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Xin Ying Chen

on 23 September 2011

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Transcript of Ford

Ford Motor Company was the second largest industrial corporation in the world.
More than $144 billion.
More than 370,000 employees.
Operations spanned 200 countries.
Since, 1903, 260 million vehicles had been produced.
Cars, Trucks, Crossovers, SUV, Hybrids, Commercial. Company Background Ford's
Exiting Supply Chain Reduction of the number Reduction of the number of suppliers in 2 decades.
Just-In-Time, Total Quality Management & Statistical Process Control.
Categorize suppliers into Tier 1, Tier 2, Tier 3. Issues:

Tier 1 suppliers' technology was not as developed as Ford's technology.

IT maturity decreased rapidly in lower tiers of the suppliers (Tier 2, Tier 3).

Ford could not acquire expected cost reduction from its suppliers. Ford Production System (FPS)

Modeled roughly on the Toyota Production System.

Aimed leaner, more responsive, more efficient production.

Focused more pull-based system, continuous flow, synchronization, stabilisation.

By using Synchronous Material Flow, buffer stocks decreased significantly. Order to Delivery Order to Delivery (OTD)

Ongoing forecasting of customer demand from dealers.

A minimum of 15 days of vehicles in each assembly plant's order bank to increase manufacturing stability,

Regional "mixing centers" that optimise schedules deliveries of finished vehicles via rail transportation.

A robust order amendment process to allow vehicles to be amended for moe color and trim variations. Ford Retail Network


To be a test bed for best practices in retail distribution and drive those practice throughout the dealer network.

To create an alternate distribution channel to compete with new, publicly-owned retail chains.

To buy all the Ford dealers in a local market so that the dealers were incompetition against the "real competition". Definition of
Virtual Integration Virtual integration is a form of value chain management.

Under such a system, the link of the value chain are brought together by information arrangements among suppliers and customers.

Shipment of the components that the company needs can be arranged through internet or a network computer system.

Michael Dell - "Virtual Integration means you basically stich together a business with partners that are treated as if they are inside the company." Component of
Virtual Integration Types of Postponement: Subcontracting

Core Business, what to relocate Processes Integration/Info Systems

Work with tier 1 suppliers and indirectly with tier 2 and 3. Virtual Integration allows us to: Faster time to market: Different model every year Higher Flexibility Core competencies Reduce cost (Assets & Inventory) Degree of Power Imbalance:

Lot of suppliers an few manufacturers (oligopolistic environment, specificity of the products) Degree of e-commerce activity:

Customize but not buy Factors affecting the adoption of Virtual Intergration Strategy asymmetric dependence of one supply chain member on another

size of an organization

market share proportion of electronic sales revenue to overall sales Degree of product customization:

build to order

Recommendations A pragmatic appication of virtual integration into Ford's production.

Ford's Reality: Intricate and multi-level tier supplier. Improve quality & reduce the resources. Buying experience of a car. Dell: No dealer part A centralized information technology system Forecasting customer demand improving efficiency with suppliers. Dealers should be more involved in Ford's supply chain for critical demand forecasting. Postponement:A critical requirement Postponement:
Delaying part of production until actual customer orders are received.
Producing at a mass level without incurrring customization costs. Time
Form Within the firm: Cloud Computing may be? Implications
Efficient practice of managing large & complicated supplier and dealer networks. Customer orders synced real time to the centralized information system. components Tier 1 Tier 2 Tier 3 Assure an adequate supply component overtime at an optimum total acquired cost. components components Different choices of color, interior and exterior appearances and product features will then match up with current production schedules. share real time customer orders to downstream distributors and logistics . minimizing inventory levels and shorter product to market time.

increase coordination level across assembly production with suppliers

create higher flexibility in both firm's structure and core processes to allow decentralization in operational decision making and faster response to market change. The application of postponement as a consequence of virtual integration. focused on increasing the responsiveness to actual customer demands by postponing manufacturing activities for customization.

first-tier suppliers integrated into the final assembly plant.

suppliers combine the standard modules into customer-specific finished products.

together, supply a large percent of the total value of the purchase car. suppliers

(wheels) suppliers

(suspensions) suppliers

(exhaust system) allow Ford to achieve:

shorter lead-times.

close coordination of the suppliers in the assembly line.

greatly facilitate the integrated management of physically separated units.

permit further decentralization approach to co-exist within the entire system.

as a result:

real time customer information for faster product to market time.

lower variability for demand forecasting.

concentrate on its core competence of designing, assembling performance and outsourcing of peripheral parts to manufacturers.
Degree of Competition in the Market:
time based competition

number of new products being introduced into the market Burhan Gorgulu
Chen Xin Ying
Felipe Cornejo
Lian Zhi
Pham Thu Trang
Yao Wang Overview:

1) Ford's background and existing supply chain.

2) Definition of Virtual Integration model.

3) Components of Virtual Integration.

5) Benefits of Virtual Integration.

6) Factors affecting the adoption of Virtual Integration.

7) Recommendations for Ford

8) Implications Questions?
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