Ford motor corporation the advantages of a robust supply chain & continuous improvement process

Salem Hollow Consulting Firm December 12, 2013

1 | P a g e F o r d : T h e A d v a n t a g e s o f a R o b u s t S u p p l y C h a i n & C o n t i n u o u s

I m p r o v e m e n t P r o c e s , 2n d

E d i t i o n I g o r S . G a r c i a

Denotes material has been utilized in another document titled Ford: Growth and

Innovation by Igor S. Garcia





Table of Contents

Table of Exhibits ...................................................................................................................................... 3

Table of Tables ........................................................................................................................................ 4

Table of Figures ....................................................................................................................................... 5

Prologue .................................................................................................................................................. 6

Downfall of an American Car, Rise of a Global Icon .................................................................................. 7

The Missing Era ....................................................................................................................................... 8

The Way Forward: Red, White & Bold19 ................................................................................................. 10

One Ford ............................................................................................................................................... 11

Continuous Improvement & Social Media .............................................................................................. 14

Conclusion ............................................................................................................................................. 15

Exhibits & Tables ................................................................................................................................... 16

References ............................................................................................................................................ 23





Table of Exhibits

Exhibit 1 (a) Ford Automobile Production 1903-2000. (b) US Fuel Prices from 2000 to 2011. (c) Steel

prices vs. Gold and US$4 (d) US Automotive Fuel Efficiency from 1972 to 2015. ..................................... 16

Exhibit 2 1970s to 1980s (a) Paid advertising for Ford Pinto as a family vehicle (1970s). (b) Toyota

Corolla highlights fuel efficiency. (1980s) (c) Toyota Camry in paid advertisement highlights its reliability.

(1980s) (d) Ford Pinto circa 1980s, fuel tank explosion, known issue by Ford, chose to ignore it. ........... 17

Exhibit 3 Total Units produced from 2001 to 2011. Units take increased reduction, a result of the Way

Forward.11 ............................................................................................................................................. 17

Exhibit 4 Ford Cash Flow Statement from 2003 to 2012.9 ....................................................................... 18

Exhibit 5 (a) EcoBoost Engines increase by almost 50 fold after only 3 years. (b) Acknowledging the

absence of a fuel efficient small car segment, Ford creates a Super Segment, where they lead the way.

(C) 3 out of 10 fuel efficient vehicles are Ford and powered by EcoBoost Engines. (d) One out of 10

Electric Vehicles is a Ford Vehicle. ......................................................................................................... 19

Exhibit 6 Scott Monty at nmX expo presents metrics on social media marketing and the Ford Fiesta. (a)

What Millenials want when buying or repurchasing a new product. (b) How Millenials influence others.

(c) Response from Social Media World after 100 agents began to share their Ford Fiesta Experience.14 19

Exhibit 7 Ford Vehicles Produced from 1998 to 201212........................................................................... 20

Exhibit 8 Ford Grows in China despite a late arrival, currently at #6. ...................................................... 20

Exhibit 9 December 5, 2013 Launch of a Global Ford Mustang - Available in 110 countries from 36. ...... 21

Exhibit 10 Ford Mustang to launch in 110 countries - empowering the One Ford Strategy. .................... 21

Exhibit 11 Ford Auto Production Ranking ............................................................................................... 22

Exhibit 12 Ford's Standing in Global Markets. Particular Best Sellers in China and US, #1 & #2 largest

auto markets respectively. .................................................................................................................... 22





Table of Tables Table 1 Strategic Challenges and Strategic Solutions to remain competitive and profitable. .................. 10

Table 2 R&D and Advertising Costs for Ford Motor Company Pre & Post - One Ford Plan....................... 16





Table of Figures Figure 1 Henry Ford on his 1896 Quadricycle, one of two built.2 ............................................................. 7

Figure 2 (a) Ford Five Hundred designed to compete against (b) Chrysler 300, winner of 2004 Motor

Trend Car of Year Award. ....................................................................................................................... 18

Figure 3 (a) Ford Taurus 2010 to compete against (b) Chrysler 300 ........................................................ 18





Prologue

In selecting this topic as a choice for discussion, I will express, as the author, to have a level of

admiration and perhaps adoration, towards the way in which everything was done and how it was done.

In fact, evaluating the development of the situation at Ford Motor Company, and all possible calculated

outcomes, one would have counted Ford Motor Company out at its one hundredth anniversary, &

instead of a celebratory discussion on “Growth and Innovation at Ford”, this discussion could have been

titled, “Death of An Automotive Legend: Leadership At Its Worst”. Instead, Ford Motor Company, led by

a board to top executives, managed to revive an American Icon and bring it back from a disastrous loss.

Bringing the Blue Oval back, meant rethinking the entire strategy from Operations to end user

perspective and back. The plan to revive modern time FoMoCo was christened “The Way Forward”,

which later would shift to the “One Ford” strategy. In 2005, William Clay Ford II, asked the North

American President/Executive Vice President of FoMoCo Mark Fields to design a plan to return Ford

back to profitability. Mark did as he was requested, reviewing all aspects, considered within operations,

investment opportunities, and financing opportunities, all to reflect current condition of Ford in the

market place. The Way Forward was not simple, it was hard, it was painful, it left many unemployed, it

scarred not only Ford, but it scarred suppliers, Michigan and the US as whole; but the sacrifice had to be

done for the betterment of all. I know. I was there in Michigan, working at Chrysler; I saw the impact

first hand.

My own preference to pursue an MBA at a Top International Institution and Program was

inspired by Mulally and the execution of the revival at Ford. As I sat in my office in Miami, FL and read

about Mulally’s achievements, his accolades and background, I grew more and more interested in

developing my skills. He attended MIT Sloan School of Management, on my part I saw the future slightly

different and opted to apply an executive MBA program in Florida, close to my office and home. A

couple of weeks after applying the program, I was being interviewed by the program’s admission

department and shortly thereafter, I was accepted into an MBA program. Unfortunately, family

challenges delayed my academic progress, I never enrolled and I endured a minor setback, nevertheless,

family is always first. Eventually, I would see light at the end of the tunnel. My family challenges

required that I would relocate from Miami, FL to Connecticut, at which point, re-invigorated by the

vision of one day being in the same shoes as Mulally, I opted to seek a top institution, so I arrived at the

IE Business School. Unlike other top executive MBAs, which are either full time or based on closed

perspective views, in pursuing IE, I sought a program where I can sharpen my Global Employee skills,

while also increasing my understanding of Global Business, as I interacted with other global employees;

something not seen in other top Management Executive MBAs.

So, as I present this discussion, I aim to analyze each of the steps which were executed by

Mulally and other executives and evaluate the decisions made, and opt to present whether a more

elaborate solution could’ve been executed. Then again, the root cause for choosing the topic is because

I admire what they did and view the totality of the execution as quasi perfect. The Way Forward / One

Ford Strategic Plan showcased that not all business executives are out to become wealthier and seek





only to use the shareholder as an excuse for bad execution, and/or self-personal gains. Here, Alan

Mulally shines as a CEO, Mark Fields created the perfect plan to reduce operations, reflective of market

share, & William Clay Ford, Jr. becomes a bigger man as he chooses to step down to allow more

experienced individuals to bring the plan to fruition. Additionally, an energetic Scott Monty provides a

means to channel the energy at Ford to the world. More importantly, Scott Monty has given Ford the

power to receive input from customers first hand by creating bridges via earned media.

Voicing my opinion and supported by data, I hope to present Ford Motor Company and how it

strategically made all the right decisions, leading to a game winner.

Downfall of an American Car, Rise of a Global Icon The United States has been an industrial powerhouse since the end of World War II.

Industrialization of the US gave rise to increased research and development and manufacturing, but

overall increased the nation’s brand equity, it yielded expansion of its brands from domestic brands to

global brands. It was here that we see the emergence of Ford, an American automotive icon. Yet, when

assessing the true beginning of the Ford Motor Company, i.e. considering 1945, it is possible to still

travel 42 years further back. Here In 1903, we will find a 40 year old man seeking recognition among his

peers. He worked for Thomas Edison and during his spare time he would invent a Quadricycle.

Recognition for his Quadricycle, see Figure 1, led Henry Ford

to becoming a member for a joint venture, named Detroit

Automobile Company (later renamed Cadillac). Discontent

with the way things were being managed, Henry decided to

forge his own path, leaving DAC and founding the Ford

Motor Company. It was here that in Highland Park,

Michigan, that Henry decided to find ways to make the

automobile more affordable to the masses, provide

independence, increase and add value to each one of the

small business owners and families seeking ways to mobilize

across the newly forged nation. In all, Henry Ford had one

objective, which was to build the perfect car for the

everyday American, becoming a part of their lives, enriching

their lives.

Henry was not the first to invent the car, and lack of automobile history knowledge has

confused the masses who are not sure to answer who among Germany, France or the US was first to

invent the automobile. Well, this is not the stage to debate who was first to roll out a self-propelled

unit. Yet, I will say, Daimler was first, and I will stop here. Henry’s achievements lie not in being the

first, but rather in making it affordable to the masses, by doing two things: first, he built only one car,

the infamous Model T, and then he adopted the assembly line process to put it together. By integrating

the assembly line to automobile construction, Henry was able to initially drop prices for automobiles

from $2000 to $850, and the prices would continue to drop as the assembly process continued to be

Figure 1 Henry Ford on his 1896 Quadricycle, one of two built.

2

http://www.youtube.com/watch?v=S4KrIMZpwCY





optimized, eventually to a vehicle cost of $2501, 2. Henry purchased the same part, in volumes, from a

selected few suppliers. He also manufactured some parts in his own facility and adopted an assembly

line process to assemble the Model T. The result was a vehicle ahead of its times, leading in quality,

performance, price competitiveness and affordability to the masses. Furthermore, with each

opportunity available to improve his Model T, may that be operations or innovation, Henry Ford invited

the opportunity, the result was continuous improvement, unending. The Model T would become the

first global platform and recorded approximately 15 Million units from 1909 to 1927.

Henry saw the Ford Motor Company grow steadily from 1903 to 1930 see Exhibit 1(a), with a

couple of interruptions in 1927 and 1928, the initial stage of the Great Depression. Thousands of people

were laid off from Ford and entered the unemployment line. For two more years 1929 and 1930,

FoMoCo would deliver 1.5 and 1.1 Million units respectively. Not until 1949 would FoMoCo return to

building over a million units per year to return to profitability. It also did so at the helm of Henry Ford II,

son of Henry’s only son Edsel Ford. Edsel Ford died in 1943, while father & founder, Henry Ford, died in

1947. The Ford Motor Company endured its first economic challenge, almost bringing it to the brink of

extinction; yet tough decisions, good planning and an apparent immaculate execution gave Ford the

ability to tell the story its way.

The Missing Era As technology has diffused more and more in other areas of the globe, either via reverse

engineering, purchased technology or simply innate development, the rest of the world has become

more and more industrialized. This industrialization has given other countries the opportunity to put

winning automotive industries, with several qualities important to today’s consumers. These qualities

can be stated as fuel efficiency, quality, reliability, aesthetics and safety; technology such as integrated

DVD players, Bluetooth technology, and other features being order qualifiers. In addition to rising

competitors in the 1980s, the automotive industry saw itself as a target to both systematic and

unsystematic risks. For instance, continuous rise of gas prices [Exhibit 1 (b)], while the efficiency of the

engines has not increased at the same pace in order to keep the consumers content, see Exhibit 1 (c).

Steel prices have also increased substantially as seen in Exhibit 1 (d), on the other side the ever

increasing demands of the UAW also compromised the livelihood of the FoMoCo. Energy prices

continued to increase to limits only seen in the 1980s. As opposed to middle east conflicts, which are

also present today, there is one more issue, that today other rising economies are demanding the same

energy supply that 1st World Countries have consumed for over a century. The rising fuel costs and

global economic instability have made certain automotive segments which were once lucrative, such as

the Sports Utility Vehicle (SUV) segment, no longer as profitable as they once were, given some of the

risks mentioned above. Hence the pendulum appears to be swinging back into the direction of smaller

and more fuel efficient vehicles, here Ford is carving out a niche in a known segment as the “Super

Segment”. The Super Segment is comprised of a combination of subcompact, compact, midsize and

small sport utility vehicles.

http://www.modelt.ca/background.html





Finally, globalization has made once known as domestic markets, world renown. As a result of

globalization, we now have Japanese auto manufacturers, such as Toyota sitting atop the volume

deliverer, Honda delivering top quality, and Mazda delivering aesthetics, while South Koreans having

Hyundai and KIA are doing everything, from fuel efficiency to aesthetics. From Germany we have

Mercedes Benz, BMW and the Volkswagen Consortium with its MQB Core Platform a level of innovation

which has shocked the industry to its own core, as production prices for several VW and daughter

companies have dropped as several vehicles can be built from one parametric platform. Still pending to

arrive are Indian vehicles, such as Tata or Chinese vehicles such as Geely and Chery; here we see that

Chinese vehicles are quickly catching up in quality standards to international brands20.

During the 1970s, systematic risks such as the oil embargo, created a crisis of disproportionate

magnitude, making fuel scarce and hard to fill up the large vehicles from previous decades. Additionally,

Japanese competition began to arrive, analyzing and conquering the American public interest & hearts.

Meanwhile, challenges in quality began to plague the American Automotive Industry; one common

quality/safety issue, Exhibit 2, was the Ford Pinto8. The Ford Pinto was known to have a fuel tank issue,

which would become reactive when bumped i.e. it would explode. Despite this challenge, the Ford

Pinto saw production of some 3 million units in the 1970s. Ford chose to do nothing about the potential

risks, and this would come back to haunt the brand. Ford noted that cost to repair the engineering

challenge was greater than the number of lawsuits which would be settled8. As a result of OEM

complacency, American consumers had very little option to demand quality, safety, aesthetics, fuel

efficiency or reliability. It is known that many OBMs sought to manufacture with the objective that the

consumer could be back in the shop buying spare parts as soon as possible, or that the consumer would

be back at the dealership as soon as possible to purchase a new vehicle. It was during this span of time,

that Japanese Manufacturers began to take notice of the inefficiencies of American Manufacturer and

began to produce vehicles that Americans would enjoy driving, while also save money at the pump. But,

enjoy can have a deep meaning, so I will define it, purchasing a vehicle and driving it worry free.

The 1980 - 2000 was an age of mergers or acquisitions in the automotive industry. Many

American companies purchased European name plates to add a luxury brand to their book offerings.

Ford acquired Aston Martin, Jaguar, Land Rover, Volvo and a stake of Mazda. Later on, Ford would learn

from managing these companies how to save its own core business.

From the 1980s to the 2000s, Ford Motor Company saw several threats influence the domestic

and international market. The once American prowess shared only by German engineering, was now

being challenged by other international brands, stemming from Japan and Korea. From Japan, Toyota

led the pace and focused mainly in delivering cost, quality and reliability. From Germany, Volkswagen

began to collect automotive companies much like a boy scout on a mission collecting badges, plus

shared components and/or operations, this allowed VW to be price competitive by reducing fixed costs

even into its luxury platforms, such as Audi. Ford, like other American auto companies began to see the

effect and impact that a bad reputation bared on their names. Lack of quality, lack of reliability in

previous years had driven domestic and international customers away from Ford designs. The

conservative image maintained young buyers from buying vehicles that they could not identify with.





Instead, young buyers would opt for imported vehicles; while previous buyers would opt to purchase a

more reliable vehicle, hence often choosing a foreign badge. After 2005, the market would make shifts

in trends and position, Ford and other Detroit manufacturers below Japan’s Toyota. Volkswagen was

not too far behind. From 1998 to 2012, Ford has seen a lower footprint in the Global Production, but

since 2009, Ford has been profitable as a result of an aggressive plan to improve Global Operations, all

at the helm of Allan Mullaly.

The Way Forward: Red, White & Bold19 The Ford Motor Company, also known as the Blue Oval woke up on January 23, 2006. William

Clay Ford, Jr, called on Mark Fields, then President/Executive Vice President of The Americas to shake

things up and propose a plan that could bring Ford back to profitability by 2010. In response to his

request, Mark Fields defined “The Way Forward” plan, see Table 1, now a possible topic reviewed in

many Business Schools. The plan called on bold leadership and innovation to create changes in the

culture, operations, future investments to revamp the product line, improve quality. Yet above all, the

idea called for a plan to maintain the customer at the core of the business model.

“When I speak about operating like a smaller company, I’m not talking about

shrinking our size. I’m talking about the way we operate, the way we make

decisions and the way we relate as a team.”, Mark Fields, January 23, 2006

“Great Firms – Toyota, Nike, and General Electric, to name a few – evolve and change. So do great

strategies.” Cynthia Montgomery, Putting Leadership Back into Strategy.

This second quote will be seen as key in later sections, upon the arrival of Alan Mulally to Ford,

but also in marketing strategies, set forth by Scott Monty.

Table 1 Strategic Challenges and Strategic Solutions to remain competitive and profitable.

Challenges Potential SolutionsGas Prices Up and Continue to Increase Reduced Production by 500 million thus far.

Steel Prices Up Focus on Core Brands, Ford, Mercury & Lincoln

Increasing number of name plates, increased from 215 in

2002 to 255 in 2005

Divest premium brands Volvo, Aston Martin, Jaguar, Land

Rover and Mazda.

Expected 300 name plates by 2010 Grow Ford Brand Equity Domestically and Internationally

Market Growth In US stagnant Utilize Innovation as the Marketing Differentiator.

Conservative Designs of years past did not see eye to eye

with targeted customer.

Reduce Operations - Cease operation of 14 plants.

Revenue can not be sustained with current costs and market

share.

Upgrade Operations to be Flexible and Complete more than

one platform.

Ford driven by Cost and Capacity not by Customers. Reduce workforce

Change Mentality through bold leadership and innovation. Change Mentality through bold leadership and innovation.

Gather customer feedback faster & create faster

development of platforms.

As part of restructuring, invest in small car platforms and

hybrids.

Ford - The Way Forward





Exhibit 4 identifies the Cash flow statement from 2003 to 2012, hence identifying the impact the

Way Forward Plan had in Net Revenue at Ford, since its implementation began in 2006. It is also

possible to see that ahead of the Way Forward announcement, Ford Motor Corporation had begun to

divest operations; sale of assets had accumulated approximately $13.9 Billion over the course of 4 years

from 2003 to 2006.

Nevertheless, despite the Way Forward announcement Ford appeared to stall, unable to make

further progress, while Toyota continued to gain on Ford and GM. First, Toyota dethroned Ford as the

number two auto producer in the world and then, it dethroned General Motors as the largest auto

producer in the world.

Just as Cynthia Montgomery has noted, in her “Putting Leadership Back into Strategy”, Great

Firms – Toyota, Nike, and General Electric, to name a few – evolve and change. So do great strategies.

William Clay Ford, Jr. made a couple of unprecedented announcements after 5 years at the helm

of Ford as CEO. William also devoted a lot of his time working with Mark Fields to create the Way

Forward Plan. The first announcement was a vow to the company, which would showcase his sacrifice

for the better of the company. He would not take any pay, until FoMoCo was back into being

profitable11. The second announcement was probably just as incredible. William realized that the job

ahead would require more than a strategic plan to bring the company back into the black; it would also

require an executioner. In 2006, months after the Way Forward Plan was announced, William Clay Ford

Jr. Chief Executive Officer and the Executive Board Member at Ford announced that he had hired Alan

Roger Mulally as the new Chief Executive Officer.

One Ford Alan Mulally was a 37 year veteran at Boeing who had managed to bring back Boeing from the

brink of extinction, a scenario very similar to FoMoCo. He was a graduate from the University of Kansas

with a Bachelor of Science and a Master of Science, in Aeronautical Engineering, and a Master’s Degree

from MIT Sloan School of Management.

Upon his arrival, he rebranded the Way Forward Plan with One Ford, meaning One Team, One

Plan, One Goal. Yet his long term goals included the transformation of Ford from an econo-box into

something more appealing for the customers, value added. He would set goals to set best in class in

Quality, Fuel Efficiency, Safety, Smart Design and Value.12 Additionally, Alan Mulally sought to unite

Ford worldwide, to gather the best efforts across the world and project back to all the markets in the

world the best possible Ford effort. To do so, Alan would rely on experience, technology, innovation

and the most important asset of them all, Ford’s Supply Chain including the customer. The One Ford

Plan would require Ford board members to confront tough decisions, including the largest refinance

package in an era. Additionally, it would require that Ford would amputate its own arms, it needed to

divest, sell those less profitable operations, such as Volvo, Range Rover, Jaguar, Mercury, Aston Martin.





In doing so, Ford disposed of research centers, production facilities, assembly facilities, suppliers and a

lot of unprofitable operations. Mark Fields who rose through the ranks of Mazda, brought a lot of

learning from Mazda into Ford, key to the Way Forward Plan. In fact, Mazda was the only profitable

operation sold, which emerged from failure in a similar fashion as Ford did. Nevertheless, it gave an

opportunity to Ford to focus on its core operation, that of building Ford Vehicles, instead of trying to be

too much for a lot of people.

Fresh on the job, Mulally undertook the role of executioner at Ford, particularly executing the

Way Forward Plan / One Ford. There seemed to be just one small problem…….the company was running

out of funds. Alan decided to finance future projects by refinancing the fixed assets of the Ford Motor

Corporation back in 2006, so his claims in visiting the 1st time are noted as those of a fellow CEO lending

support for the cause, when accompanying the other CEOs. The move not only gave Ford independence

at a time, when government TARP, meant partial ownership of the companies by government, but the

move added Brand Equity to Ford………Bold leadership & Innovation…..The $24 Billion provided

FoMoCo’s fixed assets, gave Alan Mulally, Mark Fields and William Clay Ford, Jr. exactly what they

needed and thus began the execution of the Way Forward. Over the next few months, one would see

one of the biggest corporate revivals in the history of modern corporate America. Additionally, Alan

would employ his leadership characteristics by striking a formidable deal with the UAW in 2007 where

benefits went from defined benefits to defined contribution. Not to be outdone by Volkswagen AG,

Ford invested heavily in China, by seeking out partnerships as it sees the Pacific as a fertile ground for

growth.18 Today, Ford ranks 6 in China, see Exhibit 8, aided by a top global seller in the Ford Focus.

But what did One Ford particularly mean???? For years, the Ford Motor Company operated as a

decentralized engine; an effort which allowed the company to reach the globe at a localized level, a

difference to the application model utilized by BMW, Toyota, Mercedes Benz and others in the

automotive industry, who employed global platforms to build the desirable vehicles sought out by

millions. The design and production process required that thousands of suppliers become involved in

the production process of Ford’s massive global operation, as different platforms bared different

suppliers. Ford platforms worldwide amounted to a total of 27 platforms at the arrival of Alan Mullaly

to Ford. This vague sense of operation drove Ford to produce vehicles confronted by both ends of the

spectrum, i.e. profitable and unprofitable, and when production costs, exceeded sales, Ford sought

growth by acquisition, adding luxury European brands. Luxury brands which eventually also lost luster

and became unprofitable, and as Mark Fields noted, were making profitable operations, unprofitable, as

it resources from profitable operations to maintain them as an offering. Another problem with

production at Ford, led to lack of push pull production system, often leading to over production of

vehicles.21 As Ford confronted profitability challenges, it also sought to pursue cost improvements from

its suppliers.23

The challenge at Ford’s decentralized design process was vast enough to consider that different

vehicles in the same market country aimed to contain different technology packages, component

designs, given the intense level of decentralization; objects as simple as turning signals differ from one

vehicle to another, and as Allan would later define, “….the vehicles lacked the Ford Feeling.”, a coined





term which referred to vehicles lacking identity, leading to the consolidation of best efforts and

production of global vehicles. Therefore, it would be necessary to improve the Ford Feeling, execute

some level of centralization and improve operations, including divesting of operations. Alan Mullaly

aimed to reduce the number of global platforms under his One Ford Plan, shifting from 27 to 14

platforms, and currently seeks to reduce even further from 14 to 9 by 2017.22 Ford is also aiming to

identify key suppliers and reducing the number of suppliers from 1260 to 750 suppliers.22 In essence,

Ford hopes to keep suppliers which provide the greatest amount of value added. Annually, Ford

recognizes its leading suppliers with the World Excellence Award, an award for embracing the

fundamental characteristics of One Ford. This is an acknowledgement of gratefulness for adding value

to the final product.

Yet, a valuable criterion is now in place at Ford, who globally purchases approximately $75+

Billion in goods from its suppliers. Ford has instituted long term sustainable relationships with its

suppliers, instead of short term financially beneficial relationships. Today, Ford employs a three

pronged approach:

1. Building capability at individual supplier facilities

2. Engaging with strategic suppliers

3. Collaboration with peers in the automotive industry

The selected suppliers enjoy large volume purchases, incorporate continuous improvement

practices, receive corporate trainings and add value to the Ford Motor Company end product to the

consumer, not only by means of delivering parts, but by means of collaboration. Ford has learnt, similar

to Toyota’s method of Keiretsu, that in order to be successful there has to be investment in the

supplier/OBM relationship; it cannot simply be a financial bonding, based on squeezing profits out of the

supplier. This would indicate that Ford looks to integrate the suppliers into other efforts besides just

component deliveries, such as human rights, material sustainability efforts, working conditions, training,

conflict minerals. Yet, in order to better understand the impact of this One Ford change, and the impact

that changes to the supply chain management have created, it is important to view before and after

standings at Ford, physical designs, global reviews and financial reviews.

Today, Ford is ranked 5, see Exhibit 11, among global auto producers, as it saw itself become

displaced, first by Toyota (Japanese), then by Volkswagen (German) and now by Hyundai (South

Korean). Yet it is possible that this is a little incentive to Ford who is once again highly profitable, see

Exhibit 4, and manages to be present in some of the world’s largest auto markets, particularly the US

and China, as seen in Exhibit 12. Additionally, by maintaining a lean operation and a healthy supply

chain, Ford has been able to:

Incorporate leading vehicles onto global stage, such as the Ford Fiesta, the Ford Focus

and recently the Ford Mustang.

Abilitiy to develop and integrate green technology into its vehicles.

Ability to Rank high in quality ratings.





Ability to rank high in fuel efficiency.

Become profitable.

One example can be provided by the fact that he sought to employ import from around the

world, the global presence of the Ford Focus and Ford Fiesta. 85% of the Ford Focus parts are standard,

and 15% of the parts are customized to fit the market where the vehicle is sold. The Ford Fiesta is 65%

the same for all countries where it is present, while 35% of the vehicle is fitted to suit the market where

it is sold. These two vehicles also provided what Allan needed, fuel saving technology, pizazz for the

younger customers, while also offering reliability and quality. How to excite the customers about these

new products will be seen later. On December 6, 2013, Alan Mullaly completed yet another feat, by

expanding another model in the Ford family, The Ford Mustang. This launch expands availability of the

brand from 36 countries to 110 countries; see Exhibit 9 & Exhibit 10.

The safety margin at Ford can be measured by the government agency SaferCar, part of

the NHTSA (National Highway Traffic Safety Administration), where Ford scores an average of 4.5 / 5

stars for its vehicles on average. In addition to the structural integrity of the vehicles, Ford has also

made available other technology, such as Crash Avoidance System Effectiveness14. In the US, Ford has

also excelled in some areas for resale value of its cars particularly the Focus and the Mustang, while

other sources acknowledge the 2013 models such as the new Ford Fusion, the Fusion Hybrid, the Ford

Focus Electric, Ford Explorer. Other characteristics have placed Ford Vehicles among the top fuel

efficient vehicles in the market; again another customer driven desire implemented by Ford as a means

to cater to the customer and not vice-versa, as seen pre Way Forward/One Ford.

Alan, in collaboration with others at Ford, takes the credit for bringing Ford Motor Company

back into profitability ahead of schedule in 2009, as oppose to 2010.

Continuous Improvement & Social Media

Continuous improvement as seen by the assembly specialists, or by the marketing guru, or the

engineers, or the collaboration of Ford employees with suppliers, provides a defined degree of

connections and possibilities, which up to now had been considered a significant tool to many. Previous

efforts of continuous improvements appeared only to be corporate and often excluded the opinion of

the consumer, as seen in Reference 17. But with the help of a marketing Guru, Scott Monti, at Ford,

Ford has been able to tap into the customer’s responses in real time, by creating Ford Social. Via Ford

Social customers can access Ford and feel the connection to the factory. Ford Social aimed to take down

the barriers between corporation and customers and allow the customers to voice their comments and

concerns without feeling the weight of addressing a corporation. Ford, learning from its previous

experiences in the 70’s with the Pinto, and 80’s with the Ford Escort and Taurus, learned that the best

voice to keep ahead is to listen to the customers, a discrepancy of simply designing with hope of

customer purchase, instead, today Ford listens to the customer and designs based on the demands of

http://www.safercar.gov/

http://editorial.autos.msn.com/12-best-resale-value-cars-2012#2

http://www.kbb.com/new-cars/best-resale-value-awards/best-resale-mid-size-car-2013/

http://www.kbb.com/new-cars/best-resale-value-awards/best-resale-hybrid-car-2013/

http://www.kbb.com/new-cars/best-resale-value-awards/best-resale-electric-car-2013/

http://www.kbb.com/new-cars/best-resale-value-awards/best-resale-electric-car-2013/

http://www.kbb.com/new-cars/best-resale-value-awards/best-resale-full-size-suv-2013/





the customer. The ideas, likes, concerns and complaints from customers are received and utilized

towards the continuous improvement of the product. By doing this, Ford has increased its degree of

continuous improvement dramatically, since Ford is now integrating the customer, as a link into its

supply chain.

Conclusion While Henry Ford was wise to focus on the supply of its parts and how the quality would provide

a benefit to its customers, either by quality or cost of ownership, subsequent leaders up to William Clay

Ford Jr., failed to follow suit. As the Ford Motor Corporation grew into one of the largest producers of

vehicles and a conglomerate at time, it went from providing a good that would add value to the lives of

customers, to a product which was designed to create revenue for the corporation. The latter can not

be successful if the customer fails to connect with the product.

In order to succeed, Ford has integrated the customer into the supply chain by creating Ford

Social, and has begun a new method to communicate with suppliers. Ford understands that squeezing

profits from short term suppliers, is not as beneficial as creating long term relationship with suppliers

which provide value added to the end product, which in turn reflects a product with a higher objective

value. The combination of the shift in methods to manage the supply chain have given the new Ford

Motor Corporation an ability to reset Corporate Objectives, the flexibility to renew its marketing

strategy. Additionally, the order winner and qualifiers have been reshaped. The ability to have fewer,

better trained suppliers, has added Ford with an ability to rely on teams that add value, by providing

quality, innovation and image. With the new resurgence, it is possible to note that Ford looks to reach

new markets, such as expanding in China, and creating global platforms that meet the need from all

citizens of the world, rather than building local platforms to meet local needs. All this can only be done

via a superb organizational structure, capable to understand the meaning of lean manufacturing and

capable to expand these philosophies beyond the confinement of the walls at Ford. Ford has learnt that

in order to be successful, it needs to listen to feedback, good or bad, as in all cases, the bad ones are the

golden nuggets, areas of potential improvement. Seeing that Ford employs Six Sigma, it understands

that not all suppliers can adopt this lean manufacturing process, so it provides freedom of a process, but

in order to ensure alignment between the OBM and the supplier, Ford provides training, thereby

creating points of intersection between the supplier and the OBM.

As Ford continues to execute the One Ford Plan, Ford will continue to have success. This

success, will be subject of its supply chain, its operational process and its execution.





Exhibits & Tables

Table 2 R&D and Advertising Costs for Ford Motor Company Pre & Post - One Ford Plan.

Exhibit 1 (a) Ford Automobile Production 1903-2000. (b) US Fuel Prices from 2000 to 2011. (c) Steel prices vs. Gold and US$4

(d) US Automotive Fuel Efficiency from 1972 to 2015.

Item / Year 2004 2007 2010 2012

Research and Development 7.4$ 7.5$ 5.0$ 5.5$

Advertising 3.2$ 5.4$ 3.9$ 4.0$

Some Operational Costs of Interest [$Billions]





Exhibit 2 1970s to 1980s (a) Paid advertising for Ford Pinto as a family vehicle (1970s). (b) Toyota Corolla highlights fuel efficiency. (1980s) (c) Toyota Camry in paid advertisement highlights its reliability. (1980s) (d) Ford Pinto circa 1980s, fuel tank explosion, known issue by Ford, chose to ignore it.

Exhibit 3 Total Units produced from 2001 to 2011. Units take increased reduction, a result of the Way Forward.11





Exhibit 4 Ford Cash Flow Statement from 2003 to 2012.9

Figure 2 (a) Ford Five Hundred designed to compete against (b) Chrysler 300, winner of 2004 Motor Trend Car of Year Award.

Figure 3 (a) Ford Taurus 2010 to compete against (b) Chrysler 300





Exhibit 5 (a) EcoBoost Engines increase by almost 50 fold after only 3 years. (b) Acknowledging the absence of a fuel efficient small car segment, Ford creates a Super Segment, where they lead the way. (C) 3 out of 10 fuel efficient vehicles are Ford and powered by EcoBoost Engines. (d) One out of 10 Electric Vehicles is a Ford Vehicle.

Exhibit 6 Scott Monty at nmX expo presents metrics on social media marketing and the Ford Fiesta. (a) What Millenials want when buying or repurchasing a new product. (b) How Millenials influence others. (c) Response from Social Media World after 100 agents began to share their Ford Fiesta Experience.14





Exhibit 7 Ford Vehicles Produced from 1998 to 201212

Exhibit 8 Ford Grows in China despite a late arrival, currently at #6.

0%

2%

4%

6%

8%

10%

12%

14%

-

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00

70,000,000.00

80,000,000.00

90,000,000.00

Un

its

Pro

du

ced

Ford Vehicles Produced Per Year (1998-

2012)

Ford

Total Production

Ford % Per GlobalProduction

0200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,0001,800,000

Sales By Units Sales Through June 2013

Sales By Units 2013





Exhibit 9 December 5, 2013 Launch of a Global Ford Mustang - Available in 110 countries from 36.

Exhibit 10 Ford Mustang to launch in 110 countries - empowering the One Ford Strategy.





Exhibit 11 Ford Auto Production Ranking

Exhibit 12 Ford's Standing in Global Markets. Particular Best Sellers in China and US, #1 & #2 largest auto markets respectively.

ToyotaGM

VolkswagenHyundai

FordNissanHonda

PSASuzuki

RenaultChrysler

Daimler AGFiat

BMWSAICTata

MazdaDongfeng Motor

MitsubishiChangan

GeelyFuji

BAICFAW

Great WallMahindra

IsuzuChery

AvtovazBrilliance

JACBYD

LifanVolvo

ProtonChina National…

PaccarGAZ

Ashok LeylandHunan Jiangnan…

GAC GroupShannxiPorscheSoueastNavistar

King LongUAZ

Tangjun Ou LingHebei ZhongxingSichuan Nanjun

0 5,000,000 10,000,000 15,000,000

Automotive Industry 2012 Toyota

GM

Volkswagen

Hyundai

Ford

Nissan

Honda

PSA

Suzuki

1 Toyota Toyota Corolla 1,020,000 1 VW VW Lavida 291,894 1 Ford Ford F-Series 559,506

2 Hyundai Hyundai Elantra 1,010,000 2 Ford Focus 249,576 2 Chevrolet Chevy Silverado 360,775

3 Wuling Wuling Sunshine 943,000 3 Buick Buick Excelle 192,772 3 Toyota Toyota Camry 318,990

4 Ford Ford Focus 919,000 4 VW VW Sagitar 185,963 4 Honda Honda Accord 282,102

5 Kia Kia Rio 500,000 5 Chevrolet Chevrolet Sail 148,491 5 Honda Honda Civic 253,561

6 Ford Ford Fiesta 781,147 6 VW VW Jetta 249,518 6 Nissan Nissan Altima 249,518

7 VW VW Jetta 745,000 7 VW VW Passat 233,547 7 Toyota Toyota Corolla 233,547

8 Toyota Toyota Camry 726,000 8 VW VW Bora 229,082 8 Honda Honda Cr-V 229,082

9 Chevrolet Chevrolet Cruze 691,000 9 Nissan Nissan Sylphy 148,491 9 Ford Ford Escape 228,290

10 VW VW Golf 648,000 10 Chevrolet Chevrolet Cruze 226,293 10 Ford Ford Fusion 226,293

11 VW VW Passat 565,000 11 VW VW Passat 565,000 11 VW VW Passat 565,000

12 Honda Honda Civic 555,000 12 Honda Honda Civic 555,000 12 Honda Honda Civic 555,000

Worlds Best Se lle rs 2013 Sa les By T op Manufacturer Groups in China Sa les By T op Manufacturer Groups in US





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2013.

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http://oica.net/?s=Production+Statistics+1980&x=0&y=0

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– 2013 Government / Industry Meeting, January 30, 2013

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China Improves Significantly, Narrowing the Gap with International Brands, October 31, 2013

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Documents

Ford motor corporation the advantages of a robust supply chain & continuous improvement process