The main issue at hand for Ford Motor Company is whether it would be beneficial to virtually integrate their supply chain, modeling themselves after Dell’s approach to supply chain management. Ford’s current supply chain is going through a time of change whereby new management feels that adapting to virtual integration could bring large benefits to the entire supply chain that could substantially reduce amount of inventory on hold. Ford have historically engaged in a push system, which is defined as having a pre-existing schedule that allows goods to move down the supply chain according to what the organization believes will be sufficient to meet demand. Virtual integration would blur the lines in the supply chain process within and across the company’s boundaries.
Ford have implemented new supply chain schemes to try to refine their supply chain to be more consistent, effective, and timely. This can be seen in their the Ford 2000 initiative which focused on key attributes in their production basis to move towards a pull system, their order to delivery system to reduce order times from 45-65 days down to 15, and their Ford Retail Network which aimed at buying all Ford dealerships in local markets to reduce competing with one another and keep consistent looks between all of the showrooms.
At this time in Ford’s history with an increasing focus on connectivity via internet and intranet present in other organizations and being developed within their own organization, Ford has decided to look at Dell’s supply chain and decide whether it would be beneficial to adopt the same strategy, adopt specific processes that would could be carried over, go in a different direction, or maintain the status quo.
Environmental and Root Cause Analysis
Advantages of Virtual Integration
Integration of a virtual supply chain could bring about numerous benefits for Ford to refine their supply chain that would potentially make them more profitable and a leader in the industry for cost effective supply chain management. Since it is so competitive, any cost effective procedures could make their product more appealing to the end customer and to their suppliers to give them preferable terms and share information.
The key advantage to virtual integration for Ford would be able to accurately forecast the amount of inventory they need. Dell currently operates with a limited amount of inventory on hand by only ordering exactly what they need. For example, Michael Dell explains in his interview that when they order, they will say “Tomorrow morning we need 8,562, and deliver them to door number seven by 7 A.M”. Currently, Ford uses the Order to Delivery initiative which aims at reducing lead times and by sharing the information with suppliers, they would speed up the entire process and deliver the end product faster and with a reduced cost base for the organization.
Another big advantage of implementing virtual integration for Ford would be for its Ford Retail Network, where Ford aims to purchase each showroom and give a consistent design and reduce competition between dealerships that sell Ford automobiles. Having the ability to communicate with each other in real time by pooling and share resources such as consumer demand and inventory would be crucial to perform above and beyond their competition, since
Weaknesses of Virtual Integration
The essential weakness for virtual integration for Ford is trying something in an industry that has historically never used such a supply chain method to deliver their product. As Dell is in such a different industry, it may be hard to derive some of their benefits from their supply chain, such as having minimal employees and outsourcing a large part of their manufacturing and inputs. Dell’s industry is made up of much cheaper products that can easily be replaced and any fault will not cause danger to the end customer. For example, Dell strives for only 1% of their monitors