Running head: TQM AND FORD MOTOR COMAPNY 1

Deliverable 2: TQM and Ford Motor Company

Rona Sharma

Mumbai University

Management basics

Dr. Trivedi

February 18, 2016

TQM AND FORD MOTOR COMAPNY 2

Ford Motor Company

Introduction

Ford Motor Companys mission and vision statement One Ford: One Team, One Plan,

One Goal focuses on the restructuring that the company has undergone recently in an attempt to

modernize its processes and its competiveness in a global marketplace.

In 1903 Henry Ford started the Ford Motor Company with $28,000 in cash, and changed

the way cars were made, and in the process, the way the world moved. Fords vision was to

make cars available to everyone. With what can be described as one of the companys most

important innovations, Ford debuted the moving assembly line in 1913. This process was one of

the first of its kind, and a precursor to many lean production tools used in manufacturing, to

help the company produce more cars than their competitors, and make cars more affordable to

the general public. Ford had created an operations management success.

In 2012, sales of automobiles showed the company $134 billion in revenues worldwide,

with over 2 million cars sold. The company has spent much time, energy and money in

restructuring to improve their balance sheet; efficiency and productivity to provide customers

with the vehicles they want, and help ensure future success. The company employs 171,000

globally and the ONE Ford mission has been created as a four point business plan to restructure

and operate profitably with current demand and a changing model mix, to increase development

of products that the customers want, and to work together as one team.

According to the companys corporate web site, ONE Ford encourages focus, teamwork

and a single global approach, aligning employee efforts toward a common definition of success.

Many of these concepts have been introduced to our team in the operations management class,

and we will attempt to highlight how those concepts are used with the Ford Motor Company.
TQM AND FORD MOTOR COMAPNY 3

Production is the creation of goods and services. (Heizer & Render, 2011) In Ford

Motor Companys case, that production is automobiles, and parts used in making autos.

Operations management for Ford will include the production of cars, the marketing for both the

Ford brand and the different product lines, and the financial and accounting side of the business.

Ford Motor Company operates 77 office and plant locations currently, changing its model

recently to more efficiently align customer demand to cars produced. That process has included

layoffs and plant closures where necessary, focusing on minimizing overcapacity and a more

responsive product worldwide. The company has changed its view of itself, thinking of itself as a

global company, not a regional one. We have reduced the number of global vehicle nameplates

from 97 in 2006, to 59 in 2008, to 38 in 2010, and to 37 in 2011. Eventually, we expect to

improve that figure to 20 to 25 models globally, according to the company web site.

Often, when we hear the word, productivity we think of labor productivity or the

measurement of output within an hour of labor. Operations Management states labor

productivity as, output per hour or output per worker-hour; in which the manufacturing is the

major focus over services because the output is easier to quantify. (Heizer, 2011) The

measurement of productivity at a Ford auto assembly plant is fairly forthright. Its either: a

physical measure, the total number of cars produced in a given period of time (a week, a month,

a year) divided by the number of worker-hours needed to produce them or a monetary measure,

the total dollar value of cars produced in a given period of time divided by the total number of

worker-hours needed to produce them. For example, Ford knows the exact amount of vehicles

that leave each plant, and amount of hours incurred by each employee.

Ford spent much of 2006 through 2009 downsizing their operations and reexamining

production globally, downsizing production by almost 25%. While layoffs and plant closings
TQM AND FORD MOTOR COMAPNY 4

were the first part of the North American restructuring equation, the company also looked at Ford

Credit operations, sold auxiliary companies and found many areas where improvements in

processes could improve efficiency. Dedicating the new mission statement and vision to provide

the cars that customers demanded, with better fuel economy and luxury items that are considered

standard, working together across the spectrum to focus on one goal, the company has seen a

rebound in both brand and sales. Ford has seen 14 straight months of profit from operations, a

return of investment grade stock rating, and the return of the Ford Blue Oval, which the company

had put up as loan collateral during their financial crisis.

Ford has recently seen hiring employees necessary to accommodate the increasing sales

they are experiencing. Our global marketplace has meant that Ford needs more technology

driven professionals, and has begun using social media and other internet tools to hire more

skilled workers for the 21st century. To increase employee commitment to the changes and the

new leaner focus on productivity, Ford uses employee profit sharing for hourly employees and

bonuses for salaried employees. Ford partners with the United Auto Workers union to offer on

the job training, tuition assistance, courses with Dale Carnegie Institute and classes offered

through the partnerships Tech Shop. "Our whole approach is to make sure we deal with reality

and we deal with it in a positive proactive fashion," says Mark Fields, Chief Operating Officer.

Navigating the recent auto crisis and its ensuing restructuring has meant a new Ford Motor

Company in many ways.

Operations Strategy in a Global Environment

The global product strategy of Ford Motor Company is to provide global markets of

many automobile varieties that are of superior design and quality, environmentally culpable; all
 TQM AND FORD MOTOR COMAPNY 5

with valuable feature power. Developing automobiles consumers want and need, including

quality, safety, and green technologies.

With the average consumer demanding more luxury, driver assist technologies and

greater safety features, Ford is continually designing and improving features available to

customers. Recent improvements have included inflatable safety belts, cross-traffic alerts, sensor

technology, rearview cameras and more. Modifying these customer demands to the country of

sale enables the company to more effectively produce to the market.

Project Management

In his book, Project Management: Case Studies, author Harold R. Kerzner notes that

Pcubed Inc. is the owner of the project management methodology at Ford Motor

Company. (p. 399). Management methodology includes the following three phases: (Kerzer,

2004)

1. Discover and define Asses the overall health and baseline of the project management process.

2. Develop and deliver Develop and pilot the recommended solutions.

3. Deploy and drive Endure solutions are fully implemented across the department.

Kerzner goes on in his book, Advanced Project Management: Best Practices on

Implementation, to point out that after a methodical process to select the best project

management software, Ford decided on Microsoft Project (p. 38-39). Not only was it compatible

with Fords project management methodology but it was compatible with their other technology

tools. Ford designed a project methodology and then selected a software package that best fit that

methodology.

Forecasting
 TQM AND FORD MOTOR COMAPNY 6

In a report in 2010, Every Car Listed reported issues and resolutions implemented by

Ford to address issues with Forecasting. In 2009, Ford struggled with developing estimates for

demand on recent model releases. Their problems range from underestimating trim packages in

popularity to the overall shortfall of inventory. The 2010 report included feedback from one Ford

dealer that estimated that at one point, he only had a 30-day supply of inventory. (Every car

listed, 2010) Jim Farley, who is Fords vice president of global marketing stated in response, the

automaker underestimated the demand for its F-150 double-cab, which led to short supply of the

popular full size pickup truck.

Farley reported that there were multiple impacts to the underestimation. Not only did this

short supply inconvenience the dealers; the miscalculations also directly affect the companys

bottom line.(2010) in response, it is reported that in 2010, Ford began to increase their

campaigning of market acceptance research for up to six months before new models are

released. (2010) these campaigns included gathering information using social media such as

You Tube, Facebook and Twitter. Finally, Ford started a reservation system that provides their

automobile features and trim packages to fulfill output based on current orders. They gather

information months before they start production, which they are using for forecasting.

Quality Management

Heizer and Render identify three important reasons that quality is important: (1)

company reputation, (2) product liability, and (3) global implications (Heizer & Render, 2011, p.

191). These three areas are especially important in the auto industry.

Reputationfor car and truck buyers, brand reputation has as much or more to do with

customers purchasing decisions as price does.

 TQM AND FORD MOTOR COMAPNY 7

Product liabilityProduct liability can be extremely expensive for auto makers. The cost of

product recalls can reach into the millions of dollars, and liability in the case of injury or death

even more.
Global implicationsFord is a global company, so the impact of poor quality affects everything

from unemployment to the trade balance between nations.

Since 1999, Ford has used Six Sigma as a quality management method. Six Sigma is a

TQM concept designed to reduce defects to help lower costs, save time, and improve customer

satisfaction (Heizer & Render, 2011, p. 195). Statistically, it is a process that falls within 6

standard deviations of the mean. This means 99.9997% accuracy, or 3.4 defects per million.

Quality has risen dramatically as a result, As of 2008, the warranty repair rate for Ford by

utilizing Six Sigma decreased by 60% (Scheid, 2011). According to AutoOnInfo.net, who

compiled Consumer Reports Overall Reliability Rankings from 1975 to 2010, Ford ranked 13th

in 2010, up from 27th in 1995.

Capacity and Constraint Management

Capacity, in the case of an automaker like Ford, could be defined as the number of

vehicles that can be produced or as the number that can be warehoused. We will use the first

definition.

There are four terms that relate to capacity: design capacity, effective capacity, utilization,

and efficiency. Design capacity is the maximum number of cars that can be produced in a time

period (lets say that number is 100,000 per year), while effective capacity is the number of cars

that Ford expects to make. They may not wish to make every car that they can, in order to give

time for retooling for new product lines, or to avoid paying overtime and shift premiums (lets

assume they desire 80% effective capacity or 80,000 cars). Utilization amounts to the percentage

of design capacity completion, and efficiency amounts to the percentage of effective capacity
TQM AND FORD MOTOR COMAPNY 8

completed, (if Ford produces 60,000 cars, utilization is 60% and efficiency is 75%). Considering

the billions of dollars invested in facilities around the world, Ford, of course, wishes to maximize

utilization.

Constraints are the bottlenecks; the parts of the process that limit other parts.

Unfortunately, Ford has experienced constraint problems just as the company is taking great

strides in gaining market share and profitability. The Ford India plant in Chennai, India

historically runs at about 80% utilization (producing 160,000 cars with a designed capacity of

200,000), but last year dropped to just 5,700 cars in one monthonly 34% utilization due to

powertrain and component constraints (Baggonkar, 2011).

The theory of constraints lays out a five-step process to identify and mitigate

constraints: (Heizer & Render, 2011, p. 291)

1 Identify the constraint.

2 Develop a plan for overcoming the identified constraints.

3 Focus resources on accomplishing step 2.

4 Reduce the effects of the constraints by offloading work or adding capacity.

5 Go back to step 1 and find the next constraint.

Layout Structure

Heizer and Render define seven types of layout: (Heizer & Render, 2011, p. 345)

1 Office layout workers, spaces, equipment

2 Retail layout shelf space, traffic patterns

3 Warehouse layout tradeoffs between space and the cost of materials handling

4 Fixed-position layout oversized projects like ships and buildings

5 Process-oriented layout low-volume, high-variety products (job shops)

TQM AND FORD MOTOR COMAPNY 9

6 Work-cell layout production of a single product or related products

7 Product-oriented layout repetitive or continuous production

Henry Ford is credited with revolutionizing auto manufacturing one hundred years ago

with the introduction of the assembly line, and is still the layout structure in place today at most

manufacturing plants. Ford also employs hundreds of thousands of people in offices that utilize

office layouts for teamwork and collaboration. Individual components, like the Automatic

Transmission Operations center utilize work-cell environments.

Human Resources

Ford has locations throughout the world and because of this they have very large Human

Resources department. In the past, there were HR locations at each individual plant. As Ford

grew this type of structure seemed to be ineffective. Employees had different direction

depending on which location they were located. Management realized that Ford was not

managing globally their HR department to the best of its ability and decided that changes had to

be made.

Ford uses many factors to ensure maintenance and reliability of their products. They

focus on vehicle safety with components of design, technology, driver education, and

collaboration. (Ford Motor Company, 2013, p. 344) Their safety processes include their Haddon

Safety Matrix, Safety Design Guidelines (SDGs) and Public Domain Guidelines (PDGs). (p.

347-348) Using the Haddon Safety Matrix, they are able to view factors of maintenance and

reliability including human behavior, vehicle safety, and the environment and components such

as pre-crash, crash, and post-crash. (p. 348) Using the matrix helps create vehicles that can cater

to all factors of maintaining the safety and reliance of their products and those who use them.
TQM AND FORD MOTOR COMAPNY 10

References

Baggonkar, S. (2011, July 15). Ford bumping into capacity constraints. Retrieved

August 12, 2013, from http://www.business-standard.com/article/companies/

ford-bumping-into-capacity-constraints-111071500096_1.html

Ford Motor Company (2013). Ford sustainability 2012-2013. Retrieved August 11, 2013, from

the Web, http://corporate.ford.com/doc/sr12.pdf

Heizer, J. H., & Render, B. (2011). Operations management (10th ed.). Upper Saddle River, N.J:

Prentice Hall.

Kerzner, H, (2004). Advanced project management: best practices on implementation. John

Wiley & Sons. New Jersey.

Scheid, H. (2011, May 25). TQM at Ford Motor Company (M. McDonough, Ed.). Retrieved

August 16, 2013, from http://www.brighthubpm.com/methods-strategies/72279-tqm-and-

ford-motor-company/