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Ford Motors “Virtual Integration”?

Ford Motors “Virtual Integration”?

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Ford Motors “Virtual Integration”?

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  1. Ford Motors “Virtual Integration”? Red Group


  3. Ford Motors Profile • Pros Group: • “Virtual Integration”: reduce working capital & expose to inventory obsolescence • Cons Group: • Important & sustainsive difference between auto business & others • COMPANY BACK GROUND • Based in Michigan, world 2nd largest industrial Corp. (Rev:$144 billion; employ 370,000 employees, operation spanned 200 countries) • Core business: design & manufacture auto for sales Red Group

  4. Ford Motors Profile • In 1995: Ford embarked plan “ Ford 2000” called for: • Dramatic cost reduction • Eliminate organizational & process redundancies • Ford new global approach required: IT was placed in the process of reengineering. In supply chain area:IT used to enhance material flows, and reduce inventories. • Mid 1995: launched a public internet (>1 million visits/day in 1997) • Mid 1996: launched company-wide intranet • Jan 1997: had in place B2B capacity connecting Ford with supplier • End 1998:profited $6.9 billion, ranked 4th overall Red Group

  5. Ford Motors Profile • FORD EXISTING SUPPLY CHAIN & CUSTOMER RESPONSIVENESS • Ford Existing Supply Base • In 1980: several thousand of supplier picked based on cost rather than overall supply chain cost • In 1990: a shift toward longer-term relationships with a subset of every capable suppliers. • Organisational difference: powerful force within Ford. • Ford Production System (FPS) • Modelled roughly on Toyota Production system. • Focus on key attributes of production process: move to pull-based system • Order to Delivery • A key process of Ford reengineering: 15 days of delivery • OTD vision: to create lean, flexible, predictable process • Ford Retail Net work • 1 Jul. 1998: launched 1st FRN • Goals: consumer to receive the highest level of treatment. Red Group

  6. About Dell A Global Supplier in Computer Industry Found in 1984 Valued by 12 $ billion after only 13 years of operation Red Group

  7. About Dell Direct Business Model/ Virtual Integration Order Suppliers Dell Customers Delivery Value Added Customization Conduit for Suppliers Create & Expand Market Hold Inventory Customer Service Mngt Processes Source of Market Knowledge Rapid and Convenient Delivery Low Costs High Margin Pull Approach Red Group Technologies and Relationship

  8. FORD ANALYSIS Ford business model: order Suppliers Manufacturer Distribution Channel Customers delivery Red Group

  9. FORD ANALYSIS • Strength: • High ranking and large scale in automobile industry • Reduce cycle times through OTD and FPD system: • OTD relies on: ongoing forecasting of customer from dealers, increasing of manufacturing stability, optimizing schedules and deliveries, developing order amendment process • FPS aims at making Ford manufacturing leaner, more responsive, more efficiency • Strong investment in IT • Lower cost by restructuring, reducing inventories, pressing cost reduction from suppliers, improving quality continuously • Assist suppliers in improving their operation through JIT inventory, TQM, SPC and sharing information via the extranet • Set up Ford Retail Network and Ford Investment Enterprises Company Red Group

  10. FORD ANALYSIS • Weakness: • More focus on supply chain approach, less focus on demand chain: • Value chain is not derived from customer expectation directly but through retailers • Supply chain management based on cost, little regard of value chain’s costs as a whole • Less collaborative with automakers, suppliers, retailers • Complexity in supply chain structure: large network of suppliers and retailers • Unclear integrated system in term of internal processes between procurement and product development • Aggressive and Push approach strategies Red Group

  11. OPPORTUNITY and THREAT • Opportunities: • Globalization trend and market opportunities • Customers trust in Ford’s brands • Threat: • Competition • Complexity • Customization • Excess capacity Red Group

  12. DELL AND FORD COMPARED • Comparative Metrics ( see OHP slide) • Ford has larger business size & scale: • Assets, employee, manufacturing facility • Dell has much fewer physical assets, lower revenue but profits achieve market capitalization well in excess of Ford’s Red Group

  13. DELL AND FORD COMPARED • Business model: See more details on slides • Dell: • - New model • Direct sale &marketing/ strong customer relationship • Focus on customer : quality, cost saving, accurate response, after sale service, integration solution • Empower/ Pull processes • Virtual integration oriented in the whole value chain/ outsourcing • Ford: • - Traditional model • Mainly indirect sale/ customer relationship • Focus on design and manufacturing/ core business • Control/ Push to Pull movement processes Red Group

  14. VIRTUAL INTERGRATION IMPLICATION • Characteristics: Maximize and ensure the mutual stake holder value in the whole value chain: • Excellent performance in whole value chain • Technology Network on e-contacts • Trust relationship • No borders : more coordination, cooperation & collaboration • Success factors • Simplicity • Flexibility • Speed • Innovation • Integration Red Group

  15. RECOMMENDATIONS FOR TRANSITION TO VIRTUAL ORGANIZATION Ford Motor Company should: 1. Develop strong Demand Chain to meet & exceed customer satisfactions in term of: • Design Currency: variety of styling & engineering • “Exclusivity”: flexible for customization • Performance, reliability • Service: intervals, cost and convenience • Competitive price • Low depreciation • Operating economies Red Group

  16. RECOMMENDATIONS FOR TRANSITION TO VIRTUAL ORGANIZATION 2. Better Relationship Management through out the value chain by: • Better segmentation strategies: to drive the value chain and to utilize the strength of brand. • Procurement & R&D: Integrate current separate procurement function with R&D function to focus on consumer surplus rather than cost only. Develop multi-skills between procurement & product development. • Better utilize the Internet to facilitate sharing information/ fast response to customers • Remove the layers of suppliers for more value-added & simplify IT (Electronic Data Interchange links) so that more suppliers can joint the value chain Red Group

  17. RECOMMENDATIONS FOR TRANSITION TO VIRTUAL ORGANIZATION 2. Drive the organization from traditional OEM to ODM & OBM&S: Red Group

  18. RECOMMENDATIONS FOR TRANSITION TO VIRTUAL ORGANIZATION 3. Drive the organization for more efficiency: • Maximum the value of supplier network & continuous improvement the value added of each partners in value chain. • For more effective operation & coming over the exceed capacity issue: the outsourcing production/ co-production are good alternatives. • In applying direct selling approach (from B2B to B2C): Instead of investing a lot of $ for buying all Ford Dealers: outsourcing & utilizing internet technology as Virtual Dealer are also alternatives. • Reducing the complexity by applying standardizing criteria for part supplier network-More availability, more flexibility & faster in OTD. • Recruit, Training & Develop high skills work forces that can sense & response to rapid shift. Red Group

  19. DISCUSSION: In the transitional process to virtual, how the automotive industry, especially FMC will face with this challenges: How to coordinate through the value chain to satisfy customer expectations in fast & frequently changing fashion in term of: • What processes addressed new approach to customers? • Which & how new competencies obtained? • How to improve the capability of customization? • What is the new infrastructure required? • Can we seek a new response from suppliers? • How to shorten time-to-market? • How to reduce complexity to change veh. spec. while manufacturing? • How to build, communicate & measure scorecard based performance?. Red Group

  20. Virtual Integration-The way to success • Our Vision • To become the world's leading consumer company for automotive products and services. • Our Mission • We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. • We anticipate consumer need and deliver outstanding products and services that improve people's lives. • Our Values • Our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit. • We are an inspired, diverse team. We respect and value everyone's contribution. The health and safety of our people are paramount. • We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. • We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders Red Group

  21. Virtual Integration Suppliers Customers “No Boundaries” Red Group