Ford Motor Company
Ford is the oldest automobile company and also one of the car companies presently in danger of becoming bankrupt once more. Most of their problems stem from a poor product as compared to other products in competition, but also one of their problems has been inventory management. Customers want a car that is specific for their needs. They do not want a car that is generic for the entire population. Ford has started to realize this phenomenon, and has begun a new inventory management program. The inventory management program is called build-to-order (BTO).
This is where the customer will select what they want out of the car and Ford will provide that car meeting their specifications. The problem with Ford’s quest to implement BTO is that Ford faces many challenges in implementation. For example, “the challenges of implementing it in the auto industry are daunting-particularly in North America-and it isn’t clear that the economics will work. “(Agrawal, Mercer & Kumaresh, 2001, p. 62) Doubts vary, but most lie in the realm of spending and benefits from that spending to bring forth a BTO plan.
On the technical side, it is noted that: Moving from a mass-manufacturing (or “push”) system of production, which automakers have continually refined over the years, to a BTO (or “pull”) system would require numerous operational and organizational changes throughout the auto industry value chain. (Agrawal, Mercer & Kumaresh, 2001, p. 62) One of the problems with the BTO system is that the auto dealers do not tell customers about the existence of such a system and that many customers do not even know that such a system exists.
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(Agrawal, Mercer & Kumaresh, 2001, p. 62) This leaves Ford Motor attempting a new system that no customer knows about, but if the customer did know about the system they would probably participate. The benefits are to Ford Motor and not to the dealers. For example, “a true pull system would mean a massive reduction in finished goods (for both the manufacturers and the dealers) and in components inventories (for both the manufacturers and the suppliers).
“(Agrawal, Mercer & Kumaresh, 2001, p. 62) This aspect of the BTO system would be good news for Ford Motor, but bad news for the dealerships that are losing out on inventory and direct customers. It is no surprise that the dealerships therefore do not inform customers about the BTO system and the ability for customers to order their automobiles straight from Ford Motor Company. Ford Motor’s supply chain management, however, is steering into more positive territory.
Ford has accomplished this objective by combining forces with other car makers such as GM in order to create a more flawless system that can be integrated into a seamless whole. In 1999, “Ford and GM announced the introduction of internet-based supply chain management systems. Each company plans to do its procurement via the internet. “(Brookes & Wahhaj, 2001, p. 95) The next detail to explore is the amount of savings this internet system will introduce for Ford in the long-run.
According to Brookes and Wahhaj, “significant savings are expected in the process (savings of up to 20 per cent are reported in The Economist, 1999). Subsequently Ford and GM have joined together along with other manufacturers to develop a common system. ” (2001, p. 95) The implementation of the computer system in order to maintain a uniform supply chain has been helpful to the company and has saved the company money. It is in their inventory control and the reluctance of their suppliers (dealerships) that have hindered their growth into the new area of BTO.