Company Background
Founded in Delaware in 1919 Ford Motors Company was born as a producer of automobile designs, today, Ford is one of the largest car manufacturers globally with diversified and multifaceted business model. The core businesses of the organization include design, manufacturing, marketing, financing and servicing all products. The variety of the product line is significant, including passenger vehicles, trucks, SUVs and electrified vehicles. Moreover, most recently the organization entered a luxury car segment through an acquisition of Lincoln Luxury car production (Ford, 2015).
While the core industry for the organization is the passenger car segment, the focus of the long-term strategy is to aggressively diversify the income channels through connectivity, mobility, autonomous vehicles and customer experience. Financial performance of the organization reflects a healthy and sustainable position of the company on the market with a total revenue $ 140.6 billion in the financial year 2015 with 3.5% increase relative to the same period 2014. Moreover, Ford's operating margin increased from 4.6% to 6.8% in 2014-2015, providing the company with better internal financing options and higher liquidity.
Supply Chain Management Efforts
Ford’s automotive supply chain management (SCM) is, arguably,one of the most complex and technologically advanced in the industry. It is possible to better understand the role of SCM in strategic planning by looking at the volume of financial transactions and upstream diversity. Total global buy of Ford is estimated at $ 100 billion with over 4,400 supplier sites in 60 countries globally, out of which 1,200 are the tier 1 suppliers. The company manufactures over 100,000 parts at 62 manufacturing sites.
SCM and Organizational Structure
The organizational structure of the organization is the mix between the vertical and matrix structures, which enables the higher level of visibility and control over the decision-making process. The SCM department works in clusters to ensure that the project and product development groups are diverse in their personal and professional profiles. The focus of One Ford plan is on streamlining and cost-effectiveness of the supply chain through the effective mix of company-owned facilities, such as Ford River Rouge Complex. The expected outcome of this strategy is to gain more control over some of the key direct components and materials used in the production process.
SCM Fit Within the Organization
Based on the complexity, scale and the size of the operations, it is critical to developing high integral standards and the Code of Conduct for SCM as well as the organization in general. Ford is highly focused on the Corporate Social Responsibility (CSR) and with that, SCM social justice and environmental compliance practices are essential for the sustainable development and the brand image (Mullerat and Brennan,2011). With suppliers and outsourcing partners located in 60 countries, the existing matrix governance structure with vertical hierarchy is the right fit for the organization (Coile et al. 2013).
Product Development Process
Product development involves various layers as the organization deals with 100,000 parts and over 500 production and 650 indirect commodities to manage the process with a large number of suppliers. Process layout and quality compliance are critical in this situation.
Process Layout
Ford production layout should be seen internally for all the production lines.The objective is to maximize the efficiency of workflows and resources along with increasing the human capital efficiency and productivity. The company is involved in Vehicle Operations Manufacturing, Stabling Business Unit Engineering, Powertrain Operations Manufacturing, Material Planning and Logistics and Plant Operations. All the units work on the objective to build lean and effective operations with standardized practices and control systems throughout the integrated SCM. The system sets the goal to build best in the world production with the focus on production excellence and shared goals (Ford, 2015).
Quality Control
Ford production system is based on the continuous improvement methodology, involving safety, quality, delivery, cost, people, maintenance and environmental standards, which are implemented not only internally, bu build on the critical condition of working with external suppliers. Moreover, CSR-driven strategy also fosters the use of sustainable materials, compliance with the Policy Letter 24, Code of Human Rights and other standards to address the issues in quality and safety within the supply chain (Ford, 2012). To ensure the continuous control of quality, the company conducts a number of random batch tests on its products. This control also involves the quality data gathered through market research and analysis of the customer quality expectations.
Procurement Process and Forecasting
Ford procurement process makes the significant contribution to the CSR strategy and receives a lot of attention from public and non-for-profit sectors. With that in mind, the key to this element is the appropriate strategy for selection and screening of suppliers. The decisions on the choice are taken based on the joint input from purchasing, product development and finance and material planning departments. The procurement process is partially automated thoroughly integrated system which updates stock levels and production needs forecasts sent directly through EDI to the Tier I suppliers (Herausgeber, 2011). Recently, the company implemented new Supplier Risk Management approach, which applies process improvement techniques, which allows suppliers segmentation in risk groups and drives higher quality standards in procurement (Ford, 2015).
In-house vs. Outsourcing Decisions
Part of the development and operational improvement plan is to optimize the operations from cost perspective and responsiveness to specific markets. At the same time, Ford realizes the need to ensure quality and control over the organizational structure. To achieve that, some of the production is concentrated in domestic plants, which gives visibility and control of some production components for the core segments (Rushton and Walker, 2007). The complexity of the supply chain and the variety of parts to be produced demand effective decisions and cost-optimization practices, based on the outsourcing as opposed to in-house production. Ford recognizes that the core business of the company is design and manufacturing (WSJ, 2016).
Contract Issues
The approach that Ford chose to deal with contract issues and legal cases is twofold: set clear and measurable standards through Supplier Code of Conduct and regular internal audits on the production, assembling plants and storage facilities of the third-party suppliers; take a proactive approach to social justice and community projects, providing free training for suppliers, building on knowledge and awareness of employees across the supply chain with regards to human and labor rights and opening specific counselling opportunities to create differentiated safe and secure working environment (Ford, 2015).
Production Control Systems
Back some years ago Ford adopted new strategic initiative based on 10 critical decisions within all the operational and commercial areas. Demand, scheduling, inventory management are part of this new One Ford plan (Kisser, 2015). As it was previously mentioned, the production process grounds on seven major focus areas: safety, quality, delivery, cost, people, maintenance and environmental standards.
Demand and Scheduling
The demand and scheduling process goes through the standard for the industry chain of raw materials and components inventory, followed by the parallel assembly lines with backend operations across various departments (technical support, product, and quality assurance etc.), and the finished item inventory. The company works with short and intermediate schedules of processes and resources. The concerns are addressed through automated scheduling directly in the production facilities as well as semi-automated scheduling incorporate regional and local offices.
Inventory Functions and Analysis
The company applies pure aggregate planning strategy and very low seasonal and safety inventory stock. This cost-reduction strategy and zero waste strategy is enabled by the integrated inventory and demand forecasting systems and strong partnership relationships with suppliers. With the focus on Just-in-Time (JIT) approach, Ford aims at minimizing costs by continuous monitoring of manufacturing to adjust inventory. Given the variety of the inventory stock units, Ford adopts market-based inventory decisions.But the complexity of the business from the location perspective makes organization adopt varying practices in different markets (Kissinger, 2015).
Relationships between the Supply, Demand, and Logistics
Conclusions
Based on the above analysis, it is possible to argue that the organization has developed one of the most modern and extremely effective supply chains. Vertical and horizontal integration allow significant improvement in the integration with the upstream and downstream suppliers, while technical innovation builds strong demand forecasting and partnership relationships with the clients in Business-to-Business (B2B) and Business-to-Consumer (B2C) sectors. Competence, experience and the successful integration of the global SCM into the matrix structure constitutes one of the major strengths of the organizational SCM. Along with the focus on innovation and strategic relationships with suppliers, these competencies build on the competitive advantage of the company.
Some of the focus areas for improvement include the complex and bureaucratic organizational structure. Due to the complexity of the operations, its scale and size, Ford is heavily dependent on strong segmentation and separation of responsibilities. This not only limits its flexibility and responsiveness externally but builds on significant cost of Human Resource management and training.
References
Mullerat R. and Brennan D. (2011). Corporate Social Responsibility The Corporate Governance of the 21st Century. Alphen Aan den Rijn:Walters Kluwer. Print.
Herausgeber W.K. (2011). International Supply Chain Management and Collaboration Practices. Koln: Josef Eul Verlag Gmbh.
Coyle J., Langley J., Novack R.A. and Gibson B. (2013). Supply Chain Management: A Logistics Perspective. Mason: Cengage Publishing.
Rushton A. and Walker S (2007). International Logistics and Supply Chain Outsourcing: From Local to Global. London: Kogan Page Publishing.
Ford (2015). Annual Report. Ford Motors Company [Online]. Retrieved 24 June 2016, http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2015-Annual-Report.pdf
Ford (2015). Supply Chain Overview. Ford Motors Company [Online]. Retrieved 24 June 2016https://corporate.ford.com/microsites/sustainability-report-2014-15/supply-overview.html
Ford (2012). Sustainability 2011/2012. Ford Corporate Website [Online]. Retrieved 24 June http://corporate.ford.com/microsites/sustainability-report-2011-12/blueprint-governance-management-manufacturing.html
WSJ (2016). Ford to Shift Work Abroad. Wall Street Journal [Online]. Retrieved 24 June 2016, http://www.wsj.com/articles/ford-to-move-current-small-car-production-outside-u-s-1436463445
Kissinger D. (2015). Ford Motor Company Operations Management, 10 Decisions, Productivity. Panmore Institute. Retrieved 24 June 2016, http://panmore.com/ford-motor-company-operations-management-10-decisions-areas-productivity
