FORD

By group 8
Surbhi Singh
Wasim Akhtar
Zeba
Astha
Shilpa Gupta
Sweta Kumari

1. Will you buy a car online? Consider the

experience that you (or your friends or
family members ) have had in buying a car .
Compare these with the experiences of
buying a computer online ( If you have never
done this, go to Dells website and explore
how online computer buying works) . What
do you think explains the differences?

In general , we will not prefer to buy car online, unless we are

getting significant price difference by buying online.

Comparison of Buying Experiences

Buying Car

Buying Computer online

Purchasing
decision time

More time

Less time

Influence of
reference group

Significant

Less

Evaluation of
alternatives

Involves more time Easy

and complex

Option of
customization

Restricted

Extreme

Other concerns

Resale value,
safety and
reliability

Performance, Speed

Reasons for difference in buying experiences

Buying Car

Buying
compute online

Category of
product

High
involvement
product, more
of luxury
product,
Integral

Moderate
involvement or
low involvement
product, more of
necessity, Modular

Role of third
party

High

Less

Ease of purchase Less

High

2.What is virtual integration and what

benefits Dell derives from virtual
integration ?How important are these
advantages in the auto business ?

Virtual integration is a new form of value chain

management.
Under such a system, the links of the value chain are brought
together by informal arrangements among suppliers and
customers.
Shipments of the components that the firm needs can be
easily arranged through the Internet or a networked
computer system.
The same type of arrangement allows the firm to fully serve
their customers in ordering, services, or any other needs.

A way of capturing the advantage of vertical

integration without actually vertically integrating
Vertical integration solves production problems
related to communications, coordination, and
control but at a cost of the increased overhead
needed to arrange production organization.
Virtual integration therefore is the ability to
achieve the advantage of vertical integration
without incurring the overhead.

Control
The prospect of
improved control
over the actions of
suppliers is another
important rationale
for virtual
integration.

Communication and
coordination
Business partners
treated as insiders of
the company
which speeds up time
to market

Relationship
Good relationship
with the customer

Cost
Eliminates the
cost associated
with carrying
large inventory
of finished goods

Benefits derived by Dell

Important in case of Auto Industry

Inherent complexity of the automotive product
Many components such as tyres, windscreen wipers,
and electrical components are sourced from large
suppliers and are same for all companies. So these
products can be virtually integrated.
Difficult in case of model specific component.
Being powerful and large company makes it difficult
to develop virtual integration ( e.g. Ford supplier
network had many layers )

Q3.Compare the enterprise models of Dell & Ford. Do you think the
financial performances the two firms are linked to their enterprise
models?

Enterprise Model
Comparison
Dell
Operating Principles
Customer
Intimacy

Ford
Breakthrough Objectives/Key
Initiatives
Demand to Delivery
Ford Retail Network

Demand
Pull

Ford Production System

Order to Delivery
Supply Chain Mgmt. Leadership

Velocity

Order to Delivery
Ford Product Development
System

Virtual
Integration

Fixed to Variable Cost Shift

Modular Assemble
Extended Enterprise

Focused on strategic
partnerships: suppliers
down from 200 to 47

External logistics
supplier used to
manage inbound
supply chain

Similarities
Suppliers maintain
nearby ship points;
delivery time 15
minutes to 1 hour

Customers frequently
steered to PCs with high
availability to balance
supply and demand

Demand forecasting is
criticalchanges are
shared immediately
within Dell and with
supply base

Suppliers own inventory

until it is used in
production

Differences
Complexity is low: 50
components, 8-10 key,
100 permutations

Demand pull throughout

value chain
information for
inventory substitution

Assemble facilities
rather than setting
up manufacturing
plants which
reduces cost
Financials
Inventory confined
to suppliers reduces
the inventory cost
and working
capital.

Dell eliminated the

resellers markup

Employees are less

in no. in case of Dell
which reduces the
expenses.

Process Complexity
A large number of suppliers
3 tiers of suppliers
Business was usually over the phone and
fax
Ford a $150billion company enjoys a
tremendous leverage over its suppliers
Annual component price decrease
Powerful independent dealer network
Unionized labor force

4.What do you think is the ideal use of internet in

the auto-business vis--vis its use in PC industry
(you may focus on marketing & distribution,
production & purchasing, after sales service, new
product development)?

Internet technologies helps in interaction with suppliers

and customers.
Helps in sharing design databases and methodologies
with suppliers
Helps in communicating inventory levels and
replenishment needs regularly
Keeps track of the customers which further helps in
forecasting demand
Focus on digital advertisement
Online marketing surveys aimed at customers.
Online customer feedback centre.
Solving all the queries and problems of customers by
making all the technical support available on the
companies website
Customer interactive forum
Enabling MIS.

5.What historical legacies and operational issues do you think will affect
Fords ability to move to a Built-to-order model?

Ford is 100 yrs old Founded 1903, Dell on the

other hand was founded 15 years ago
Product variety
There is a requirement to manage large
number of individual component
inventories
Production capacity for individual
components get set long in advance
and cannot be changed quickly

Contd
Process Complexity
A large number of suppliers
3 tiers of suppliers
Business was usually over the phone and fax
Ford a $150billion company enjoys a tremendous
leverage over its suppliers
Annual component price decrease
Powerful independent dealer network
Unionized labor force

6.What practical challenges must Ford

address as it tries to establish internet
linkages with its supply base and its
customers?

Difficulties in establishing business to business linkages

Difficult to determine feasible and appropriate redesign of
the process
Ford supplier network had many more layers and many
more companies as compared to Dell
Lack of technology and technological sophistication that
prevail in the supply chain, especially at lower tiers ( the
lower tier suppliers were not able to invest in new
technologies)
To create consistency in technology standards and
processes in supplier network
At Dell, purchasing activities reported into product
development organization but at Ford, purchasing was
organizationally independent of product development

7. Customer responsiveness initiatives that

Ford took to position the company
favorably for success
Ford Production system made production process
more responsive and pull based system
Reduce the customer order to product delivery time
to 15 days
Forecasting of customer demand from the dealers
Having regional mixing centers that optimize
scheduled deliveries of finished vehicles
Robust order amendment process
Creating an experience for the customer in the
showrooms that would make him come back
frequently (FRN)
Superior selling service and more service outlets

Q8. If you were Teri Takai what would you

recommend to senior executives? To what
extent should Ford emulate Dells
business model.

 If Ford is to successfully emulate Dell then they are

best able to do this in areas where they have
similarities.
The most notable congruency is in the area of supply
of generic components. Here Ford should continue its
process of building strategic relationships.
Where components are of a more specialised nature
then Ford should examine the relationships to
ascertain whether bringing suppliers closer to the
company will offer benefits to both parties

 Ford should work on its' internal culture. Integration of

supply chains on the scale practiced by Dell can only
occur in an environment where information flows freely
to all points of the supply network.
As outlined in the case documents; Ford maintains a high
degree of separation of the purchasing departments from
marketing and production. Ford will not be able to
provide focus up and downstream unless they themselves
are committed to an open culture where logistics
information is a part of the life blood of the company.

The relationship with customers is more difficult. The dealer

network will probably be averse to Ford moving towards direct
sales, as it will threaten their livelihood. They can reap some of
the benefits by introducing a web based ordering service for
cars, allowing clients to specify the car that they want and then
matching the requirement to the cars already in stock through
out the network. If a client prefers they could order a vehicle
built to order and supplied to a local dealer. This will enable
Ford to become closer to the needs of clients, seeing accurately
what they want rather than what they buy because it is
available.

 This compromise will give the company some benefits:

Information about customer wishes.
Opportunity to reduce both dealer stocks and Fords' stocks
by avoiding duplication.
Delaying the final form of the product by increasing the
range of dealer fitted items will enable Ford to simplify
manufacture, whilst offering a greater degree of 'real
customisation' to clients.
Delay of final form will increase dealer revenues, buying
their enthusiasm and consent for the next stages of
coordination.