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Supply Chain Strategy

Michael Shelley, Simon Wong, Guan Shen

The problem

Benchmarking on best practices from industry leaders such Dell, who have successfully created a lean, efficient and responsive supply chain. Ford is poised to determine if it can also successful adopt this business model.

Virtual Integration

Customers and suppliers thought of as partners

Dominant Model

Customers

"The biggest change from business as usual is changing the focus from how much inventory there is to how fast it's moving"

Mass Customization

Key Issues

Criteria

Does the solution reduce costs?

Does the solution build variability?

What is the solution's degree of redesign?

Alternatives

$$$$$

Recommendation

Must move from a push to a pull approach

Many lessons to be learned from Dell model, but cannot simply copy it --> too many differences in product, customers, etc.

Ford Dealer Network should continue, but an ultimate goal should not be to own all dealers

--> FDN is a good way to gain insight from customers by selling direct

--> Far too expensive to buy all current dealers

Thank You!

Questions?

Different Product; Different Customer

4

  • Dell --> Large volume, commercial customers; easier to build partnerships

  • Ford --> Mainly individual consumers that will buy a car every 5 years; much more difficult to maintain the relationship as 'partners'

  • Car is more of an emotional product (outward projection of self image); much more complex

  • People want to test-drive a car; internet sales not likely

B2B vs B2C

3

Distribution

  • Dealer Network --> Dealers are independent from Ford

  • Difficult to 'partner with customers' if there is no direct interaction

  • Dealer's and Ford corporate may have different objectives

  • Decreases flexibility in the supply chain

  • Ford has recently started to buy dealerships (Ford Retail Network)

2

Organizational Structure

  • Purchasing department separate from design team --> Purchasers have the power

  • Leads to a push strategy - Ford sells what they have rather than what the customer wants

  • At Dell, purchasing works closely with design and engineering (product development) to ensure they are meeting consumer demands and market trends

1

Complexity & Myriad of Suppliers

  • Ford has 180 manufacturing facilities compared to Dell's 3

  • Ford has 300, 000 + employees

  • Design + Assembly of product is much more complex

  • An enormous amount of suppliers compared to Dell

  • Inherent complexity limits the type of relationship possible with each supplier

(ie, big discounts at year end)

Manufacturer

Suppliers

Distribution Channels (ie, Retailers)

Suppliers

Customers

Manufacturer

"Virtual integration means you basically stitch together a business with partners that are treated as if they're inside the company"

Status Quo

Vertical Integration

Virtual Integration

  • Dell Model

  • Have to develop communication systems with suppliers, customers

  • Vastly improved flexibility --> give the customers what they want

  • Lower inventory costs

  • Significant system redesign and associated costs

  • Have to purchase dealer network
  • More traditional approach than Dell model

  • Focuses on owning the supply chain rather than partnering with the various entities in the supply chain

  • Would be very costly to buy suppliers and dealers

  • Would ensure objectives are allowed across the entire supply chain

  • Internal communication is the focus, rather than inter-organizational

  • Does not address issue of better understanding the customer
  • Continue operations as normal

  • No changes in the supply chain

  • Short term --> No extra costs to change current model (No redesign costs)

  • Longer term --> increased supply chain costs, less in tune with customer's demands, low inventory turnover, heavy discount
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