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
…show more content…
Ultimately, from looking at car manufacturer history, it is certain that this risk is low frequency but high severity.
Management Recommendations Ford suffered a major setback in its production facilities where 7,000 vehicles were not produced and numerous workers were not able to work during their last supply halt. Imagine the effect of a seven day-halt. The next big interruption in Ford’s supply chain could cause heavy losses and many people could lose their jobs for an occurrence that could have been avoided. Yet, even though Ford Motor Company has already felt the severe effects of one of its supplier’s halt in production, it has made no changes to its supply chain policy in order to protect itself from this risk. Instead, Ford has decided to simply retain the risk. We recommend that Ford get Contingent Business Interruption Insurance. CBI Insurance covers lost profits and additional expenses that stem from an interruption in a supply chain. Many manufacturers purchase this insurance when they typically depend on a single or several suppliers for their materials (IRMI). This insurance would greatly benefit Ford, as it will protect them against severe future losses from a production stoppage in one of its single source suppliers. Moreover, if Ford had this insurance coverage in 1998 when it’s German supplier halted production because of faulty software, Ford would have not been as severely affected.

Risk #2: The discovery of

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

Open Document