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

Principles of Logistics and Supply Chain Management Assessment Task 2: Formal Report 2500 words Student Name Student ID Number Table of Contents Table of Contents 2 Executive summary 3 Introduction 3 Background and business environment 4 Challenges of Ford Motor Company in Logistics and Supply Chain Management 5 Roles of Logistics and Supply Chain Management in Ford Motor Company 7 Organizational performance trade-offs in Ford’s Supply Chain 8 Role of logistic management and Penske’s solutions in adding value to Ford’s operations performance 10 Conclusion 11 Recommendations 12 References 13 Executive summary Logistics management is critical in the Ford Company and by Penske Company taking up the responsibility of training of the working team through Six Sigma. The Ford Company was in a crisis where it was faced with challenges, such as decentralization, streamlining operations to increase performance, as well as financial invisibility. Penske, within its power, changed the structure of the organization by centralization of the operation management and hence cutting the extra cost. Further, Penske instituted Origin Distribution Centres (ODCs) and merged shipments. Later on, Penske closed down 6 of the ODCs as a way of further cutting down operation costs. The organization, therefore, works under minimum cost but yields maximum productivity. Moreover, Penske introduced real-time supply chain that ensured that deliveries are made in time, appropriate scheduling, therefore, increasing the overall organizational performance through productivity. Penske has been in control of the Ford’s logistics and supply chain management operation. Introduction The contemporary world calls for the organizations to have a competitive edge in order to succeed. Logistics plays a crucial role in the economy, as it is a major contributor to the variations in the market forces (Sebastian, 2014 pp 7). In the past, logistics was in the internal operation roles of the lower line of management. However, due to advancements, it has extended to the external environment of the business. The organizations do always undergo radical changes in their structure to increase the productivity. Moreover, an organization should always aim to maximize the least resources to achieve the ultimate outputs and with that, the organizations will be able to increase their profit margin bearing in mind that they are operating at minimum costs (Meade, & Sarkis, 1998, p 201). Outsourcing of management skills is the tactical way to re-engineer the structure and culture of an organization in order to increase productivity. In that regard, this thesis aims at showing the benefits that Ford Motor Company gains after outsourcing the operation management in the logistics and supply chain management of Penske Company. Background and business environment The management of the supply chain and logistics has become a critical issue in the business world today. The effectiveness of the logistics translates to the success of the whole chain hence the success of the business or companies as a whole. The economy being interdependent, the logistics play a vital role to boosting the world’s economy. Ford Motor Company is a renowned manufacturing company that has mostly concentrated in the manufacture of the automotive materials. Ford Company by itself was unable to manage its operations effectively, and as a result, the Penske being a company resilient in Logistics Management and SCM, it merged with Ford to take up the whole operation functions. Penske, therefore, introduced changes where it felt led to the failure of the Ford Company (Cooper et al., 1996, pp 1&2). Penske disregarded decentralization and centralized the whole logistic operation by establishing origin distribution centres, which served as the stations or points at which the materials departed from. The cultural and structural re-engineering done by Penske resulted in the maximization of output while the costs were cut off and minimized. Penske solved the problems experienced by Ford through ensuring accountability, as well as through the introduction of the real-time visibility to the organization (Penske, 2010). The distribution and transportation of materials were made efficient and easy by simply adding some suppliers and educating them on the Six Sigma practices. Ford Motor Company incurred high costs without the logistics management in place. The inventories, transportations, distribution, as well as the production levels, changed radically to most efficient ones. Ford Motor Company was in a contemporary environment where there was adverse technological advancement, global market and costs forces surrounding it because it was an international company. The employees and suppliers were not qualified before the Penske Company joined in and hence introduced a six sigma training to equip the employees with the appropriate skills according to the advanced technology. The Penske Company, therefore, gave appropriate long-term solutions, which are working up-to-date. Ford Company is operating under the same strategies up to now with minimum carriage cost and maximum outputs and delivery (Penske, 2010). Challenges of Ford Motor Company in Logistics and Supply Chain Management Being a huge company with quite some branches, Ford has faced the challenge of centralizing the logistics flow of information and operations. Centralization of a company eliminates confusion where the flow of command is distinctively noticed. The logistics company, Ford, would operate more efficiently and effectively with distribution centres, where the logistics originated. Such centres would ensure that there is proper co-ordination of the logistics and supply chain hence proper management is undertaken (Penske, 2010). The Ford Motor Company was also faced with the challenge of rationalization operations, both carrier and supplier. The challenge of streamlining the operations deters the overall performance of the company, and the sense of accountability is lost. Where the operations are haphazard, the company would easily fail for lack of accountability and hence performing poorly. In order to help the situation, the management of the Ford Motor Company must ensure there is role clarity for each and every individual employee, which in return will resolve the problems of role ambiguity and hence accountability (Penske, 2010). The real-time supply has been a great challenge to the Ford Motor company. Moreover, the financial visibility has been a challenge too. The Ford Motor Company, however, has taken up the challenge and by proper scheduling, and timetabling of the supply chain and logistics has helped the situation (Penske, 2010). The scheduling use of an effective routine in specific routes served by the company is a major solution that Ford Motor Company is using to overcome its challenges. The introduction of new technologies in the industry has been a challenge to the Ford Motor company. In the contemporary logistic industry, much has been undergone revolution because of the discoveries and introduction of other technologies and skills in the field. The company, therefore, ought to evaluate its performance, management, as well as the entire employment body in order to identify the training needs to instil the proper and required skills in the employees, as well as the management (Tan, 2000, p43). Roles of Logistics and Supply Chain Management in Ford Motor Company Logistics and supply chain management have a great responsibility to play in the company, such as the Ford Motor Company. A logistics company is always entitled to satisfy its customer base and, therefore, the key role of logistics is to ensure that all the customers are served appropriately to their satisfaction. In order to satisfy the customers, the company must maintain a qualified pool of employees, and this can only be achieved by proper education and experience. The logistics and SCM has the role to ensure that the workers are qualified with the appropriate skills in order to work efficiently and effectively. Ford Motor Company works closely with Penske, which has a qualified team that has undergone the Six Sigma kind of training. The two work hand in hand to streamline the company’s operations, which hence translates to meeting the customers’ demands. The company should ensure that everyone is satisfied from the supplier to the intermediate consumer and ultimately the final consumer (Cooper, et al., 1996, pp 3). The satisfaction of the three levels translates the success of the logistics and SCM operations. Logistics and SCM play a vital role in the integrated effort of The Ford Motors Company. This is where the operation ensures that the veracious product is chosen, at the right price and delivered to the specific customer at the appropriate place. In order for this to happen the appropriate promotion has to be used in order to meet the expected system approach. By ensuring that the right materials are delivered to the appropriate consumer, at the most appropriate time and place, is key to effectiveness (USAID, 2011 pp 16). With proper planning and implementation, as well as proper scheduling, the minimum resources are maximally utilized (Leonardo da Vinci, n.d, pp 13). Moreover, the SCM and logistics works sufficiently to minimize the resources used but still maximizing the outputs. The two have played a major role in ensuring the effectiveness and efficiency of the organization where the minimum resources are utilized to gain maximum results. The maximization of outputs translates to the increase in productivity and profitability of the entire company and hence logistics meets its role of corporate profits. The Ford Motors has surely achieved the corporate profits role, played by logistics and SCM (Meade, & Sarkis, 1998, p 206). Organizational performance trade-offs in Ford’s Supply Chain Ford strives to increase its entire performance by maximizing outputs while minimizing the resources or rather the inputs. The company has used a number of trade-offs to monitor and increase the organizational performance. Planning and strategizing is one of the key tradeoffs that can translate to the success of the organization by increasing the performance of the employees. The process of determining the task a person will do, at a specific time and how it will be done is essentially called planning. Planning ensures that a proposed cost is maintained during implementation or when the task is being undertaken (Mader, 2013, p 3). Assessment of the current situation is the first step of planning for the future tasks. Ford Company assessing the benefits and demerits of decentralization, means that the company is making its preparations to plan for higher organizational performance (Leonardo da Vinci, n.d, pp19). Penske after being the lead logistics provider of Ford Motor Company, it took over the logistics management. After evaluation, Penske tradeoffs the decentralization form of organizational governing and introduced the centralization of logistics in certain centres. The Penske being the topmost manager of the centralized logistics of the Fold Motors, it became the key decision maker and hence increased the outputs, as well as minimisation that came along with decentralization of the management (Penske, 2010). Moreover, Penske opened up Origin Distribution Centres (ODCs), which were ten of them from where the shipping operation would be undertaken. The ODCs were centralized, as they received their orders from the ultimate centre, which was from Penske. These centres carried out the shipping activities more effectively and efficiently and hence adding value to the organization while cutting down the cost of logistics and transportation. Additionally, the qualified team of Penske had to train the Ford workers with the Six Sigma practices, and therefore, they gained the required skills to undertake the logistics functions. Additionally, the trained workforce could match the technological levels when the real-time strategy was introduced. Therefore, the organizational productivity increased significantly (Jahre et al., 2012 pp 62). In addition, a firm accountability strategy was formulated to gain the real-time discernibility of delivery and productivity. With this, the cost was surely reduced, and the outputs maximized. Penske later on closed down six of the ODCs when the shipment was changed and by so doing, the costs were cut further. As a result, the Ford Motor Company significantly increased its organizational performance and hence productivity (Leonardo da Vinci, n.d, pp20). Role of logistic management and Penske’s solutions in adding value to Ford’s operations performance Evidently, the merging of Penske and Ford was a total success. The logistics and SCM, in addition to Penske’s solutions to the challenges faced by Ford, brought significant output increase. Penske introduced the tradeoffs, which were major solutions to the challenges faced by the organization. The introduction of the integrated logistics programs sums it all. In order to successfully meet the expected operation performance goals, the logistics must be integrated into the management level. Penske’s solution was a complete success because the logistics centres opened were an integration of functions, which included the Carrier and Premium Freight Management, Network Design Optimization, IT System Integration and Finance Management. These functions are coordinated in one centre, resulting in proper integration, as well as adding value to the Ford’s operations performance (Gleissner, & Femerling, 2013, pp 12). Additionally, centralization of the operation was a major factor that added value to the operation performance of the company because it minimized the additional costs by cutting them off. Penske took control of all the logistics, and hence being the lead logistics leader, due to the quality team with the sufficient and appropriate skills, Ford gained from its involvement with Penske. Moreover, with centralization, the actions down the hierarchy could be easily monitored (Tan, 2000, pp43). Penske ensured strict accountability, which made the working team more committed and performed as expected because each individual was accountable for his or her own doing. The introduction of the real-time approach ensured that every operation is in due time. Timeliness of the operation is important since the success of the logistics is determined by the timeliness of delivery (Zhiang & Carley, 1994, pp 140). The time between the points of inception to that of the final consumption should be appropriate in order to avoid further additional and unnecessary costs. Therefore, the introduction of the real-time program, accountability of performance, as well as centralization of logistic management adds significant value to Ford’s operation performance (Jahre, et al., 2012, pp 62). Conclusion In conclusion, the Ford Motor Company has significantly improved with the assistance of Penske Company. Ford being faced by challenges, such as streamlining, centralizing operation, as well as establishing a rea-time approach, in logistics management, the best solution was Penske. Penske with its resilience in logistics and operation management can effectively reengineer the operations at Ford. The interaction between Ford and Penske was advantageous since it took a long-term strategy that is effective up to date. Penske sees to it that the cost of logistics is reduced while the outputs are maximized effectively. Ford and Penske incorporate procurement, production, distribution and disposal logistics in order take Ford Motor Company into a different course. The Penske Company adds significant value to Ford because its productivity increased when the costs were reduced through centralization and streamlining of the operations. The Ford gives the full logistic operation responsibilities to the Penske Company, and it surely succeeds in managing the freights and carriers. The carriers are at a cost check until to date as one of the trade-offs that Penske used to improve the economic status of the Ford Motor company. Therefore, it is evident that it is advisable to get external and outsourced management ideas and help for a company to improve. Outsourcing results in re-invention and reinstatement of the organization and hence the organization succeeds and increases in productivity. Recommendations I concur that Penske gave appropriate solutions for the Ford Motor Company to succeed. However, I feel that performance appraisal should be done to the employees in order to identify further training and development needs. Once appraised, the company can identify the areas that are doing better, as well as those that are failing the company. Due to the constant technological changes, in not only the logistics and supply field but also the technological and business world as whole, I feel that a learning culture should be natured in the Ford Company in order to increase further the productivity level of the organization. Moreover, I feel that the organization would have excelled more if the employees’ performance was monitored, and the environment influenced appropriately in a positive manner. The environment at which Ford operates should be incorporated in the management of the organization where a market research can also be undertaken, and with so doing the organization will surely increase its productivity significantly. References Blecker, T. et al (Eds.), 2014, Innovative Methods in Logistics and Supply Chain Management. (pp 3- 601) Retrieved from https://hicl.org/sites/hicl.org/files/books/2014/blecker-2014-innovative-methods-logistics-and-supply-chain-management.pdf Cooper, C. M. et al, 1996, Supply Chain Management: More Than a New Name for Logistics. The International Journal of Logistics Management. Vol. 8, No. 1. (pp 1-14). Retrieved from http://www.researchgate.net/profile/Douglas_Lambert2/publication/235278234_Supply_ Chain_Management_More_Than_a_New_Name_for_Logistics/links/0c96052de5e13dd0 b9000000.pdf Gleissner, H and Femerling, J.C., 2013, Logistics. Springer Texts in Business and Economics. Vol.16 (pp 3-18) retrieved from www.springer.com/.../9783319017686... Jahre, M. et al, 2012. Improving health in developing countries: reducing complexity of drug supply chains. Journal of Humanitarian Logistics and Supply Chain Management. Vol. 2 Iss: 1 (pp. 54 - 84). Retrieved from http://www.tlog.lth.se/fileadmin/tlog/Jahre_et_al._2012.pdf Leonardo da Vinci, n.d, Education and Culture. Couriel. 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C., 2000. A framework of supply chain management literature. European Journal of Purchasing & Supply Management 7 (39-48) USAID | DELIVER PROJECT, Task Order 1. 2011. The Logistics Handbook: A Practical Guide for the Supply Chain Management of Health Commodities. Arlington, (pp 1 – 160). Retrieved from http://apps.who.int/medicinedocs/documents/s20211en/s20211en.pdf. Penske 2010, Ford motor company: Six Sigma Initiatives streamline operations. Retrieved from < http://www.penskelogistics.com/insights/case-studies/ford/ > Zhiang, L. and Carley, K. 1994. Organizational Response: Trade-Offs Among Opportunities for Review, Cost, and Performance. (pp 140-146). Retrieved from https://www.aaai.org/Papers/Symposia/Spring/1994/SS-94-07/SS94-07-019.pdf Read More