Strategic Supply Chain Management: Ford Company's Essay.

Lean Manufacturing at Ford

Topic: Strategic Supply Chain Management: Case Of Ford Company

In this present era, most of the business entities are trying to establish their presence in the global market due to which they are struggling hard in terms of improving their operational efficiency and effectiveness. Thus, the present report aims to provide a brief evaluation of the contribution of strategic SCM practice to three specific supply chain (SC) areas such as lean manufacturing, inventory management, and customer service. Throughout analysis is going to be considered leading global automobile manufacturing company Ford to investigate the presence topic critically. Overall SCM strategy of Ford along with the selected three SC areas that bring benefits or challenges for the company will be highlighted through comparison. Along with this, recommendations for identified SCM issues will be provided in the context of the aforementioned company.

Overall supply chain strategy of Ford in the area of Lean, customer service, and inventory management 

Companies operating across the manufacturing industry have been trying to improvise their SCM practices to minimise the additional expenses associated with shipping, producing, and insuring inventory (Shabbir et al., 2019). In the context of Ford, one of the leading and renowned global manufacturing brands, the company is found to have stable and sustainable competitiveness across the global market. In the context of the following figure, it is identified that the company has witnessed increased revenue at the rate of 7.23% reaching a value of 136 billion U.S. dollars during the fiscal year 2021 (Carlier, 2021). Considering this evidence, it can be mentioned that SCM practices in the areas of lean manufacturing, customer service, and inventory management propel the growth and competitiveness of the company. The primary reason behind mentioning this statement is going to be highlighted in the adjacent paragraph.  

 

Figure 1: Revenue value of Ford

(Source: Carlier, 2021)

With the growing concern on environmental sustainability, most of automobile manufacturing companies are found to adopt sustainable practices to minimise the environmental impact by minimising production waste. As mentioned by Ghobadian et al., (2020), lean manufacturing can be considered as one of the strategic approaches that have been embraced by different global manufacturing companies like Ford to improve their operational efficiency and maximise overall business productivity. It is identified that Ford incorporates and utilises Six Sigma manufacturing approach to transform its existing process and accomplish its strategic business goals.

For example, cost reduction, minimising solvent consumption, streamlining SC practices, improving customer satisfaction rate, and improving product quality are the key factors that influence Ford to adopt a lean manufacturing approach through incorporation of Six Sigma methods (Munteanu & ?tef?nig?, 2018). This enhances the chance for the company to strengthen its market competitiveness and business stability within the domestic and international markets. It is identified that the overall lean approach that is being undertaken by Ford can be referred to as “Consumer-driven Six Sigma” that maximises their chance to accomplish their business goals effectively.

 

Figure 2: Six-Sigma Approach

(Source: Munteanu & ?tef?nig?, 2018)

Customer Service at Ford

In the context of customer service, Ford is found to obtain a strong customer base by offering customer-centric service and product ranges. Ford is found to utilise Web 2.0 Communication channels such as social networking sites, self-service websites, direct marketing, and others to interact with their target customers easily and effectively (Uzorh et al., 2018). This helps the company to understand the preferences and needs of their target customers directly without involving any third parties, which positively influences them towards improving their services and operational activities. The company is found to introduce different types of programs that are being designed to maximise the satisfaction of car owners as well as experiences that target customers obtain during and after their purchase from Ford (Kapoor et al., 2022). Thus, it can be mentioned that strong and strategic customer services can be considered as one of the key aspects that help the company to streamline its SC practices and improve its market competitiveness.

Inventory management plays a significant role that is found to have a direct impact on overall organisational performance. Effective inventory management enhances the chance for manufacturing companies like Ford to maximise business competitiveness and business profitability. It is identified that Ford has been struggling hard to improve their inventory management practices. A news report published in 2021 revealed that Ford has witnessed a sales decline of 33% during the fiscal year 2020 due to the shortage of chip supply (Wayland, 2021). On the other hand, it is identified that due to the shortage of semiconductor chips for the electronics, Ford had witnessed production delays that negatively influenced upon its sales and performance efficiency (White, 2021). Still, now, the company has been struggling hard in terms of improving its inventory management efficiency by minimising the existing issues.

Literature Review

In response to the change in consumer preferences, globalisation and business competition, most of the manufacturing companies have been embracing the concept of lean manufacturing. Ghobadian et al., (2020) underline the major goal of lean manufacturing is to minimise or eliminate waste. The author also underlines that in this present business era, companies, specifically those operating across the manufacturing industry, are found to show their preferences towards minimising operational and physical waste. Lean in this regard plays a significant role to address any type of production waste within the workforce and prevent wasted resources in talent and time.

Yadav et al. (2020) on the other hand, mentioned that the urgent requirement to minimise the negative corporate environmental consequences while maximising its social benefits and financial strength attracts companies to adopting lean-approach. In this regard, the theoretical aspects of the e-supply chain can be interlinked to analyse its relationship with the lean manufacturing processes. E-supply chain management or E-SCM offers opportunities for manufacturing businesses to improve their efficiency and competitiveness by minimising costs (Taghipour et al., 2021). Along with this, this approach helps companies to improve their JIT (Just-In-Time) initiatives and improve overall product or service quality accurately. E-SCM can be considered as one of the key parts of the lean approach as both E-SCM and lean emphasises upon improving operational activities by reducing cost and waste. Thus, it can be mentioned that lean manufacturing improves the capabilities of companies to streamline their supply chain activities and maximise their business profitability (Albzeirat et al., 2018).

Inventory Management at Ford

 

Figure 3: E-Supply Chain

(Source: Taghipour et al., 2021)

Compare and Contrast

Ford is found to utilise a combination of the agile and lean manufacturing approach to improve their production activities and maintain business sustainability. For example, perceiving the need for business effectiveness and production efficiency, Ford is found to implement a new and modernised manufacturing system namely “Ford Production System” or FPS. It is identified that the implementation of FPS enabled the company to transform its exciting mass production system (MPS) into a lean manufacturing system (ICMR, 2022). It is identified that with the help of the FPS system, Ford improvises and streamlines its manufacturing operations and strengthens its productivity in a more effective and efficient manner.

 

Figure 4: Ford Production System

(Source: Ford, 2022)

On the other hand, the concept of “theory of contracts'' can be interlinked as it illustrates an approach that limits the constraints and factors that hinder the chance for companies to accomplish strategic business goals (Yorke, 2017). Ford with the help of its employees has established a "Flow-based Production Line" that helps them to remove any type of contrasts through the "Continuous Improvement Process (CIP). This, in turn, maximises their chance of accomplishing lean business goals accurately and maximising market competitiveness.

In contrast, Ford has witnessed production and manufacturing challenges in the midst of Covid-19 that negatively influence upon its performance and productivity. Due to the closure of manufacturing operations, Ford failed to meet the demands of their target customers efficiently leading to the deletion in their productivity and profit margin (Business-standard, 2021). However, the company has been taking proactive measures through its lean approach to minimise the existing issues accurately in the future.

Transparency and visibility of the existing lean manufacturing and SC can be expanded and improved through incorporation of modern technology like Blockchain. For example, a news report published in 2020 underlines Ford is trying to utilise Blockchain technology to perceive the cobalt supplies, which is found to be one of the major components for the batteries of electric cars. Along with this, the company is intending to utilise the Blockchain Platform of IBM to improve its supply chain operations in the future (Mullan, 2020). This initiative will be effective for Ford in order to minimise their existing identified issues and can streamline their overall manufacturing and supply chain process

On the other hand, it can be recommended that Ford can incorporate and take advantage of the e-supply chain approach. The key reason behind this suggestion is that the adoption of the implementation of an e-supply chain will help the company to minimise delivery time, improve operational efficiency and improve customer satisfaction. This, in turn, will positively drive business success, productivity, and market competitiveness (Alzoubi, 2018). Thus, it can be mentioned that in the context of lean manufacturing, Ford has the potential to improve its operations more efficiently through adoption of strategically identified SCM practices in the future.

Literature Review

Customer service plays a significant role for any business entity in terms of improving brand image, business stability, and profitability margin. As mentioned by Sabara et al., (2019), companies that are operating across the manufacturing industry have been trying to adopt innovative strategic approaches that enhance their chance to obtain customer loyalty. On the other hand, with the fast-changing business world, the demands, preferences, lifestyles, income, and needs of target customers have also been changing at a rapid pace. This generates urgency for the companies operating across the manufacturing industry to adopt suitable communication channels and media to interact with their target customers directly.

Relation between Lean Manufacturing and E-Supply Chain Management

In this regard, the concept of the 3C model of supply chain can be interlinked to identify the significance of customer services. In the context of the 3C model, the success of an organisation is highly reliant upon three specific aspects such as company, competitors, and customers (Wang et al., 2018). Companies that are able to maintain balance between these three aspects in SCM activities can effectively enhance their chance to accomplish business goals. 

 

Figure 5: 3C model

(Source: Created by the learner)

Customer service is considered as one of the integral parts of SCM that enable companies to build strong relationships with potential customers. This, in turn, helps to identify whether the offered products meet the customer's needs in accordance to which optimal business decisions can be made. It identified that customer service along with the demands is found to be different from one industry to another (Copacino, 2019). Thus, building a strong customer base enables companies, specifically operating across the manufacturing industry, to streamline and improve the efficiency of the entire supply chain process.  

Ford is found to incorporate customer-centric business approaches that enable them to maintain performance consistency and market competitiveness. Considering the 3C model concept from the earlier section, Ford also emphasises upon maintaining balance between customers, company image, and competitors. For example, in order to build strong relationships with their target customers the company has incorporated Web.2 communication tools. The company constantly upgrades its communication channel to interact with its target customers to know about their demands and preferences (Adeola, 2020). Starting from social media platforms such as Facebook, YouTube, Instagram, and Twitter, to a direct marketing approach, Ford tried to gather all customer-related information before launching or introducing any new product range or services.

In recent times, customers are found to show their preferences towards availing and purchasing products that are customised and personalised. Considering these aspects, Ford has launched a personalised service centre where customers can customise their purchased Ford products according to their needs and preferences. Customer loyalty can be considered as one of the key reasons behind the continuous success and market competitiveness of Ford. The reason behind this statement is that Ford introduced the “FordPass Rewards program” to offer opportunities to the target customers to obtain complimentary maintenance facilities for their vehicles as well as earn additional points on the service spending at the Ford dealership (Ford, 2019). Along with this, the company also offers services to customers at work or home that enhance the chance for the company to gain customer loyalty. Considering the initiatives of Ford in relation to the customer service signifies that having strong service facilities can positively drive business success.

As stated in the earlier section, customer service plays a crucial role for gene retaining competitive advantages for an organisation, thus, it can be recommended that Ford can take the advantage of Omni-channel strategy. As mentioned by Kim et al., (2022), with the rapid change in consumer behaviour and their purchasing pattern, most of the manufacturing companies have been adopting the Omni-channel strategy. It is identified that Omni-channel helps companies to improve product availability, drive traffic and sales, as well as help companies to integrate the digital touch points. Along with this with the help of the Omni channel strategy, Ford can improve their customer services and maximise its overall productivity accurately in the future.

Conclusion

Literature Review

Most of the business entities operating across the manufacturing industry are found to have key objectives that are emphasised on generating brand value and competitiveness. As mentioned by Ho et al., (2021), inventory management for manufacturing companies helps to determine how and which stock requires to be ordered and within what specific time. Having effective and systematic inventory management helps to track inventory-related activities starting from product purchases to sales of the finished goods. In most of the cases, it is identified that due to lack of accurate details or stock, inadequate inventory process, and changes in consumer demands, companies are failing to manage their supply chain process in a systematic and accurate manner leading to the generation of loss of profitability by minimising the productivity.

Logical performance is found to be affected negatively due to the change in or inappropriate stock level. In this regard, it can be mentioned that with a strong and appropriate inventory management system, an organisation can fulfil or meet the customer's order accurately and within the preferred time. In this regard, the concept of the SCOR (Supply-chain operations reference) model can be interlinked as incorporation of the model concept helps companies to streamline their SCM activities. SCOR model helps to categorise SCM activity into four different aspects such as delivery, make, source, and plan respectively (White, 2021). Adoption of this model concept enables companies to understand the way they can manage throughout SCM activities by improving the inventory management operations.

 

Figure 6: SCOR model

(Source: White, 2021)

Compare and Contrast

It is identified that despite strong and effective SCM practices in the two identified areas such as customer services and lean manufacturing, Ford has been struggling hard to minimise their inventory issues. Persistence of prolonged persistence of inventory management issues restricts the company and creates complexities in meeting the needs of their target customers accurately (Inegbedion et al., 2019). A news report published in 2021 revealed that due to the prolonged persistence of the shortage of semiconductor chips leads to the production shutdown along with dwindling inventories of new vehicles. This negatively affects Ford's performance productivity along with its sales values. For example, the sales of the vehicle range of Ford are found to be declined by 26.9% in 2021 as compared to the year 2020. This, in turn, creates negative consequences for the financial performance of the company as well (Grzelewski, 2021).

On the other hand, it is identified that the pandemic situation also creates complexities for the company to maximise its sales value and profitability. It identified that buyers are found to show their preferences to order their required car or vehicle through an online platform, which generates the inventory shortage issues. This, in turn, generates urgency for Ford to incorporate strategic techniques to minimise these issues proactively. Thus, it can be mentioned that Ford needs to act proactively to mitigate this issue and improve overall SCM practices strategically in the future.

Considering the challenges that Ford has witnessed in its inventory practices, it can be recommended that the company can incorporate and utilise the MRP (Material requirements planning) system. As mentioned by Pooya & Pakdaman (2019), MRP is considered as a technology-based inventory management system that helps organisations to improve their overall productivity. For example, Ford can incorporate this system to determine their required raw materials as well as schedule their respective deliveries accurately.

Recommendations

 

Figure 7: MRP system in inventory management

(Source: Pooya & Pakdaman, 2019)

Presently the company is found to witness challenges like production delay, delay in delivery, failure to meet the customer's demands, and others. Incorporation of MRP systems can serve as beneficial to minimise inventory issues by improving overall manufacturing efficiency. Though the company is found to utilise the MRP system, however, they failed to improve the scalability and efficiency of its inventory system (Kortabarria et al., 2018). Thus, Ford is required to upgrade their system according to the present business requirements to minimise the issues strategically in the future.

Conclusion

In the context of overall discussion, it can be mentioned that business entities operating access the manufacturing industry requires to improve their SCM practices. It is identified that having effective and strong SCM is one of the key drivers for business to drive competitiveness, productivity, and growth.

Supply chain Management or SCM is considered as one of the complex and most important aspects of any business entity that includes activities such as strategic collaboration, planning, and coordination with the potential stakeholders in an efficient and systematic manner. In the context of the manufacturing industry, SCM is found to be associated with the activities of facilitating the transformation and transfer of the raw materials into the finished goods.

From the discussion, it has been identified that lean manufacturing, customer service, and inventory are the key supply chain areas that help Ford to maintain its performance and business stability globally. Ford is found to utilise combination of agile and lean manufacturing approaches that help them to maximise its productivity and growth. On the other hand, with the help of an effective customs service approach, Ford has been able to strengthen its global customer base. However, it is seen that the mentioned company has been witnessing inventory management issues that negatively affect upon its financial and sales value. Other than this, the company is found to have the opportunity to minimise its existing issues by incorporating the mentioned recommendation in the future. This will positively drive business success as a whole by streamlining the overall supply chain process.

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