Automotive Leader Implements Multi-Enterprise, Multi-Tier ‘Buy-Sell’ Procurement Program to Control Critical Commodity Category.

Ford_Motor_Company
Supply Chain Leadership: Then and Now.

In the early 1900’s Henry Ford’s goal was to achieve total self-sufficiency by owning, operating and coordinating all of the resources needed to manufacture an automobile. By the 1930’s this goal was realized at Ford’s Rouge Factory located just south of Detroit where the Detroit and Rouge Rivers meet. Ford’s Rouge Factory remains one of the 20th Century’s manufacturing marvels, and to this day is frequently cited as one of the greatest examples of a ‘fully integrated manufacturing enterprise.’

Almost a century later, Ford’s manufacturing strategy and supply chain structure is the antithesis of Rouge’s self-sufficiency model. Today, Ford moves ever closer to becoming a virtual manufacturing enterprise focussed design and final assembly and outsourcing non-core manufacturing operations. While their manufacturing strategy and supply chain structure is vastly different, Ford continues to apply many of the foundational operating principles to thier business that were conceived by their namesake and founder a century earlier.

Challenges.

Today, Ford manufactures approximately 20 per cent by value of its production parts, components and assemblies, with the remainder of production provided by their external network of partners and suppliers. A consequence of this strategy meant:

  • Loss of visibility and control of a strategic commodity category; and significant cost driver.
  • A fragmented metals spend reducing purchasing leverage and priority with Steel Producers.
  • A more complex and extended planning process for the entire Supply Network.
  • Exposure to price & supply volatility as well as financial instability in the supply base.
  • Excessive part and material proliferation affecting capacities and inventory held a multiple points in the Network.

Strategy & Objectives: Recapture Control through the ‘Buy-Sell’ Process.

Recognizing these challenges and opportunities, Ford made a strategic decision to take back control their aggregate metallic spend on behalf of their value chain. To achieve this objective they introduced a unique multi-tier procurement process to their North American part-component Supply Network. The ‘Buy-Sell’ process (also referred to as ‘Resale’) allowed Ford to control cost and supply by purchasing production volume directly from the source and ‘reselling’ it volume to their external part suppliers; in effect becoming the single supply source to their sub-tier community. This is achieved without Ford’s ownership of the manufacturing asset or assuming any physical of financial inventory exposure.

How Newview helped.

To translate this strategy into action and provide a robust scalable solution capable of powering a sophisticated sourcing program across a complex global network, Ford turned to Newview’s Procurement™ and Multi-Tier Procurement processes to provide

  • A configurable and scalable multi-enterprise technology platform that could support the ‘Buy-Sell’ (Resale’) process across their entire extended value chain globally – including robust pricing control that allows Ford to reflect each commercial relationship on an individual basis.
  • A flexible data model capable of accommodating structured & unstructured data and capturing information that does not reside in any one system, location or enterprise.
  •  Secure supplier self service environment with role based access allowing users from multiple enterprises, locations and geographies to participate in a coordinated process.
  • A robust reporting and business intelligence capability that can access real-time data and end-to-end visibility of key information as an input into forecasting, planning and commodity management.
  • Multi-Enterprise workflow directing part suppliers to designated sources to requisition material.
  • Seamless and noninvasive processes for converting the existing volume without any disruption to suppliers, and allowing for rapid adoption of new program participants globally.

    • Multi-Tier Procurement Process Model: ‘Buy-Sell’ (Resale)

Delivering Sustainable Value

Launched in 90 days, Newview’s solution and system provides Ford and their Supply Network partners with significant strategic value and direct cost savings through:

  • Improved raw material pricing through leverage of aggregate volume & supply source visibility to demand pattern.
  • Intelligent transaction flows for optimal tax and foreign exchange benefits.
  • Improved forecasting, planning and coordination throughout the Supply Network.
  • Inventory reduction through part-material specification rationalization and consolidation (e.g. grades, gauges, widths, etc.)
  • Improved productivity and material utilization by aligning part manufacturing capabilities with optimal supply source.
  • Rapid, noninvasive ‘on-boarding’ of new program participants, entities, or geographic regions with zero increase of administrative resources or head count.
  • Increased visibility to financial, material and information flows and the ability to mine data for strategic and tactical decision making.
  • Fewer financial and material claims disputes, and the associated cycle time for resolution.
  • Savings on IT costs due to noninvasive technology & outsourced management of solution

Click here to request the full version of “Driving Global Metals Spend at Ford” via email.