Supply Chain Management at Ford Motor Company - Report Example

Supply Chain Management at Ford Motor Company Supply Chain Management at Ford Motor Company Innovation has always been a significant part of the automotive industry since the inception of the engine in the 18th century. By the 20th century, the technological developments further progressed and the more efficient vehicles were designed. The beginning of the ‘motor cars’ formally began in 1906 when Ford’s Model T was launched (Bradley, et al., 2005). As technology advanced, so did the manufacturing process and Henry Ford’s assembly line was introduced in 1913. The company has since been operating as an automotive giant in the industry. On the other hand, General Motors continued expanding its business by acquiring other companies like Chevrolet and new companies, such as Lincoln Continental, Volkswagen, etc., began entering the market and thus began the competition between the automakers (Aherne, 2007). By this time, General Motors began introducing a variety of vehicles, giving it an edge over over Ford. The present automotive market is much more complex than it used to be a century back as the customers have become more educated, increasing the buyer power. The rivalry in the global automotive market is intense, the threat of substitution is high, there are many barriers faced by new companies trying to enter the market, and it’s mostly in favor of the buyers due to the available options, lower cost of switching brands, and the standardization of the commodity associated with the product (Bradley, et al., 2005). In order to get a competitive advantage in the industry, the companies have no choice but to bring down the manufacturing cost, especially since players from Asia have entered the global market (BERA, 2004). This is where the supply chain management comes in. Supply chain management is defined as “management of material and information flow in a supply chain to provide the highest degree of customer satisfaction at the lowest possible cost” (Business Dictionary, 2013). The companies in the automotive industry are much dependent on external suppliers for their materials before the vehicle can be assembled together (Helper, 1990). One supplier may be supplying to multiple companies at the same time and may have multiple suppliers themselves. It is estimated that that there are a minimum of six stages in the supply chain from supplying the raw material to assembling the final product (Olhager, 2002). It is thus crucial to ensure a smooth flow in the supply chain to ensure efficient manufacturing. Some of the popular theories in the supply chain management include the following: Just in time (JIT) theory refers to the efforts and strategies applied by the management in order to increase revenue by reducing the cost of manufacturing within the company (Bongiorni, 2004). The theory suggests that improvement in the manufacturing process is continuous. By being in a continuous process of improvement, a company can increase its return on investment as the manufacturing process keeps getting more and more efficient (Alternburg, et al., 2003). The theory advocates that all unwanted inventory present in the company is a hidden cost and not an asset (Bongiorni, 2004). It is thus suggested that the company must get rid of the unwanted inventory and continuously improve its process of manufacturing by adopting methods that require lesser amount of inventory (Slack, et al., 2012). Material Requirement Planning (MRP) is another theory that can be applied to the supply chain and it implies that the best way to improve efficiency of the manufacturing process is through planning and control of the inventory system (Wuttipornpun & Yenradee, 2006). The theory focuses on the availability of the materials required to manufacture a product and the availability of the product to the customers. However, the materials and products must not be present in an excessive amount and must be controlled according to the demand. Finally, there must be a proper plan of production, i.e. how and when the product will be delivered to the customers and how much of it is purchased. Total Quality Management (TQM) is perhaps one of the most popular theories of management and has been widely used in many organizations over the years. The theory proposes that in order to gain competitive advantage over other companies, one must make efforts to increase the quality but decrease the cost of that quality (Nicoleta, 2010). The main purpose of the theory is to achieve customer satisfaction which would benefit the company in the long run (Hackley, 2003). Moreover, the theory suggests that the process of improving quality of the product is not only dependent on the management, but it is something that must be taken in to consideration at every step through every employee involved (Lewis, et al., 2006). Ford is a company that either has applied all of the above mentioned theories in its process of manufacturing at some point. In fact, Henry Ford has made many contributions to the development of the JIT, even though it is said to have been developed by Taichi Ohno, mainly because the theory was not popularized until the Japanese company, Toyota, began applying it during the 1980’s (Casey & Dodge, 2010). In reality, the foundation of JIT had actually been set much earlier by Henry Ford in his book, Today and Tomorrow. The JIT was initially developed to maintain a smooth flow of material on the floor at “the right time, the right place” and in right quantity (Pride, et al., 2011, p. 230). An example of the reduction in the number of workers at Ford can be used to explain this as it took a total of 15 workers to complete one car back in 1919, and the number came down to 9 in 1921 as more efficient methods of production were applied (Peterson, 2002). Similarly, TQM is being applied in Ford Motor Company since the very beginning. The company not only controls waste, but also makes sure that quality of the product is maintained at all levels of production. Due to this quality assurance of the company, the rate of warranty repair has significantly decreased over the years (Nicoleta, 2010). Presently, the TQM is mainly applied in the company through the process of Six Sigma. The company is making use of the DMAIC process which stands for “define, measure, analyze, improve, and control” (Scheid, 2011). The DMAIC allows the company to detect any shortcomings or potential problems of the product before it is launched by skilled engineers and specialists (Scheid, 2011). Since the company is able to maintain high product quality it is also able to maintain a loyal customer base. The improvement in the quality also requires innovation which has helped the company apply and maintain better process of production compared to its competitors. Lastly, the MRP is maintained in the company to maintain sustainability in raw materials, assessment of suppliers, the supply chain environmental management, materials management and logistics (Ford Motor Company, 2012). A good quality product cannot be produced without making use of sustainable materials. The company makes sure that all its suppliers fit their sustainability criteria. The company routinely addresses the sustainability issues with respect to the environment and human right issues. It is important to maintain sustainability not only to avoid risk to the operations of the company but it is also important for the brand name and reputation. These issues related to sustainability are maintained throughout the process of supply chain management while the suppliers of the company are also facilitated throughout the process so that they are able to match the sustainability standards of the company (Croom & Barani, 2009). The company does not only have a sustainability criteria set, but it also has multiple suppliers so that the company is not dependent on a single source for its material. Moreover, the company is always in the continuous process of improving the methods of managing material with its suppliers, such as recycling the plastic resins so that it can be used as post-consumer recycled plastic in parts that require it (Ford Motor Company, 2012). Moreover, the company follows the concept of lean production which allows it to minimize waste and maximize profit. Ford Motor Company has been one of the leading companies of the automotive industry for more than a hundred years and it is regarded as one of the most popular contemporary brands. The reason why it has been able to last this long in the industry without facing any defeat is that it has always made use of clever strategies to maintain quality supply chain management. The three main factors that the company has been able to achieve throughout its years of existence are minimum cost, maximum quality enhancement, and efficiency in the process of production. The company has made use of both, innovation and sustainability, which has automatically given it a competitive advantage over other companies. The company has made use of innovation in its supply chain management by adopting a process of lean production and applying processes like TQM and JIT to make sure that quality of the product is maintained with minimum waste. The company has been able to eliminate all waste through the process of continuous improvement. The strategies applied by the company have not only been successful for the Ford Motor Company, but others have also made use of similar strategies to increase efficiency in their process of production, such as Toyota and the use of JIT. From the inception of the assembly in the early 1900s until the adoption of DMAIC through Six Sigma in 2010, the company has kept up with the desired quality at the desired cost through innovation and sustainability in each step of its supply chain. List of References Aherne, W., 2007. Lessons from the American automotive industry. Student Economic Review, 21, pp. 209-217. Alternburg, K., Griscom, D., Hart, J. & Smith, F., 2003. Just in time logistics support for thr automobile industry, s.l.: Bloomfield State College. BERA, 2004. Modern Global Automobile Industry. [Online] Available at: [Accessed 28 February 2013]. Bongiorni, S., 2004. All in the timing, s.l.: The Greater BatonRough Business Report. Bradley, D. et al., 2005. Automotve Industry Analysis, s.l.: Georgia Institute of Technology. Business Dictionary, 2013. Suppy Chain Management. [Online] Available at: [Accessed 28 February 2013]. Casey, B. & Dodge, H., 2010. Henry Ford and Innovation, s.l.: The Curator. Croom, S. & Barani, S., 2009. Sustainable supply chain management – an exploration of current practice, s.l.: European Operation Management Association. Ford Motor Company, 2012. Sustainability 2011/12, s.l.: Ford. Hackley, C., 2003. Doing research projects in marketing, management, and consumer research. london: Routledge. Helper, S., 1990. Comparative Supplier Relations in the U.S. and Japanese Auto Industries: An Exit/Voice Approach. Business and Economic History, 2(19), pp. 153-162. Lewis, W., Pun, K. & Lall, T., 2006. Exploring soft versus hard factors for TQM implementation in small and medium-sized enterprises. International Journal of Productivity and Performance Management, 55(7), pp. 539-554. Nicoleta, I., 2010. Principles Of Tqm In Automotive Industry. Romanian Economic and Business Review, 5(4), pp. 187-197. Olhager, J., 2002. Supply chain management: a just-in-time perspective. Prodution Planning and Control, 13(4), pp. 681-687. Peterson, P., 2002. Fords Contribution to Just in Time. Management Decision, 40, pp. 82-87. Pride, W. M., Hughes, R. J. & Kapoor, J. R., 2011. Business. Cengage Learning: s.n. Scheid, J., 2011. TQM and Ford Motor Company. [Online] Available at: [Accessed 28 February 2013]. Slack, N., Brandon-Jones, A., Johnston, R. & Betts, A., 2012. Operations and process management. London: Prentice Hall/Financial Times. Wuttipornpun, T. & Yenradee, P., 2006. Finite Capacity Material Requirement Planning System for a Multi-stage Automotive-Part Assembly Factory. Science Asia, 32, pp. 307-317. Read More