The production of goods and services involves several steps that must be well coordinated. They include sourcing and transporting raw materials, production, and transportation of finished products. Companies must have a strategic plan on various production activities to improve their competitiveness and increase customer satisfaction. Strategic supply chain management is one of the activities that ensure an increase in efficiency of such activities as designing, making, and ultimately delivering products to the customer (Hugos, 2011).
Founded in 1903 by Henry Ford, the Ford Motor Company is one of the largest vehicle manufacturers in the world (Rubenstein, 2001). The analysis of transportation, reverse logistics, partnerships and collaboration, inventory and purchasing management shows why the company has continued to flourish. The Just-In-Time (JIT) management philosophy is one of the factors that have led to the success of the company. The company has incorporated the JIT strategy into all functions of supply management.
Transportation systems significantly aid in logistics. Well-developed transportation systems lead to lessening costs and increasing efficiency. Transportation helps to connect various steps involved in the conversion of resources into finished products. These steps involve separation of companies for production, transportation, storage, wholesaling, and retail sales (Klier & Rubenstein, 2008). Transportation helps to provide time and place utilities for a product. Thus, it ensures that customers get satisfaction with a product.
The Ford Motor Company has a vast transportation network. The company has manufacturing plants around the globe and produces vehicles under various brands. The vast transportation network necessitates the company to devise strategies for the reduction of transportation costs. The company receives various services from the Original Equipment Manufacturers (OEM) located in various parts of the world. The company also sends fully assembled vehicles to dealers located around the globe. The Just-In-Time (JIT) management philosophy of the organization significantly affects the transportation strategy employed by the company. The use of JIT sometimes made the company experience shortages of products leading to the shutdown of plants. This happened in 2001, when a terrorism threat led to the cancellation and delay of several flights. The company shut down five plants in the USA and reduced its production volume (Sodhi & Tang, 2012).
Ford entered into contract with Penske Logistics to undertake changes in its transportation system. The company helped to centralize transportation by creating 10 Order Dispatching Centers (ODC). Suppliers deliver their products to ODCs. Goods are loaded onto trailers for transportation to respective plants. At ODCs, there is cross docking of different supplier shipments heading to the same plant. The use of ODCs helps to reduce plant inventory and provides better understanding of the variation in costs of freight among separate plants and carriers (Klier & Rubenstein, 2008).
Reverse logistics is the movement of goods in the opposite direction of a supply chain. Thus, reverse logistics can be referred to as the movement and storage of goods returned by the end-user (Wisner, Tan, & Leong, 2009). The return of goods by the end-user is for repair, recycling, recovery or recall (Ackerman, 2007). Most companies view reverse logistics as an unwanted process in the supply chain. However, it can be successfully used to increase company’s competitiveness, recycle reusable materials, and promote services, which a company offers to the customer (Tseng, Taylor & Yue, 2005). However, the complexity of reverse logistics makes most companies shun it. It has complex inventory management, there is little warning on when there will be arrivals, and designing its network is tricky (Ackerman, 2007).
The importance of reverse logistics makes it necessary for managers to develop strategies that will enable companies get maximum benefits from reverse logistics. To ensure its efficiency, it should have separate management and organization. In addition, a company should enure that reverse logistics has necessary IT support. The company must ensure that reverse logistics ultimately lead to financial benefits to the company (Ackerman, 2007).
Ford uses reverse logistics to promote services and improve the competitiveness of its vehicles. The company has a buy back option, when it gives customers a choice to sell a vehicle to the company after some time, so that it may be recycled (Fleischmann & Klose, 2005). Customers return vehicles to the manufacturer, and the company offers a price that is equal to the market value of the vehicle or sometimes even higher. This was evident during the recall of Windstar minivans that had defective axles (Jensen, 2010). Reverse logistics enables the company to recycle components of vehicles it manufactures. It makes the company environmentally friendly. This is in line with the company’s strategy of differentiating its products based on environmental friendliness. The company has several collection centers, where vehicles are collected for recycling (Hitt, Ireland & Hoskisson, 2010).
Partnership and Collaboration
Business organizations do not work in complete isolation. They need help of other companies to ensure efficiency of their operation. Thus, partnerships and collaboration are a necessity for business organizations. Supply chain partnerships and collaboration help an organization to plan and execute various activities. A vital component of supply chain partnership and collaboration is sharing of information (Sehgal, 2009). Thus, organizations need to have necessary infrastructure to ensure there is efficient communication. In addition, there should be trust and openness between various members in partnership and collaboration. Organizations must ensure that they can cope with drawbacks, such as inadequate communication and betrayal to get maximum benefits from partnership and collaboration (Mentzer, 2004).
Ford has formed several partnerships and collaborations with companies that are in its supply chain. The company ensures that there is sharing of information on engineering, planning, and production. Ford has created a platform for sharing information with suppliers and logistic operators. He used the “daily call in” to communicate daily needs of the company to its suppliers. Ford sent and checked this information daily. In addition, he shared knowledge with manufacturers. The company also helps suppliers in the process of continuous improvement. From time to time, specialists of Ford may visit suppliers’ premises and help to solve some problems they face (Toni, 2011).
Customer Service Management
In an organization, customer service management has two elements; strategic and operational elements. Strategic process involves the creation of a framework to manage the process. Operational process implements the framework. Customer service management includes the administration and management of the Professional Service Agreements (PSAs). PSAs match particular customer or customer segment needs with the products produced by the company. Customer relationship management process teams develop the PSAs and the customer service management teams undertake activities to support the PSAs. The customer service management process teams should comprise of managers from the entire corporate functions of the organization (Lambert, 2008).
Ford attempts to tailor their products to the unique needs of individual customers in various segments. The company has set up communication mechanisms to enable it respond to various needs of the customers. This has made the company successfully handle the higher expectations that customers have for personalized service communication from their technicians (Jha, 2008).
Purchasing is one of the most visible activities of an organization. It is an interface between two different organizations. Thus, purchasing leads to the beginning of inter-organizational relationships. For companies that are involved in manufacturing goods, purchasing is the only function that provides them with an opportunity to deal directly with suppliers. The strength of a supply chain depends mainly on the relationship between the purchaasing company and the supplier company (Chary, 2009).
Ford ensures that it has a good relationship with its suppliers and gets various products at the lowest possible price. To enable suppliers to benefit from economies, Ford urges them to use the same contract. Suppliers combine the contract value of their contracts with that of Ford, since it also buys steel, and benefits from better terms (Weele, 2009).
In supply chain management, inventory management is crucial. The lack of proper inventory management can make supply chains and organizations sustain needless costs because of missing products in stock. In inventory management, the most important aspect is keeping inventory costs as low as possible. However, the stock should ensure that the company’s production and sales run smoothly at the least possible costs. Inventory management determines when to order and how much to order. Proper inventory management enables an organization to get maximum benefits from economies of scale and protect a company against demand and lead-time uncertainties. In addition, it counteracts effects of changes in price and leads to improved customer services (Arbijorn et al., 2010).
Keeping inventory is usually associated with various risks and costs incurred by a company. The cost of inventory is one of the highest. In addition, there are costs associated with the storage of inventory. Carrying it makes a company face the risk of products becoming obsolete. Therefore, companies must balance its inventory to ensure that management is as cheap as possible. Companies that have large stock turnover do not worry much about inventory in comparison with companies that have low stock turnover (Arbijorn et al, 2010).
Ford uses the JIT inventory management strategy. This strategy enables the company to handle small quantity of inventory continuing to function efficiently. Products are delivered in a short period before being used in assembly lines to manufacture motor vehicles. This helps to reduce costs of inventory. In fact, Ford lets its supplier have access to its inventory management system computer and obtain data on various supplies that the company needs at its various plants. This enables suppliers to plan how to deliver products. This leads to the efficient delivery of goods when they are needed (Fabozzi & Drake, 2009).
Centralization of Supply Chain Functions
The company should centralize several functions in the supply chain to improve its efficiency. The centralization of transportation has enabled the company to save vast sums of money through reduction in the shipping costs. However, Ford should not centralize its inventory. This is because centralization would make the company serve all dealers from one location, increasing the time it takes for goods to reach the dealers. This would force the company to use a faster means of transportation to serve the dealers in almost the same time as when it had not decentralized inventory. This would lead to a significant increase in the transportation costs. The company should centralize purchasing management to make it benefit from economies of scale. However, prior to the centralization, the company must ensure that there is coordination between different assembly plants. In addition, there should be well-organized and fast flow of information between different assembly plants. Reverse logistics in one of the most complex activities in supply chain management. Therefore, its efficient centralization would be extremely difficult to achieve. Thus, reverse logistics should be managed from the manufacturing plant level. Partnerships and Collaborations, customer relations are organizational-wide activities. Therefore, centralization would help improve their efficiency.
Ford Motor Company continues to make cars that are highly regarded by consumers. It was the first company to introduce the Just-In-Time management philosophy. The analysis of supply chain functions of the company shows why it has continued being successful. Transportation, reverse logistics, partnership and collaboration, inventory and purchasing management of the company are the core aspects of the success of the company.