QUESTIONFOUR August 2020 [25]

Ford'sSupply Chain

Ford Motor Company, one of the world's largest automotive manufacturers, has worked with Penske on several Six Sigma initiatives. As its lead logistics provider (LLP), Penske's quality team of associates are trained in Six Sigma practices and work closely with Ford to streamline operations and create and maintain a more centralized logistics network. Together, they uncovered several areas for real cost savings as a result of reducing inbound carrier discrepancies, eliminating unnecessary premium costs and reducing shipment overages. Plus, Penske implemented accountability procedures and advancedlogisticsmanagementtechnologies to gain more visibility of its overall supply network.

Challenges

Todevelop,implementandoperateacentralizedlogisticsnetworkforFord

Tostreamlinesupplierandcarrieroperationsforimprovedperformanceandaccountability To provide Ford with real-time supply chain and financial visibility

PenskeLogisticsbeganitsrelationshipwithFordasleadlogisticsprovider(LLP)for Ford'sassembly plant inNorfolk, Va.Atthetime, eachof Ford's20NorthAmericanassemblyplantsmanageditsown logistics operations. Adecentralizedapproach provided totalcontrolof logistics at the plant level,but presented costly redundancies in materials handling and transportation.

Ford conducted studies to determine the benefits of transitioning the company's decentralizedlogistic operations to a centralized approach. The decision was quickly apparentcentralization of thecompany's logistics operations would increaseboth velocity andvisibility throughoutthenetwork, as well as reduce supply chain costs.

Shortly thereafter, Ford selected Penske as its North American LLP. Under the contract, Penske would centralize and manage all inbound materials handling for 19 assembly plants and seven stamping plants.

ConsolidatingLogisticsOperations

Penske immediately developed an aggressive logistics transition program with Ford. Penske would provide Ford with a single point of contact for all logistics operations.

By working with individual plants and corporate management, Penske established a baseline of current operations and outlined the proposed solutions. The new logistics program would establish a Penske Logistics Center that included the following core functions:

Network Design Optimizationimplement a more efficient inbound materials strategy through Origin Distribution Centers (ODCs)

Carrier and Premium Freight Managementmanage all carriers and logistics companies, while reducing premium freight costs

Information Technology System Integrationachieve real-time visibility of supply chain shipments, schedules and orders

Finance Managementimprove freight bill payment, claim processing and resolution throughout the supply chain

Upon development of this new plan, the Penske/Ford team began evaluating Ford'sexisting network design. Underthe plant-centricapproach, suppliers wouldmakemultiple deliveries ofthesame parts to different plants. Asupplier would pick upasmall load, deliver it tooneplant, pickupanothersmall load of the same parts and deliver it to another plant. Carriers with half-empty trucks would often cross routes with each other en route to the same plant. Aside from being highly inefficient, this design allowed for excessive inventory and storage costs at the plant level.

(source:http://www.uwosh.edu/faculty_staff/wresch/case9b.htm) With this regard,

Criticallyassesstheroleandsignificanceof integrationin ensuringFord'sstrongbusinessfunction and successful purchasing process.

This is a question from a previous exam paper