Supply Chain at Ford Term Paper

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[. . .] This makeover requires a remarkable modification for a lot of different functions inside Ford, and as the company progresses to realign its order fulfillment and development of new product processes, Ford hopes the logistics group to supply -- right, timely, precise and repeatable logistics cost estimates based on potential sourcing situations. An additional major expectation revolves around synchronizing inbound logistics with asynchronous material flow objectives and strategies within the manufacturing facilities which is a challenge that has deepened with the increased volumes of rail traffic which have been diverted to truck because of repeated deficiencies in service in the rail system of the country. Overcrowding at the manufacturing facility frequently destabilize the motive of the planner to have inbound trucks dump their materials at specific dock locations and feed those parts and components directly to points on the various assembly lines. (Optimization Engine Powers Ford's Supply Chain)

In its place, Ford's practice was to rack up unexpected time and labor expenses by dropping and hooking inbound trailers and deliver those materials at different locations within the manufacturing facility resulting in-plant movements of plants and components. Confronted with the ground realities of its immense network, the global logistics technology group at Ford decided that the tools available with them falling short of the impending challenges. By visualizing at the makeover with in progress at Ford and taking stock of the situation regarding the manner in which the key drives of the business was looking for transformation, the company viewed and assessed the current technology and was quick enough to decide that was incapable of providing an answer to the problems of the customers. Ford realized that it was necessary to solve this business problem, as also the potential to integrate their technology with their partners.

Considering the complexity of the Ford network, the company realized that in order to provide an answer from an optimization perspective, it is pertinent to consider all the points and all of the material simultaneously. The holistic view gives an important edge compared to looking at things in a series. The logistics planning life cycle in case of new vehicles in designed in three stages at Ford viz strategic, tactical and operational. In the strategic stage, it entails sourcing decisions under which a lot of sourcing scenarios are developed based on a multiplicity of drivers -- plant locations, current trade issues, emerging market considerations for instance. Subsequently, this information is entered into the tactical planning process that is the starting point for essentially developing logistics plan. Logistics cost estimates are projected during this stage and thereafter entered into the strategic processes. With the sourcing setting starts to evolve, the operational planning process begins, and Ford starts delivering logistics needs to the company's Lead Logistics Providers -- LLPs. (Optimization Engine Powers Ford's Supply Chain)

These LLPs in turn devise the logistics network to support the plan. After examination of the current technology, which optimally suits the strategic responsibility of assessing sourcing decisions, Ford chose the most modern in its class - Supply Chain Designer which is a product from the SynQuest stable. But the examining team drew a blank as regards tactical planning is considered. The current technologies according to Ford were unable to provide an answer to the complex problem confronting the company. And apart from that they were unable to solve them in one go; rather it was tackling the problem in piecemeal. SynQuest presented a core competency in providing an answer to a huge, complex mathematical problem with an expanded cost perspective which is a matter critical to Ford.

At this Ford was satisfied with the collaboration with SynQuest which would permit the both the companies to share the investment in time and intellectual property ownership was suitable. The management at Ford influenced by the capability of optimizing Ford's inbound materials operation convinced that the company would benefit from the competitive advantage through research and self-examination intrinsic in the development process, agreed to a proposal for a collaborative effort with SynQuest to build an inbound planning system and the exercise was initiated in proper solemn. (Optimization Engine Powers Ford's Supply Chain)

Comparing the Built-to-Order or BTO model of Dell with Ford it is important to note that several historical legacies are present which impacts Ford's potential to graduate to a BTO model. Ford belongs to the automotive sector and is a 100-year-old company whereas Dell has just crossed 15 years. The product variety at Ford needs the inventory management of a huge amount of individual components and the most important is the inherent manufacturing cycle time due to which production capacities for individual components are chalked out with a much greater time schedule and cannot be altered quickly. There is a large complexity in process because of large no. Of suppliers in three tiers and business is conducted normally over telephone and Fax. The systems at Ford are incompatible with one another as Ford Credit is handled by DEC Corporation whereas IBM handles its components and service divisions and the various suppliers and dealers are put on a variety of systems. (Ford Motor Company: Supply Chain Strategy)

(iii) Generating and Evaluating Alternative Solutions:

Dell Computers has a virtual integration in place and it benefits from it as it solves production problems related to communications, coordination, control, and however at a cost of the increased overhead required to arrange production organization. Thus vertical integration is the capability to derive the benefit of vertical integration without having to incur the overheads. The major benefits achieved by Dell from virtual integration are (i) communication and coordination issues. Under this sphere vertical integration results in efficient and effective coordination by means of number of mechanisms that comprise chances of physical closeness, established styles of communications and increased enthusiasm to cooperate with other members of the identical group. (ii) Another benefit, which according to Michael Dell is connecting together, a business with partners who are regarded as though they are inside the company. (iii) improved control over the actions of suppliers and un-integrated partners can exert pressure over one another as transactions open up in the course of time (iv) real time responsiveness and inventory management under which real time updation of order status and the capability to verify the order status irrespective of the position of the order in the fulfillment process assisted Dell with differentiating capabilities and increased the inventory velocity. (v) Forecasting: Dell bears a direct relationship with the customers who are crucial to forecasting (vi) Dell's access to data is simple which is useful for forecasting and greater proportion of the data are already in Dell systems. But, in case of Ford, it is the dealers in whose hands are the direct data regarding the customer demand. (Ford Motor Company: Supply Chain Strategy)

On the comparison front of Ford and Dell as regards old channel players there are issues relating to (i) Costs of building web potential. (ii) Implications for information sharing (iii) Problems of linking suppliers and other external entities who are not so technologically progressive compared to Ford. (iv) Able to forecast what customers will buy for Ford and Dell. (v) Problems in executing a genuine BTO model for a product like automobile which is a complex product. In order to go for Internet linkages with its supply bases, it is pertinent to consider as to what are the practical challenges which has to be tackled by Ford. These are (a) problems in establishing B2B linkages and (b) Technological deficiency and sophistication which are present within the supply chain particularly at the lower tiers.

As an alternative measure, Ford must utilize Internet technologies to interact with its suppliers. (i) In order to tackle this problem, Ford should consider about its relationship not just with its suppliers, but also with the dealers and customers. (ii) When the supply chain staff members do a study regarding the Dell model in particular, they realize that 'virtual integration' should include design of not just the supply chain, but also the fulfillment, forecasting, purchasing, and several other operations which was for many years regarded as distinct within the Ford hierarchy. (Ford Motor Company: Supply Chain Strategy)

(iv) Recommending solution and justification:

In recommending a solution to Ford, it lies in using appropriate technology and the only correct approach to provide a solution is to consider, assess and suggest fundamental transformation of Ford's total business model and adopt the Dell model for its business. Dell's BTO capability considerably enhanced its demand planning and accuracy at the factory execution, reduce the order-to-delivery time and improve the customer service. Dell entered in partnership with world famous company Accenture in order to rapidly deploy a new high performance supply chain planning solution which is operational in Dell's plants… [END OF PREVIEW]

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