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Case 2 Ford

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by

Xiao Wen

on 4 August 2016

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Transcript of Case 2 Ford

Virtual integration
Ford's Existing Supply Base
Ford's plan to decrease suppliers
Fostering strong price competition toward longer-term relationships
Individuals -- Subsets
Ford assist to first suppliers with Information Technology

1. Decrease the time in order to delivery, and reduce the distribution channels
2. Ford is weak in demand forecast
3. Strengthen the price control in purchasing sheer volume and services

The purpose of OTD: Reducing from 45~65 days to 15 days the time from a customer's OTD of the finished goods.
Ford Motor Company: Supply Chain Strategy
Group 6

Order to Delivery
Evaluationg Alternatives
Ford Production System
Background
Weaknesses
Opportunities

Acquire Volvo
New IT knowledge emerging
Ford 2000
Reengineering projects
Increasing of Internet presence
Shareholders value needed to increase
Retail network
Whether Ford should adopt new technology and ideas from new high-tech industries to interact with its supply chain system?


Overcapacity
The IT maturity decreased rapidly in lower tiers of the supply chain
The independent of purchasing department
OTD time: 45-65 days
Low margin on sales(compared to Financial service and Dell)
"Push" with higher inventory
Did not well forcast on market demand
Bottlenecks Throughout Ford's Supply Chain
Marketing
Material planning
Vehicle production
Transportation processes
Implementing OTD
Ongoing forecasting of customer demand from dealers
A minimum of 15 days of vehicles in each assembly plant’s order bank
Regional “mixing centers” that optimize schedules and deliveries of finished vehicles via rail transportation
A robust order amendment process
Ford vs. Dell's supply chain
Threats

Foreign-based auto competition
Developing and industrialized nations were encouraged producing export- oriented auto industries
The complexity of auto business might not adapt Dell's methods
Strengths

2nd largest industrial corporation in the world
Design & manufacture
One of the Big three in U.S.
Strong Internet presence
Most improved automaker (the No.4 quality vehicle)
World leader in trucks
The U.S. industry lead in profit per vehicle ($1,770)
Longer-term relationship with a capable supplier
Ford has a more complex supply chain
Auto parts more than a computer's
At Ford, purchasing activities independent product development
At Dell, purchasing activities into product development

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The ford 2000 initiative
Ford production system (FPS) is an integrated system aimed at making Ford manufacturing operations leaner, more responsive, and more efficient
Synchronous Material Flow
Ford defined (SMF) as “a process that produces a continuous flow of products driven by a fixed, sequenced, and leveled vehicle schedule, utilizing flexibility and lean manufacturing concepts”
In-Line Vechicle Sequencing
One aspect to achieve SMF was “In-Line Vehicle Sequencing” (ILVS), which is a system that used vehicle in-process storage devices and computer software to ensure that vehicles were assembled in order sequence.
Benefits
* This way, Ford could tell suppliers exactly when and where certain components would be needed days in advance
* Buffer stocks could be dramatically reduced
* Everybody throughout the supply chain would feel the benefit of being more efficient and more responsive
Goals
1- to be a test bed for best practices in retail distribution and drive those practices throughout the dealer network.
2- to create an alternate distribution channel to compete with new publicly owned retail chains.
Principle
buy all the ford dealers in a local market so that the dealers were in competition against the real competition rather than with each other.
Outcome
This would lead to personnel and advertising cost savings as well as inventory efficiencies


the opportunity to increase business not in new and used vehicles but also in parts and services, body shop operations and Ford credit.
Ford Retail Network
(Ford Investment Enterprises Company)
Keep its existing supply chain
Pros
No major Changes are required

Save costs of shifting
Cons
Keeping the existing IT will become obselete.
To radically redesign its supply chain based on Dell's model
Pros
Reduce working capital


Virtual integration in supply chain
Cons
Risks associated with shifting

Costly and time consuming

Nature of Dell's industry is different from the automotive which makes it a very risky move
Make partial change toward virtual integration while maintaining the dealerships
Pros
The dealers would still play a role in the distribution

Reduce OTD

Customization in clients
Cons
Risks associated with shifting

Costly and time consuming
Full transcript