Principles of Logistics and Supply Chain Management - Ford Company - Case Study Example

BUSS 2054 – Principles of Logistics and Supply Chain Management Study Period 5 2015 Assessment Task 2: Formal Report 2500 words Executive Summary This report discusses the challenges that the Ford Company faces and the measures they have to put in place in order to accomplish the organizational goals. the report also touches on the issues related to logistics and supply chain management that most of the companies face and tries to explain in detail how such issues can be dealt with; like in the case of the Ford Company, it had to contract out the management of logistics and supply chain to the Penske company in order to meet the goals of the organization. It also covers the ways in which logistics and supply chain can be done in order to reduce the cost or the expenses that the company meets when conducting their daily operations. Introduction Logistics and supply chain management is an area that always requires a professional approach in order to avoid running a company at a loss. In most cases people or in this companies fail to consider the field of logistics and supply chain management an important department that makes huge contribution to the business. Logistics plays a very important role in the growth of a given business and ensures smooth running and management of supply chain. Just by ensuring that proper measures are in place to handle issues that are related to logistics and supply chain management, then it means any company stands a chance to avoid unnecessary expenses and instead continues to make huge profits. Business challenges are always there and there is now way a business can grow without facing some difficulties on the way and best thing that a business can do is to find the best solution to hand a given issue; just like when the Ford Company realized they had an issue with logistics and supply chain management, they decided to look for a professional company to manage that are on their behalf. The logistics and supply chain management is also an area that really plays an important role especially in ensuring that goods and services are delivered to the clients at the right time while reducing the expenses of running and managing the logistics and supply chain. Background and Business Environment The moment the Ford Company realized issues related to logistics and supply chain management they decided to get Penske Company, specialist in logistics and supply chain management to provide them with logistics and supply chain management services. The moment they sign contract, the Penske Company immediately scrutinized the logistics and supply chain network of the Ford Company. That move gave them an insight on how the network is and why the company failed to achieve the best out of it. The Penske Company main aim was to develop a more centralized logistics network in order to improve the movement of Ford’s products and at the same time ensuring a reduction in the company’s expenses. Apart from developing a centralized logistics network, Penske also aimed at: streamlining the carrier and supplier operations in order to improve the performance providing real time supply chain and financial visibility solutions order dispatch centers training the suppliers on uniform set of procedures and logistics technologies implementing strict liability procedures and sophisticated supervision technologies in order to achieve real time visibility of distribution status, routing schedules and productivity developing a freight billing system to help in capturing logistics costs. Discussion Q1. Challenges of Ford Motor Company in Logistics and Supply Chain management The task of carrying out logistics and supply chain management is never an easy task. The field of logistics and supply chain management requires people who are professionals in that area in order to ensure a given organization does not run at a loss. The Ford Company faced various challenges prior to signing a contract with Penske Company which assisted in designing the best way to handle logistics and supply chain management. According to David, Philip, & Edith, (2008), when it comes to handling supply chains, the workers in charge have quite a number of issues to handle with each and every concern facing the supply chain administrator has insinuations for the company Challenges faced by Ford Company Poor logistics network – the company faced a challenging time in managing its logistics because they did not have professionals with the right experience in logistics and supply chain management. The development, implementation and the task of operating a centralized logistics network is what makes a company to succeed in its business operations. Because of poor logistics network design, Ford Company was not in a position to ensure a smooth movement of their products. Logistics network design is concerned with the governing of the number and locality of production plants and warehouses, allocation of storerooms to production plants (Bloomberg, Lemay, & Hanna, 2007). The optimal arrangement should be in a position to deliver the merchandises to the clients at the least charge and at the same time sustaining the service level necessities. The Ford Company did not have that, which became very challenging to operate and run business. Because of the poor logistics network, the company could not guarantee that the demand at different consumer sites is contented on time, (network plan prototypes usually comprise of distances constraints and/or time as service level necessities). Financial Visibility – this was one of the main challenges that the Ford Company was facing prior to deciding to let Penske Company to help them run the logistics and supply chain management. Financial sector is fundamental to any business, and once there is a sign of mismanagement of the company’s finance then that could be the end of the company (Lambert, & Burduroglu, 2011). Carrier and supplier operations – this is one area that proved to be very challenging to the Ford Company. According to Coyle, Langley, Gibson, & Novack, (2013), Carrier and supplier operations sector in any manufacturing company is very crucial. It is the sector that ensures availability of materials, movement of finished goods from one point to another, delivery of purchased products to the clients, and the smooth running of day to day operations of the company. Information Technology System Integration – the Ford Company did not have such kind of a system before the Penske Company came. Without the use of technology, the operations of any given company, especially those companies dealing with manufacturing tasks (Murphy, & Wood, 2010). Initially the Ford Company had issues in accomplishing real time visibility of supply chain shipments, schedules and orders. The company also was facing issues with the collection of money due to the lack of billing system which requires existence and the use of high end information technology skills. Discussion Q2: Roles of Logistics and Supply Chain management in Ford Motor Company Most people thing that logistics management and supply chain management (SCM) are one and the same thing, but each has its own role. According to Larson, and Halldorsson, (2004), logistics management basically refers to that part of the supply chain management that implements, plans, and regulates the effective, efficient, reverse and forward flow and storage of goods, services and related facts between the point of origin and the point of consumption in order to meet client requirement while supply chain management refers to the general management of the flow of services and goods. Logistics consist getting the right product, in the right way, in the right quality and the right quantity, in the right place at the right time, for the right client at the right cost (Kouvelis, Chambers, & Wang, 2006). With the help of Penske Company, a logistics and supply chain management company, Ford Company managed to get a real time management and track of all consignments. Some of the logistics management roles are listed below; Shaping the Ford’s Logistics network – the new rules of logistics management that Penske Company brought into the Ford Company assisted in shaping how the flow of goods move from the point of origin to the point of consumption or to the warehouse. Logistics management helped in reducing the cost of transportation due to the development of order dispatch centers by the Penske Company. Implementation of the new network design that consisted of ten order dispatch centers assisted in the centralization of the transport and distribution operations. Maximize carrier service and minimize carrier cost – a well laid logistics management played a good role in running day to day operations of the Fords Company. With the proper use of the logistics management techniques employed by the Ford Company through Penske Company, transportation cost went down. Infrastructure/resources management – this is one very important role of logistics management that played a good role in the management of the Fords Company daily operations. Logistics management ensures smooth management of human resources, packaging of materials, financial resources, warehouses, communications, and transport. Management of information systems – logistics management helps in the management of the IT departments and especially in ensuring that the company has a working billing system. Discussion Q3: Discuss the essential trade-offs in meeting organisational performance goals while minimising total costs in this case study context and in general practice Making a decision to balance two things is never an easy task because you can have one and not both. A trade-off or tradeoff basically refers to a situation that includes dropping one quality or aspect of something in order to achieve another quality or aspect. For the Ford Company, balancing between various factors and managing the business to meet the organizational goals was quite challenging as the company faced various issues concerning its logistics and supply chain management. The company had to choose between taking the company to another level in terms of getting better performance in the market or take lead in managing their logistics and supply chain themselves. Choosing to let someone else do the logistics and supply chain management meant that the company will have to lose huge amount of money to get a better service in terms of logistics management. According to Kouvelis, Chambers, & Wang, (2006), trade-offs might occur for quite a number of reasons and the idea of a trade-off habitually infers a verdict to be made with full knowledge of both the downside and upside of a specific choice. The ford company made a choice to outsource the work of logistics and supply chain management to the Penske Company because they saw a bigger picture in terms of long-term benefits; they made a choice that they never regretted because in less than two years the company was making good profits. Even though the ford company was going to pay for the service from the Penske Company, they also recognized a reduction in the cost of logistics and supply chain management which in turn increase the profits that the company was making initially. Discussion Q4 Role of logistic management and Penskes’ solutions in adding value to Ford’s operations performance The move that Ford Company took to adopt best-in-class logistics services helped them to grow and to better manage their businesses. Logistics is very vital because it generates worth – value for clients and dealers of a given organization, and the worth for the company’s stakeholders (Patrick, 2010). Penske came in with a good knowledge of logistics management which completely changed the way ford carried out their daily operations. It is very clear that, Ford Company had issues in managing their own transport network because of poor logistics management. According to the Lavassani, Movahedi, and Kumar, (2008), no matter the size of the organization, the concern for logistics can assist any effort exploit the supply chain more efficiently by reducing costs when applicable and by evading waste of materials and time. According to Ketchen and Hult, (2006), in any given organization environment, logistics either have an external or internal aims (outbound or inbound). The Ford’s company freight billing was a little be complicated because it was handling nearly 1, 500 dealers controlling about 20, 000 shipments every week. With such heavy work to handle, Ford Company faced various difficulties in gaining a clear view of the financial status of logistics operations. Penske assisted n running daily operations of the Ford Company by providing drivers with a single set of paperwork procedures. This ensured delivery documentations was collected and submitted to accounting in time. Another best move that Penske made to help the Ford Company grow its business is the development of a new freight billing system that was aimed to be used to capture freight costs and in allocation of those costs by plant. That move added value to the daily operations of the Ford Company in that Ford Company was now in a position to monitor the performance of all the plants and to see which of the existing plants had the lowest and highest freight expenses and also which haulers were most cost effective. The effort to entirely transition Ford’s logistics operations to a centralized network design was successful and now the company realized that more than five hundred outbound and seven hundred inbound trailers move in and out of the order dispatch centers operated by ford company; that was the biggest achievement by the ford company as it added value and also ensured constant growth of the business because of smooth logistics management. Having a centralized network helped in ensuring consignments are consolidated at the order dispatch centers and due to proper management of logistics the previously un-used space for cross-docking was now being utilized. Due to the proper management of logistics, the company realized that more than fourteen million pounds of freight were being cross-docked on daily basis, which in turn resulted in a reduction of inventory by about fifteen percent. Due to the employment of the appropriate logistics management transporters and dealers of the company now operate under a single set of transportation and distribution procedures, which has enabled a better service throughout the supply chain. Thus, logistics management played a very useful role in ensuring the success of the company. The solution that Penske used in ensuring smooth running and management of Ford’s Company day to day operations, such as “Carrier Rating System” also ensured that the company avoids costly distribution network, and also in-effective carriers. The transition movement also involved the application of uniform technologies, which ensures order dispatch centers are in a position to monitor consignments, identify incompetence and also to deal with materials handling issues in a more real-time surrounding. Improvement in logistics management of Ford’s Company led to surety that all the logistics expenses enters the supply chain hence helping the company to properly manage its finances. Such improvements also assisted the company in monitoring the overall supply chain management expenses and also per plant allocations at any given point in time. Conclusion Any given organization and not only manufacturing organizations face challenges in management of logistics and supply chain. This area of logistics and supply chain management is a very sensitive area that requires attention in order to achieve the best out of it. Proper approach and management of logistics network is the key to running and managing a business successfully, as seen in the case of Ford’s Company after they outsource the logistics and supply chain management services to Penske Company. References Andrew Feller, Dan Shunk, & Tom Callarman (2006). BPTrends, March 2006 - Value Chains Vs. Supply Chains Arnold, M., Nicole, D., (2004). Warehousing. Oakbrook Bartsch, F., (2013). Supply Chain Management (SCM). BB Handel. Retrieved 19 June2013. Beckmann, K., (2007). Logistik. Rinteln: Merkur-Verl Bloomberg, D., Lemay, S., & Hanna, J., (2007). Logistics. Upper Saddle River: Prentice-Hall. Coyle, J., Langley, J., Gibson, H., & Novack, R., (2013). Supply chain management: A logistics perspective (9th ed.). Mason: South-Western College Publishing. David Blanchard (2010). Supply Chain Management Best Practices, 2nd. Edition. John Wiley & Sons, David Jacoby (2009). Guide to Supply Chain Management: How Getting it Right Boosts Corporate Performance (The Economist Books), Bloomberg Press; 1st edition, David, S., Philip, K., Edith, S., (2008). Designing and managing the supply chain. New York: McGraw-Hill Gleissner, H., Femerling, J., (2013). Logistics Basics Hines, T., (2004). Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier. Joel, W., Keah-Choon, T., (2005). Principles of supply chain management. John, C., Langley, C., Brian, G., (2008). Supply chain management: A logistics perspective Ketchen, G., & Hult, T., (2006). Bridging organization theory and supply chain management: The case of best value supply chains. Journal of Operations Management, 25(2) 573-580. Kouvelis, P., Chambers, C., Wang, H., (2006). Supply Chain Management Research and Production and Operations Management: Review, Trends, and Opportunities. In: Production and Operations Management, Vol. 15, No. 3, pp. 449–469. Lambert, D. M., & Burduroglu, R. (2011). Measuring and selling the value of logistics. International Journal of Logistics Management, 11(1), 27–50. Larson, P., Halldorsson, A., (2004). Logistics versus supply chain management: an international survey. International Journal of Logistics: Research & Application, Vol. 7, Issue 1, 17-31. Martin, M., (2010). Measures of warehouse productivity: Logistics/supply chain Mentzer, J., et al. (2009). "Defining Supply Chain Management". Journal of Business Logistics Movahedi B., Lavassani K., Kumar V., (2009). Developments in Theories of Supply Chain Management: The Case of B2B Electronic Marketplace Adoption, The International Journal of Knowledge, Culture and Change Management, Volume 9, Issue 6, pp. 85–98. Movahedi B., Lavassani K., Kumar V., (2009). Transition to B2B e-Marketplace Enabled Supply Chain: Readiness Assessment and Success Factors, The International Journal of Technology, Knowledge and Society, Volume 5, Issue 3, pp. 75–88. Murphy, P. R., & Wood, D. F. (2010). Contemporary logistics (10th ed.). Upper Saddle River: Prentice-Hall. Patrick, B., (2010). State of logistics: logistics management Rutner, J. M., & Langley, C. J. (2000). Logistics value: Definition, process, and measurement. International Journal of Logistics Management, 11(2), 73–82. Read More