Team Three Operations Project: Ford Motor Company

Ford Motor Company is a leading global manufacturer of automobiles with operations around the world. Ford was a leader in early automobile manufacturing processes such as the moving assembly line. This paper will describe various operations used by Ford such as inventory control and forecasting. It also includes in-depth explanations of Ford’s use of specific project management strategies as well as quality control management procedures. The research will show how Ford Motor Company operates and what strategies it uses most.

Ford Motor Company Background

History of Ford Motor Company

The international automobile manufacturer Ford Motor Company was founded in the year 1903 and then reincorporated in 1919 (The Editors of Encyclopædia Britannica, 2017). The company started with Henry Ford and eleven investors but then was taken over by the Ford family (2017). Ford went public in early 1956 selling common stock (2017). Ford was a leader in mass production for manufacturers and started its mass production processes in the early 1900s (2017). A moving assembly line for automobiles had never been used until the Ford Motor Company integrated it in manufacturing in 1913 (2017). Earnings were raised significantly to encourage workers to increase their productivity (2017). Ford Motor Company’s history is one of manufacturing and management innovation.

Figure 1. Image showing the world’s first moving assembly line for automobile manufacturing. The Editors of Encyclopædia Britannica, 2017

The Editors of Encyclopædia Britannica say that “by the end of the 1920s, Ford had more than 20 overseas assembly plants in Europe, Latin America, Canada, Asia, South Africa, and Australia” making them the most widely known name in automobiles around the globe (2017). Ford acquired Lincoln in 1922 and started making Mercury in 1938 (2017). Luxury lines such as Aston Martin, Jaguar, and Land Rover were acquired in the 20^th century. Financial difficulties occurring in the 21^st century led to the selloff of these brands (2017).

In late 2008, the US government offered financial bailouts to the “big three” automobile manufacturers (2017). Ford avoided economic failure along with growing sales the following year (2017). More recently, Ford has expanded into creating innovation to transform the way the world moves. “Ford Smart Mobility LLC is a subsidiary formed to design, build, grow, and invest in emerging mobility services” (Reuters, 2018). Ford is working to move forward and solve future transportation issues.

Industry classification

Ford Motor Company is placed in the North American Industry Classification System (NAICS) as Automobile Manufacturing with the code 336111 (Morningstar, 2018). The Standard Industrial Classification (SIC), United States government industry classification, states Ford belongs to the category Truck and Bus Body Industry as well as Motor Vehicles and Passenger Car Bodies with codes of 3241 and 3711 (2018). International Standard Industrial Classification (ISIC) classifies Ford as a Manufacturer of Motor Vehicles with the code 2910 (2018).

Customers served

Ford provides inventory to Ford dealerships for sale to retail customers (Reuters, 2018). Other customers served include fleet customers. Dealerships sell fleets to governments, rental car companies, and commercial fleet companies (2018). The Ford brand is sold all over the world: Asia Pacific, Europe, North America, Central America, South America, Africa, and the Middle East.

Products and Services

The warranties offered by Ford are meant to cover all of their vehicles except the F-650/750, Hybrid and Electric Vehicles. The Ford approach to a warranty program is designed to empower the network of dealerships to complete the work offered by the program. According to the Ford Warranty, the terms of coverage are “Basic Warranty of 3 years / 36,000 miles” (In Manufacturer Warranties, 2017). This is comparative to the competitors warranties, such as companies like GM and Honda that offer 3 years / 36,000 miles warranty for whichever comes first. Other terms and conditions listed are the powertrain warranty which is “5 years / 60,000 miles” (In Manufacturer Warranties, 2017). This compares equally to Honda but is less than GM and Dodge. GM is offering a “5 years / 100,000 miles” warranty (In Manufacturer Warranties, 2017).
New Vehicles, Cars, Trucks, Electric Vehicles
Ford has introduced new models of their cars and trucks over the years. According to Car and Driver, “Ford’s first F-150 Raptor hit like a meteorite when it made its debut for 2010—sudden, spectacular, and surprising” (Sutton, 2017.) “Lighter, meaner, and ready to prey on smaller, weaker trucks” (Sutton, 2017). A few of the notable features of this new vehicle include that “it’s also more thoroughly engineered as a special vehicle unto itself; Ford has given it a dedicated chassis and powertrain to go with the special bodywork” (Need Citation). This new F-Series has contributed to the 896,764 vehicles sold in 2017 which is a improvement over 2016 where only 820,799 units were sold according to Ford Authority (Ford Authority, 2018).
Performance Measurements

There are many performance measurements that can be used by Ford to better the company. “He who tries to measure everything measures nothing because it is impossible to focus effectively on ‘everything’” (Levinson, 2011). Ford went on to better explain this by stating the following:

You can waste time, you can waste labor, and you can waste material—and that is about all. You cannot waste money. You can misuse money, but you cannot waste it; it is still somewhere…. Time, energy, and material are worth more than money, because they cannot be purchased by money. Not one hour of yesterday, nor one hour of today can be bought back. Not one ounce of energy can be bought back. Material wasted, is wasted beyond recovery. (Levinson, 2011)

The listed metrics in the performance indicating or KPIs include waste of human time, waste of product time, waste of materials, and waste of energy. These were identified by Ford nearly 90 years ago. “Frontline workers can easily recognize the need to initiate corrective action or proactive improvement when they find themselves waiting” (Levinson, 2011).

Production Performance Measurements

The performance metrics for the Toyota production systems (TPS) include the seven wastes. These wastes are waiting, transportation, processing, waste motion, cost of poor quality, inventory, and overproduction (Levinson, 2011). “By 2017, Ford will increase its global flexible manufacturing to produce on average four different models at each plant around the world to allow for greater adaptability based on varying customer demand” (Corporate Ford, 2017). Also in 2017, virtually all Ford vehicles will be built off nine core platforms, boosting manufacturing efficiency, while giving customers the features, fuel efficiency and technology they want anywhere in the world (Corporate Ford, 2017). Ford’s President and CEO states “our plan for creating value going forward is simple and straightforward: continue our expansion from an auto company to an auto and a mobility company” (Corporate Ford, 2017).
Quality Management

Although the concept of Total Quality Management (TQM) began under the original

Henry Ford himself, “Quality People, Quality Products” (Scheid, 2011) became the mantra of

Ford Motor Company when they implemented a much more effective TQM in the early 1980s through the 1990s. The need for an improved TQM came after Ford posted $3 billion in losses between 1979 and 1982 (Gabor, 2001). TQM is a customer based methodology that looks for customers to tell the companies what defines quality products. Ford had struggled with declining sales, and the TQM program was put into place to help turn around the company and regain lost sales and loyal customers. There are ten steps to TQM:

1. New strategies must be investigated aggressively.
2. Research your customers. Know their needs and wants. Determine who your             customers are and gather information through surveys.
3. The customers will tell you what quality products are. Listen to them!
4. Prevent loss, don’t correct it! With preventive measures to ensure fewer quality issues, there is way less cost and more streamlined approaches.
5. Cut the waste. Lessen the amount and causes of waste. Anything that does not apply to the immediate goals of the project at hand is considered waste.
6. Keep moving. Improvement processes will continue indefinitely. Stopping after a small financial and quality improvement defeats the process of TQM.
7. Stay structured. Staying on a structured path minimizes time and man hours loss on when or how to improve the process.
8. Streamline products. Fewer models of  products will help keep the focus on quality.
9. Balance is important. All areas need equal time as they all need to work together to produce a better quality final product.
10. All moving parts of TQM need the improvement strategies implemented.

With the implementation of TQM, Ford had turned around the company in a quick amount of time and by 1986 had become the leading American car company(Gabor, 2001). Following on the success of the implementation of the ten steps of TQM, Ford kept up its run of loyal customers and profits into the early 2000s. They had indeed come back from the dead so to speak to become the essence of the American car company by having a high customer satisfaction rating. However, one of the keys to TQM is to not rest on improvements. In the mid 2000s, Ford had another crisis of events that was leading to a steep decline of customer happiness and satisfaction that lead to another mindset change on how to achieve goals and turnaround the company.
Project Management

Having turned around the company with TQM in the 1980s through the 1990s, Ford had neglected to keep on the quality line of thought and had rested on its laurels. This was now coming back to bite them. The reputation for quality had been deeply damaged in the mid-2000s with a series of events including rollovers of its Ford Explorers with Firestone tires to a vast amount of recalls on numerous models to extended delays in getting new models out to the public. Ford, according to customer satisfaction surveys done, had once again fallen behind the other American car companies in satisfaction and loyalty. Realizing that they had a major issue on their hands, Ford went back to the foundation of their resurgence last time, embracing quality and the principles of TQM. However, as time changes and so does metrics on how to measure quality, it was quickly realized that they needed to update the TQM standards in order to accomplish their goal. Ford decided to employ a new quality strategy based on the 6-Sigma process which Ford called Consumer-Driven 6-Sigma. The projects are selected on three main criteria:

1. Must relate to customer satisfaction (Paton, n.d.).
2. Must reduce defects by at least 70 percent (Paton, n.d.).
3. Each project should average $250,000 in cost savings (Paton, n.d.).

Although difficult to define exactly, the life cycle of Ford’s Consumer Driven 6-Sigma is known as the DMAIC cycle and is broken down in the following steps:

1. Define. Ford contacts customers and finds what matters to them. The size, timeframe and potential financial gains of the project are discussed agreed on.
2. Measure. Process measures are developed to evaluate the performance of the process.
3. Analyze.  Analyze the data to find the issues and pinpoint solutions to the issues be it a singular issue or multiple problems at different areas of production.
4. Improve. Discuss all solutions to the original problem and pick the one that best fixes the issue, such as,  the cost-benefit analysis and implementation plan.
5. Control. Sustain the gains that have been made and put into place procedures to ensure continued focus and implementation of the final solution.

No 6-Sigma project at Ford is considered finished until the entire DMAIC cycle is complete, and Ford can audit the results to see the effect on customers and the bottom line (Paton, n.d.).

To ensure the quality and success of the Consumer Driven 6-Sigma, Ford had developed four different levels of personnel that are responsible for the implementation and completion of the process. They are the following:

1. Green Belts. Green Belts help Black Belts get the projects done faster.  Green Belts are divided into technical, manufacturing and transactional.
2. Black Belts. Black Belts are assigned full-time to the Six Sigma process. They are in charge of define, measure, analyze, improve and control cycles.
3. Master Black Belts. They have tier-one or tier-two rankings which are the highest level of performance appraisal in Ford. They help mentor and support Black and Green Belts in whatever means needed.
4. Project Champions. This position is usually a manager that work in conjunction with Master Black Belt to pick Six Sigma projects and provide the resources to ensure the success of the projects throughout the lifecycle.

The results of Ford’s commitment to quality with the use of the Consumer Driven 6-Sigma and implementation of the DMAIC cycle have been tremendous. According to Debbie Yeager, director of Consumer Driven 6-Sigma, Ford has documented 2 billion dollars in cost-savings from the 6-Sigma initiative since 2000.

Inventory Systems

Ford Motor company’s inventory system was revamped roughly twelve years ago by Alan Mulally. Mulally really put a focus on narrowing down the supply chain from Ford plants to the dealer’s lots. The main focus was to find out what each dealership specifically sold well and how to predict what cars were going to be sold. With the implementation of the new system it saved Ford dealers about $90 per vehicle in storage fees and reduced trading amongst dealers by 30-40%.

Ford Motor Company, SageTree Inc. and Teradata, a division of NCR Corp. , today announced that they have completed the implementation of SageTree’s Supply Chain Performance(TM) Suite (SCPS) of applications to improve the flow of service repair parts through Ford’s North American distribution network, thereby improving customer service and reducing costs. This marks an important milestone in the four-year contract among the companies to deploy a world-class inventory monitoring and alerting system. (PRNewsWire, 2005)

SageTree’s system is designed to give an overview of the supply chain. The system provides the user with tons of details, including a daily analysis, historical trends, and predictive information about the process. With all of the information it allows companies to see the trends in their products, and it allows them to see where they can reduce costs in their supply chain. This is very beneficial for Ford because with this information, it will allow them see what plants they need to temporarily shut down.

Financial Analysis

According to the financial highlight reported from Ford Motor Company, operating margins, cash flow, and net incomes decreased from the year 2015 to 2016. Operating margins decreased 1 percent from 2015 to 2016. Operating cash flow was 7.3 billion in 2015 and decreased to 6.4 billion in 2016. Overall net income decreased greatly from 7.4 billion in 2015 to 4.6 billion in 2016 (Financial Highlights [image], 2016). Despite the decreasing numbers, Ford still manages to pull off their second-best year ever. According to 2016 Annual Reports, “Overall, we maintained a strong cash and liquidity profile including automotive cash of $27.5 billion and net cash of $11.6 billion” (2016 Annual Reports, 2016).

Figure 2. Financial highlights in billions for Ford 2015 and 2016. [Image] Ford Motor Company

Ford continues to keep up with competition and keep their numbers high despite the challenges and decreasing numbers. Looking at a five-year overview of Ford Motor’s overall finances, they increased sales/revenues 9.86 percent from the year 2013 to 2017 (Ford Motor, 2018). Net incomes fell to 1.23 billion in 2014 but rose back up to 7.6 billion in 2017. While Ford is not number one in competing for the top against General Motors, their numbers are on the rise. Refer to the chart below for Ford’s overall net income year 2013 to 2017.

Figure 3. Ford’s net income in billions for 2013-2017. (Ford Motor Co, 2018).

Facilities

“The company currently builds around 6 million cars a year at 70 plants around the world, drawing on an annual volume of 35 billion parts” (Bowman, 2012). Currently Ford Motor Company has 24 plants in the United States of America. Ford invests lots of money into their operation plants. “Ford Motor Co. will invest $1.2 billion in three Michigan factories to prepare for production of the all-new Ford Ranger and Bronco, and to support the company’s expansion into mobility” (Thibodeau,2017). These investments are going to make significant improvements in the plants. Ford Motor Company continues to invest money into their plants and create new ones. Ford is aware of the trends in their vehicles; when specific models are not doing well on the dealer’s lots, Ford stops the production of those vehicles at the plants.

Ford said the Cuautitlan assembly plant that builds the Fiesta would be idled for three weeks. The Hermosillo, Mexico plant that builds the Fusion and MKZ and the Flat Rock, Michigan, factory that assembles Continentals and Mustangs will be idled for two weeks each. The Michigan Assembly plant that builds the Focus will be idled for one week and the Kansas City assembly line that builds Transit vans will be down for two weeks. Ford did not give dates for the temporary shutdowns. (White, 2017)

Forecasting

Ford Motor Company uses many different forecasting methods to help determine consumer consumption. Like many businesses, Ford relies on social media to help forecast customer trends, social impacts, and economic shocks. All of these can directly affect the future of manufacturing sales and productivity. With being able to predict sales and consumer interest from social media, Ford can help supply the dealers in adequate time for buyers.

According to an article in 2010 from EveryCarListed.com, Ford Motor Company determined the great impact of social media with forecasting models. The issue arose in 2010 with a 60-70 day supply time of the vehicle named Taurus. Ultimately the goal is a 30 day supply time for obtaining parts and inventory. Facing new obstacles, it was determined that using social media such as Facebook, Twitter, YouTube, and etc. would help better predict the incoming sales and purchases from Ford Motor Company. This helps the company prepare for the new demands of customers while avoiding misjudgments from automakers.

Not only does social media tell  how much to supply of a product but also the demands wanted by consumers. “In phase one, Ford lent European-spec Fiestas to 100 U.S. consumers who chronicled their experiences and posted their impressions of the vehicle using social media sites including YouTube, Facebook and Twitter. Ford’s group vice president of global marketing Jim Farley said, ‘We have 100 customers and they all have friends, and they told us exactly what they would buy’” (EveryCarListed, 2010). With the new methods in place, Ford can meet the needs with their new release the Ford Fiesta and accompany the customers “wants” with the use of social media forecasting and feedback.

Continuing to look for additional resources, Ford Motor Company also recalls previous sale history, purchases, and inventory control for planning methods. Advances were made to help aid the area of planning by using a global SAP program in between markets to help provide automakers with inventory supplies. This global SAP program covers “service parts planning and purchasing, a warehouse management system (WMS) and distribution to dealers” (Ludwig, 2016).

With different global markets, comes different approaches of the SAP system to help better aid customers. While in the European market, they use the program to run retail inventory management, controlling the amount of inventory placed on a dealer’s shelf. This system has been implemented in other countries besides the European markets: China and Asia. While in the United States, there is a different approach to inventory planning. There is a plan to hold 95 percent off-the-shelf parts for customer walk-ins. o determine which dealer should implement this plan, Ford does an overview of those who live in the area and what the primary vehicle is to better plan for the demands for inventory.

Having resources to change the forecasting and planning methods are always great, but in today’s market, it is ever changing. With the new technology, safety regulations, customer trends, and economic shocks, Ford Motor Company still has many obstacles to face with each new process in place to help better forecast. Social media has many strengths but also weaknesses as well when it comes to forecasting. Adding new processes or techniques to help better aid the planning of inventory come with a small price to pay: trial and error. Although it is not ideal to have an error with predicting sales, inventory supplies or customer trends, it is important to keep improvising solutions to help better planning for the changing market.

“The analytics organization has recently started to work with FCSD to improve on its more traditional forecasting methods. ‘To be frank, we are just getting going, but we think the project has great potential,’ Paul Ballew global chief data and analytics officer for Ford Motor Company” (Ludwig, 2016).  Ballew is referencing an approach utilizing the Ford Customer Service Department to help better plan and service Ford customers. In this example it shows the new perspective, Ford is receiving by using this method but also needs more provisions to help better assist the company. Planning, forecasting, and scheduling all come with great achievements but must be as diverse as the market it supplies.

Technology

Enterprise Resource Planning (ERP) used by Ford Motor Company in the manufacturing setting is Aptean’s Activplant. This program “collects and analyzes data from the plant floor, providing insight and intelligence to help drive efficiency improvements” (Aptean, 2014). Having this process and program provides insight to manufacturing performance. “The solution makes every production “event” available for immediate response from operators and supervisors, providing a first-hand understanding of the reasons for production peaks and valleys so companies can confidently plan for expected results” (Aptean, 2014). By having integrated systems such as Aptean, it helps Ford Motor Company create better quality goods and services without paying a high price.

Another big contributor to Ford Motor Company is Oracle programing systems. Just recently Ford and Oracle proposed an agreement of the Oracle HCM Cloud. The cloud is designed for team experience focusing mainly on Human Resource files and applications which include payroll, records, reviews, etc. By being able to have this flexibility it better suits the company on a global and financial level. “The cloud offers a single platform to access employee records and information while also helping HR professionals cut costs and save time so they can focus on more strategic decision-making and less on paperwork” (Kimberling, 2017).

Not only does Oracle help with Human Resources, but it has also provided an advantage on the manufacturing floor in previous years. “Oracle has been the major player when it comes to ERP systems and as studied it the report given for assignment in the mid-1999 oracle helped Ford open a joint venture Autoexchange which allowed Ford Motors to do B2B that is online” (Patel, n.d.). Unfortunately, Oracles use on the production floor “Everest” was discontinued in 2004 due to poor performance. Being a strong key component to Ford’s purchasing Oracle determine to stay loyal with working with Ford’s IT for better fit programming software.

Supply chain management for Ford Motor Company in recent years have been taking a new approach to the supply chain industry by implementing the green or environmentally friendly process. Items that are expected to be decreased are the reduction of carbon emissions, conserve water and energy, and cutting down on waste too show the significance and determination, Partnership for a Cleaner Environment (PACE) was initiated to Ford’s strategic suppliers. Ultimately giving the best practices and tools to perform a green performance. “PACE began as a pilot in 2014 with just a handful of key suppliers and has now grown to include more than 40 suppliers, which represent 1,100 manufacturing sites in 40 countries across the globe” (Lacefield, 2017). With this new process in place, Ford has seen dramatic changes through the supply chain management system providing projections such as reduce carbon emissions by 500,000 metric tons and an estimated 550 million gallons of water saved.

Focusing on the supply chain management itself, Ford helps suppliers with ensuring an open communication relationship; helping solve supplier problems and working together towards solutions. Program used to help the supply chain management process is Aligned Business Framework (ABF) used for purchasing. This ultimately helps by including phased-in upfront payment of engineering and development costs, extended sourcing and data transparency to Ford and suppliers. Providing suppliers with a “macro” management system from Ford rather than a “micro.” By doing so, suppliers must “ensure proper working conditions and environmental management systems throughout their value chain” (United Nations Global Compact, 2018). Which add to Ford’s overall goal of creating a better working environment for everyone involved in their production and contributing to environmentally friendly efforts.

Currently supply chain management statics can be found on Ford’s company website giving visual displays of “Working Conditions Training and Assessments, Total Supplier Sites Trained/Retrained in Sustainability Management, and Total Purchases From Tier 2 Suppliers” (Company, 2016/17). All providing detail descriptions of countries overall contribution, and previous years analysis.

Materials requirements planning for Ford is collaborated by Material Planning & Logistics Teams to provide flow of materials and vehicles to global customers at affordable costs. These teams use MRP II to help meet inventory demands across the global, this is a similar system to MRP I but is more sophisticated and can handle high volumes of inventory data. The MRP II can “quickly modify schedules, track production, and fix quality slippage” (Oz, 2009). Using this system helps improve quality and production on the assembly line.

Ford has been known to implement the use JIT inventory to increase inventory turnover. The JIT system is known as just-in-time inventory, adopted by many in the automotive industry. A process that requires management or purchasers, to plan and schedule inventory based off production. Although just introduced to Ford, this system still has various stages to be completed before full JIT systems is in takeover of Ford’s inventory.

Ford uses Project Execution, which combines bar-coding and wireless technology to ensure quality. Helping with control and management of the inventory assembly for a vehicle, Ford tags each car with a barcode. The barcode then checks the vehicle through each “gate” which could also be considered a check mark in the production process. This process is to ensure that no checkpoint is skipped and that each quality and productivity test was completed. By completing these steps and having a tracking system, it is easier for quality to determine problems and implement solutions in a timely manner.

Most technology through Ford that directly affect productivity and quality reside in systems. With new economic changes such as taking the innovative to face an environmentally friendly company and invest in the working conditions of suppliers, Ford Motor Company takes on many responsibilities. With each program and system comes new opportunity for growth and improvement, making Ford a technology diverse automotive company.

Conclusion

Ford has motors project management strategies and quality control management procedures are the key to its success. Ford Motor Company, implemented Total Quality Management (TQM) concept (a ten-step process) with the end result of higher customer satisfaction rating, but with time changing they must adapt new strategies. From the start (1903) to now, Ford has run into quality issues, but have found new strategies and procedures to overcome obstacles with the quality and operations of Ford Motor. As mentioned, in 1980s through 1990s, Ford ran into issues with the quality line which caused them to have a bad reputation and found a way to prove themselves high quality once again. Ford adopted a new strategy called the “Six Sigma” and the implementation of the DMAIC (Define, Measure, Analyze, Improve, Control) cycle with different levels which has proven to be successful for Ford Motor with improving their reputation of the quality and reportedly saved them 2 billion dollars in cost-savings. These factors contribute to its success which covers Ford Motors sales performance, analysis and its key operational strategies in which focuses on the products strategies and the structure of the corporation. It’s safe to say, the six-sigma played a large role in saving Ford’s major problems such as inadequate productivity, poor customer service, bad use of resources and not being eco-friendly and were able to complete almost 10,000 improvement projects.

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