Executive Summary

Being a company with over 100 years of history, Ford’s supply chain is very complex, both upstream and downstream. Facing with the increasing competition from Asian automakers, Ford is in a critical position to find better solutions to bridge its existing legacy supply chain to a more responsive and efficient supply chain model.

The facts that Ford should be considering when redesigning the supply chain are: Ford is selling automobiles which are very complex consumer products; Ford’s operation involves many raw materials, thus raw material vendors; Ford has to deal with individual customers who’s purchasing habit is much harder to predict therefore has limit contribution to manufacturing forecasts; last but not least, due to product category that automobile belongs to, it requires physical distribution channels versus virtual stores.

After analysis and consideration, it came to conclusion that fully implementation of virtual integration wouldn’t be practical for Ford; however Dell’s “using technology to enable coordination across company boundaries to achieve new levels of efficiency and productivity, as well as extraordinary returns to investors”, will definitely help Ford’s to identify current bottlenecks and streamline process.

Through the recommended continuous vendor relationship management, better information flow and coordination, leaner manufacturing initiatives, Ford should expect to see improved quality, higher customer satisfaction, better plant productivity, stability and lower dealer and company costs.

Issue Identification

Ford Motor Company was the second largest industrial corporation in the world. It operates business in 200 countries worldwide with about 370,000 employees and total more than $144 billion revenues. The company’s core business had remained the design and manufacture of automobiles for sale on the consumer market. To cope with the growing competition presented by Japanese car makers in last two decades, Ford took actions to continuously improve quality and reduce cycle times while dramatically lowering the costs of developing and building cars by industrial consolidation with other automobile markers, including Chrysler and Daimler-Benz.

The merging enabled Ford to take advantage of its size and global presence, however, it also brought more complexities to Ford’s product mix, more challenges in managing the further expanded supplier base and dealership networks. There are two different perspectives emerging within the company recently concerning how Ford should shape its existing supply chain to better support future business success. Whether or not Ford should adopt virtual integration- Dell Computer’s proven new and cost effective supply chain model supported by enhanced IT technologies, has become the fundamental issue.

In order to better identify whether or not it’s wise for Ford to persuade Dell’s supply chain model, it is necessary to compare and analysis in the context of both Ford and Dell’s unique business nature.

Environmental and Root cause analysis

Virtual Integration, like Michael Dell (founder of Dell Computer) interpreted, is a strategy that Dell uses to blur the traditional boundaries in the value chain among suppliers, manufacturers, and end users. Technology and information are key enablers in such new model.

1. Suppliers:

Ford used to have several thousand suppliers of production material in complex network of business relationships due to the history reason. Suppliers were picked primarily based on cost, and little regard was given to overall supply chain costs, including the complexity of dealing with such a large network of suppliers. Starting from early 1990s, Ford had begun to add more tiers to its supplier base to decrease the number of suppliers the company dealt with directly in order to improve communication efficiency and better relationship management. However, the IT capabilities, maturity