Ford Motor Company

Ford Motor Company

June 9, 2014

Attn: Robert, Greene

Dear Mr. Robert,

Find attached the report as requested.

Yours truly,

Connie Gong

Ford Motor Company

Table of Contents

Executive Summary 3

Introduction 4

Issue Identification 5 - 7

Environment and Root Cause Analysis 8 - 9

Alternatives and Options 10-11

Recommendations 12

Implementation 13-14

Monitor and Control 15

Conclusion 16

Ford Motor Company

Executive Summary

As director of Supply Chain Systems, Teri Takai recommends implementing virtual integration strategies from companies like Dell to portions of Ford’s supply chain strategy. Although there are several key differences between the companies, the restructuring plans of Ford 2000 have set a viable foundation to implement Dell’s virtual integration strategy in inventory management, customer service and support and suppliers’ management. The redesign of the process must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that historically been considered independently within the Ford hierarchy. Teri believes that implementing virtual integration by building on Ford’s key initiatives and projects including Ford Production Systems (FPS), Order to Delivery (OTD) and Ford Retail Network (FRN) that are currently underway will make their supply chain run more smoothly with less bottlenecking, reduced inventory, and better overall performance. Managers could overcome the complex and inaccurate manual process of forecasting and procuring parts which would result in reduced OTD lessen costs and enhance customer satisfaction. Further improved Supply Chain management will improve Supply Chain responsiveness and increase shareholder value to keep investors interested in the company.

Ford Motor Company

Introduction

Due to increase in market competition, supply chain superiority of competitors, high profitability of financially equal companies, Ford’s CEO, Jac Nasser is focusing on increasing shareholder value and customer responsiveness. Senior Executives have asked Teri Takai, Director of Supply Chain Systems, “how should the company use emerging information technologies and ideas from new high-tech industries to change the way it interacted with suppliers?” Corporate staff members looked at specifically how Dell manages their Supply Chain and incorporates the virtual integration strategy which gives Dell the ability to achieve the advantage of vertical integration without incurring the overhead. Virtual Integration not only elevates Dell’s speed and efficiency in meeting customer’s needs, but also allows it to achieve market capitalization greater than Ford’s with fewer assets and lower revenues and profits.

Dell applied virtual integration in four main areas: organizational simplification, inventory management, customer service and support, and suppliers’ management. Ford’s supply base is complex in nature when compared with the DELL supply base—many more layers and many more companies. This is one area that would be difficult to apply the same degree of virtual integration. Although there are several key differences between the companies, the restructuring initiatives of Ford 2000 have set a viable foundation to implement Dell’s virtual integration strategy in inventory management, customer service and support and suppliers’ management. In order to successfully implement the virtual integration, the problems existing in the current supply chain will be identified and addressed.

Ford Motor Company

Issues Identification

After closely examining Dell’s “virtual integration”, Teri realizes the differences between Ford’s purchasing organization and that of Dell’s pose complications. The redesign of the process must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that historically been considered independently within the Ford hierarchy.

Challenges that Ford faces that are not issues for DELL:

* Segregated Departments—Purchase department independent of the Product Department. The purchasing department historically to present is a powerful force within Ford and has full control and responsibility over price negotiations. Whereas, at Dell, purchasing reports into the product development organization.

* Large number of suppliers with many layers—3 tiers—is complicated to manage effectively. In its efforts to reduce suppliers from thousands, Ford has shifted from purchasing individual components to creating long-term relationships with a subset of “tier one” suppliers that provide entire vehicle sub-systems. However, the inherent complexity of automotive parts (30,000+) requires more suppliers unlike DELL which has only 50 components to assemble with about 8-10 of them being critical and a maximum permutation of 100. This also makes it difficult to implement a true build-to-order model for so complex a product as an automobile.

* Incompatible systems—not using IT to its full capacity as not all suppliers have the financial backing to bring technology changes in line with Ford’s technology changes (particularly 2nd level suppliers and lower). The lack of supporting technology poses problems in connecting suppliers and other external parties. To

Ford Motor Company

address this problem

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