Conference offers insight on Ford's sourcing direction
By Paul Mann, contributing editor -- Manufacturing Business Technology, 9/1/2003 6:00:00 AM
Dearborn, Mich.-based Ford Motor Co. isn't just working with suppliers to minimize inventory in the supply chain. According to Tony Brown, Ford's vice president of global sourcing, it's also working with suppliers on product life-cycle questions such as how many common components are actually needed.
"The auto industry is hyper-competitive," Brown told attendees at the Institute for Supply Chain Management's (ISM) conference held in Nashville in May. "That means OEMs and their partners must collaborate closely to deliver high-quality products, provide incredible service, and do it at all at a great price. What I'm talking about is a structured approach where OEMs and suppliers work together to improve quality and lower cost."
Ford calls its version of supplier collaboration Team Value Management (TVM), a process that's already been applied to numerous automotive systems. During the analysis phase, Ford and its suppliers have questioned everything. "Do we really need 26 varieties of air-conditioning blowers?" Brown asks. "Over the next 10 years, we're reducing our complement of radio head units from 120 to 10, and the economies of scale add up accordingly."
Ford has identified hundreds of millions of dollars in potential savings this year alone—without hammering supplier margins. "This revitalization effort at Ford began January 2002 and already it's working," Brown says.
More software and consulting firms are poised to address this need for up-front supplier collaboration. Just prior to the ISM conference, Plano, Texas-based EDS, along with A.T. Kearney, a Chicago-based management consulting firm and an EDS subsidiary, launched a "product life-cycle sourcing" solution that combines e-sourcing software offered by EDS with product life-cycle management technology.
"The idea is to provide purchasing professionals with input into design data much earlier in the product development process," says Mike Sorensen, a vice president for A.T. Kearney Procurement Solutions. "By doing this, customers can potentially reduce product costs by 20 percent.
"You absolutely can't leverage suppliers on price anymore," Sorensen continues. "The new paradigm is leveraging for total cost. The result is that maybe purchasing doesn't achieve a reduction in price, however, in collaborating with engineering early in the design process, the organization can achieve a lower total cost."
