Effects Of Production Stoppage On Ford Motor 's Single Source Suppliers

2194 Words Nov 15th, 2014 9 Pages
Risk #1: Losses caused by production stoppage in Ford Motor’s single source suppliers
Risk Description Although single sourcing can create an efficient, low-cost supply chain model for many top manufacturers like Ford, dependence on a single source can also end up being quite costly for a company. If one of Ford’s single suppliers halts production on any key component for any reason, there will be adverse effects. As Ford reported in their 2014 annual 10-K filing, many of the components in their vehicles cannot be re-sourced quickly or inexpensively to another supplier because of long lead times and new contractual arrangements that the new supplier must follow (Ford Motor Co.). Ford has had complications with this particular risk in the past. In 1998, faulty software in a German supplier of door and trunk latches halted production in several of their factories. After a three-day halt in Ford Fiestas and Pumas, it is estimated that the difficulties cost Ford up to 7,000 vehicles (Professional Engineering). Another example of the severity of the risk occurred several months prior to the 1998 Ford incident. Week long national strikes in Denmark froze Saab’s supplier production of key engine parts. The halt in production left Saab without engine mounts for its newly launched vehicles. Ultimately, 4,250 factory workers were sent home at an approximate cost of $90,000,000 (inflation adjusted) (Professional Engineering). This has been a recurring problem in large manufacturers…

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