourage suppliers to do sustainable work and help them to meet Ford’s requirements. Furthermore, the last approach is to collaborate across the automotive industry. Through the Automotive Industry Action Group, Ford is able to improve their managements at all levels of their supply chain. By using there three approaches, both Fords and its tiers are required to accompany specific sustainable expectation and improve their own sustainable supply chains.

Since Ford has a large number of suppliers and tiers, and business is usually done over the phone instead of communicating in person, it is a risk on their complex supply chain management. If one of the suppliers fails to meet its manufacturing demands or requirements, Ford should generate a plan to find another supplier in order to fill in with minimal delay; which is a very difficult task. In addition, another weakness of its supply chain is the lack of technology knowledge in lower tiers, which is the reason that Ford tends to develop shared commitment and supplier capability. Helping lower tiers to improve and develop, Ford can reduce the risk in its supply chain management.

In 2008 when GM, Chrysler and Ford were just months from running out of cash, GM and Chrysler received a government bailout in which Ford declined. Instead Ford developed a supply chain strategy which required vertical and horizontal coordination. Without this strategy, not only would Ford had suffered, but its competitor’s and suppliers would have also felt the pain. The matter of fact is that finding suppliers to provide automotive parts is not at all an easy task; most pieces are engineered to order and ordered in advanced. Every model differs tremendously and finding a supplier to work with takes tremendous effort. Ford CEO Alan Mullally began his mission to save Ford by cutting the list of supplier to 850 that were exceptionally necessary for Ford to continue running. Ford chose to cut relations with supplier that mainly supplied to their competitors most likely to fail, such as Chrysler; because if Chrysler did fail, the supplier will likely also fail. In order for business to continue, auto makers need parts. And in order for part suppliers to continue supplying parts at a price that is profitable to car producers, the demand requirements must be met. Ford realized it would not be able to prop up the global automotive supply base on its own and so they reached out to other manufacturers to join in the quest. GM refused claiming the proposal violated U.S antitrust laws and Chrysler was of little help because they were shutting down so quickly. Ford found the most help from Toyota and Honda which were also very concerned on the future of their suppliers. These three manufacturers began purchasing from suppliers essential to the other manufacturer in order to keep the suppliers alive; they agreed to share the cost of keeping particular suppliers in business. Finally Ford, Toyota and Honda persuaded the U.S. Treasury Department to take concrete steps to ensure the protections of the suppliers. The supply chains of U.S car manufacturers is so inter-related that without the horizontal coordination, there would no longer exist a vertical coordination. This project was known to Ford as Project Quark, and the team met every day, often before 7 a.m. and into the late darkness of the night.

Ford began as a company with the goal of manufacturing every part of their automobiles and slowly became a company that found benefit in venturing outside of their own walls. Until recently most manufactures would have their own OEM parts from suppliers, Ford found that unnecessary and created a system in which manufacturers shared and used the same parts at times. The Automotive industry is so connected in the U.S., to the extent that its success lies extremely heavily on appropriate coordination among the members. And in a way this has created a more friendly competition amongst auto-makers.

To learn more about Ford’s and their supply chain, visit the following links:

Learn more about ford.