Ford Motor Company History Analysis

Ford is the oldest automobile company and also one of the car companies presently in danger of becoming bankrupt once more. Most of their problems stem from a poor product as compared to other products in competition, but also one of their problems has been inventory management. Customers want a car that is specific for their needs. They do not want a car that is generic for the entire population. Ford has started to realize this phenomenon, and has begun a new inventory management program. The inventory management program is called build-to-order (BTO).

This is where the customer will select what they want out of the car and Ford will provide that car meeting their specifications. The problem with Ford’s quest to implement BTO is that Ford faces many challenges in implementation. For example, “the challenges of implementing it in the auto industry are daunting-particularly in North America-and it isn’t clear that the economics will work. “(Agrawal, Mercer & Kumaresh, 2001, p. 62) Doubts vary, but most lie in the realm of spending and benefits from that spending to bring forth a BTO plan.

On the technical side, it is noted that: Moving from a mass-manufacturing (or “push”) system of production, which automakers have continually refined over the years, to a BTO (or “pull”) system would require numerous operational and organizational changes throughout the auto industry value chain. (Agrawal, Mercer & Kumaresh, 2001, p. 62) One of the problems with the BTO system is that the auto dealers do not tell customers about the existence of such a system and that many customers do not even know that such a system exists. (Agrawal, Mercer & Kumaresh, 2001, p.62)

This leaves Ford Motor attempting a new system that no customer knows about, but if the customer did know about the system they would probably participate. The benefits are to Ford Motor and not to the dealers. For example, “a true pull system would mean a massive reduction in finished goods (for both the manufacturers and the dealers) and in components inventories (for both the manufacturers and the suppliers). “(Agrawal, Mercer & Kumaresh, 2001, p. 62) This aspect of the BTO system would be good news for Ford Motor, but bad news for the dealerships that are losing out on inventory and direct customers.

It is no surprise that the dealerships therefore do not inform customers about the BTO system and the ability for customers to order their automobiles straight from Ford Motor Company. Ford Motor’s supply chain management, however, is steering into more positive territory. Ford has accomplished this objective by combining forces with other car makers such as GM in order to create a more flawless system that can be integrated into a seamless whole. In 1999, “Ford and GM announced the introduction of internet-based supply chain management systems. Each company plans to do its procurement via the internet.

“(Brookes & Wahhaj, 2001, p. 95) The next detail to explore is the amount of savings this internet system will introduce for Ford in the long-run. According to Brookes and Wahhaj, “significant savings are expected in the process (savings of up to 20 per cent are reported in The Economist, 1999). Subsequently Ford and GM have joined together along with other manufacturers to develop a common system. ” (2001, p. 95) The implementation of the computer system in order to maintain a uniform supply chain has been helpful to the company and has saved the company money.

It is in their inventory control and the reluctance of their suppliers (dealerships) that have hindered their growth into the new area of BTO. McDonald’s Restaurants McDonald’s is a peculiar corporation because their supply chain and inventory management revolves around their franchises. Ultimately it is the franchise that sells their products and McDonald’s acts as the supplier of the products. One of the main goals of McDonald’s is to create a similar experience in any restaurant a customer visits. McDonald’s employs an inventory and supply chain system called Time Based Competition (TBC).

TBC is the process by which a firm will try to gain a competitive advantage by getting their products to market faster than the competitors. (Chung, 1999, p. 299) Other restaurants wanted to create large franchises within large regions and were eager to establish franchisees all around the country in order to maximize quick short-term profits. McDonald’s employed a different method called TBC in which they planned which franchises would benefit most from their supply and which franchises would need to be dropped because of a lack of commonality between franchise regions.

This may seem foolish at first to forego any short-term profits, but “McDonald’s, on the other hand, was willing to sacrifice the quick franchising profits by selling one franchise at a time and by emphasizing uniformity and QSCV (Quality, Service, Cleanliness, and Value). ” (Chung, 1999, p. 299) This solved the problem of controlling their supply chain (the actual restaurants) and maximizing the QSCV for all restaurants that McDonald’s supplied. McDonald’s was correct in not following the logic of other competitors such as Dairy Queen whose franchises “withered because of their inability to control their large territorial franchises.

” (Chung, 1999, p. 299) It seems strange that McDonald’s is the largest franchiser in the nation, and yet they employed a system of smaller is better. This worked for them and is still maintained today. It is because of this lack of a sprawling territorial franchise system that McDonald’s is able to deliver their supplies and still maintain QSCV. This is one instance where a giant corporation gained a competitive advantage by thinking locally instead of regionally. Dell Computer Dell Computer appears to have mastered the supply chain and inventory management problems faced by many companies.

Dell utilizes a distinct system from all its competitors that mainly relies on common sense and efficiency. Dell Computer uses a system borrowed from the Japanese called the KABAN system. (Fitzpatrick & Burke, 2000, p. 13) The first trait of this system is the proximity of suppliers to Dell factories. Proximity is important to the supply chain because it helps needed materials arrive to factories quicker. With shorter distances to deliver, the costs associated with manufacturing are undoubtedly cut dramatically.

Dell manages close proximity to a high degree by “[insisting] that all its suppliers warehouse the bulk of Dell-required components in facilities located within 15 minutes of a Dell factory. “(Fitzpatrick & Burke, 2000, p. 13) Basically if Dell is going to receive supplies from a supplier they would need to have a warehouse within 15 minutes of a Dell factory or Dell does not even bother doing business with them. This aspect of Dell’s business is similar to the power that Wal-Mart maintained over various suppliers.

Regulations such as this can only be made by a leader in the industry such as Dell. Another way Dell manages inventory and the supply chain is by becoming intimate with the buyer directly. Dell works directly with its suppliers in order to help cut down on unneeded inventories. This system of intimacy is denoted by: Dell assist[ing] its suppliers in streamlining their component inventories by having their customer service representatives suggest or market standard system configurations to buyers.

Therefore, suppliers are able to reduce the number and variety of components they warehouse. (Fitzpatrick & Burke, 2000, p. 13) Dell therefore helps its suppliers and in turn the suppliers help Dell with efficiency in their supply chain and inventory system. It is a mutual understanding of what the supplier has on hand, proximity of the supplier, intimacy with the buyer, and communication/assistance with the supplier, which all helps Dell become a leader in the customized computer field. Dell has also conducted a system to control inventory and supply even further.

Dell has implemented a Just-In-Time (JIT) inventory procedure when dealing with customer orders. Dell accomplishes this procedure by not requesting materials from suppliers and subcontractors until a customer has made an order through the Dell system. (Fitzpatrick & Burke, 2000, p. 13) It is in Dell’s own established principles that they can employ a JIT system. As Fitzpatrick and Burke suggest, “this latter purchasing policy and the close proximity of suppliers permits Dell to develop a JIT production scheduling system. “(2000, p.13)

The avoidance of an overabundance of generic finished products is what Dell is attempting to avoid. Unlike other manufacturers, Dell does not want to maintain a huge inventory of computers whereby the customers have few options in choosing. Dell must employ their systems in order to allow the customer freedom in what they purchase. It is the combination of “JIT, the avoidance of retail vendors in its value chain, and the marketing of standard system configurations [that] permit Dell to avoid maintaining extensive inventories of finished goods. “(Fitzpatrick & Burke, 2000, p.13)

Dell’s system relies on stringent measures and regulations that are intended to increase quick delivery, cut down on inventory, and ultimately lower costs to the consumer. Conclusion Supply chain and inventory management are important items for any company. The examples of Wal-Mart, Ford, McDonald’s, and Dell Computer all demonstrate how a company can strive or die according to how they handle their suppliers and their inventory.

References

Agrawal, M. K. , & Pak, M. H. (2001). Getting Smart about Supply Chain Management. 22. Agrawal, M. , Mercer, G. A. , & Kumaresh, T. V. (2001). The False Promise of Mass Customization. 62.