Ford & Dell Case Study

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of customer/dealer forecasts (pull system) it is no accurate. The system is actually increasing buffer inventory in the storage bank.

Alternatives

One alternative for Ford would be to adopt Dell’s Virtual Integration business model. This includes building vertically integration and partnerships with its suppliers and with its customers. They would have to build on current IT initiatives and develop IT solutions that link to all partners and all levels of suppliers and customers up and down the supply chain. The advantages of this alternative are vast. Creating closer partnerships with Tier 1 suppliers will allow them to have mutual beneficial relationships. This will allow these suppliers to have improved collaboration with Ford and would be realized as being an extension of the company. This in turn, would improve the processes between the lower tier suppliers, access to information between lower tier suppliers by providing them with the information technology they need would allow for better coordination of inventory and OTD. Moving from a “push” system to a “pull” system, allowing them see design and forecasts will give them the information they need to supply assemblies to order and increase speed time to market. Partnerships in this model would also be involved in research and development that can creates mutually beneficial asset and cost efficiencies, customer service enhancements, marketing advantages and profit growth or stability.

Partnering with customers is another aspect of this option. Segmenting larger customer groups to be able to deal with their unique requirements and provide better customer service and support. Providing online access to products, availability and vehicle configurations would be a value added service to customers while improving the ability for collect customer data. Dealer services would also be valued and creating closer dealer partnerships would provide the ability to collect customer data from dealers to help forecast demand. The ability to more accurately forecast demand is essential in improving the OTD process, enhance material flows and reduce inventories.

Disadvantages of adopting Dell’s Virtual Integration model include costly implementation, a huge amount of work involved requiring extensive resources, willingness of the supply chain partners to collaborate and the risk involved in the change. First, there is a very extensive cost of IT infrastructure and systems development that would need to be developed provided to customers and suppliers, especially lower tier suppliers. The implementation of this model would be difficult to implement and would come with some risk. Ford is a very different business than Dell with a supplier network that is much more complex and has different challenges that could cause complications. Ford would also have to fundamentally change the way some business activities had historically operated as a result of virtual integration, including the role of the Purchasing department.

Another alternative would be to implement a more feasible scope for redesign of the supply chain by continuing with and expanding on existing Ford 2000 initiatives without moving to a fully “virtual integration” as provided by Dell. This would include expanding IT abilities to the lower tier suppliers in an effort to share information across the supply chain and improve OTD and a more stable production system. The main advantage is that the since supplier network is much more complex than Dell, and narrowing the scope of changes will reduce the risk.

The disadvantage of this system is that without development of information sharing between the lower tier suppliers, the push system will continue. The ability to create reduced inventories and buffer stocks provided by the Ford Production System is dependent on accurate demand forecasts, which they don’t have. Without the ability to improve cycle times and manufacturing efficiencies, Ford may not be able increase customer satisfaction or gain a competitive edge in the global market.

Recommendation

My recommendation is for Teri Takai to implement Dell’s Virtual Integration Model. This option should be supported because the ability to take advantage of new and modern technology across all levels of the supply chain is what will enable Ford to emerge as a leader in the market. By using available technology Ford will be able to streamline processes, reduce inventories, and be more responsive to customers. The result will be improved shareholder value and provide the potential for dominance in the domestic and global markets. While some of the more cautious groups at Ford may see the risks involved in such a dramatic change, it will be important to involve all players in mitigating the risks by bringing examining them closely through the implementation process.

Implementation

The implementation plan will begin with two separate processes. The first is to identify the potential Supply chain partners to determine Type III partnerships as described by We’re in this Together, DLambert and MKnemyer, 2004. Within the first 6 months to a year, Ford should initiate meetings with Tier 1 suppliers to determine some potential suppliers to initiate partnerships with. They will use the Partnership model, which is a process for “aligning expectations and determine the level of cooperation that is most productive”. Meeting organizers will set up meeting with key individuals from both organizations that are a mix of executives, managers and operations people. These meetings will take place off-site and will determine whether each the two companies have the necessary desire to partner and to determine the level of compatibility the companies have together. These meetings will determine the suppliers that are most compatible for the Type III partnership. This is a partnership with a high level of integration and strategic alliances, and that see each other as extensions of themselves. This process should also be done with dealers and customers to identify these partnerships. Once partnerships are established, Ford teams will work directly with the partners to develop action plans to align goals and develop business strategy.

At the same time Ford will need develop an Interorganizational Information System (IOIS) that can be used across the supply chain to share information. Teri Takai will develop a team at the earliest opportunity to determine the information that is required from all levels of the supply chain. This team will include members from separate supply chain organizations, including Tier 1, 2 and 3 suppliers as well as dealerships. The