Ford Implementation of Virtual Integration: A Push Pull Strategy.

Suppliers want steady orders and prompt payment, they also want to feel valued by the company that they supply.

Firms use cost-plus pricing in order to cover their operating costs. Cost-plus means they can increase the price to their customers with whom they have contracts when the operating costs rise. Operating costs can rise for many reasons and cost-plus pricing allows firms the flexibility to manage operating costs. This flexibility is often needed when the price of a service or good is not known or hard to predict in advance (Magloff, 2011).

Various important approaches like engineering driven approaches and selection of supplier processes lead to the number of suppliers at premium prices. It reduces cost of

❖ Manufacturing – if the installation of the most expensive components or the point of product differentiation is to be delayed as much as possible, change in the sequence and timing of manufacturing steps may be required.

Integration (like any IT project) isn’t an end in itself; it must serve to make the business more profitable, more competitive, or more efficient, and the value of that greater profitability, competitiveness, and efficiency must be reflected in the requirements and budget for any prospective integration project. (Zeichick A., 2004, p1)

The suppliers are in huge number for a single category and they have huge competition

Competition is a great way to level the playing field. Competitive bidding drives suppliers down to a market-efficient pricing environment where the negotiation process can work optimally.

Bargaining power of buyers is increased and bargaining power of suppliers is increased. Increased supplier bargaining power leads to increased prices of suppliers. The threat of new entrants is lowered in the industry environment. The have attained great success in cost control by using business process automation to automate processes in order to contain costs. More keys to their success are organizational behavior, technology and processes in order fulfillment, distribution and production, and carefully chosen as joint ventures.

Lean manufacturing based on the Toyota production system (TPS) “changed the final assembly into a mixed model final assembly system to level the demand on their suppliers, converted the linear subassembly lines into U-shaped subassembly cells and redesigned the job shop into manufacturing cells. Final assembly operates with a ‘takt’ time, and the cells are designed to have a cycle time slightly less than the ‘takt’ time and to operate on a ‘make one, check one, and move one on’(MO-CO-MOO basis)” (Black, 2007, p. 3639).

Producing a product and making it available to buyers requires building relationships not only with customers but also with key suppliers and resellers in the company’s supply chain.” (pg 304) It is important that we come up with creative ways to try to keep the market balanced “It is essential that different firms in the same business not attempt to compete on exactly the same variables. If they do, competition will invariably degenerate into price—there is nothing else that would differentiate the firms.” (Perner)

I spend pretty long time analyzing Ford’s current existing supply chain condition. I immediately became aware of its highly complex environment. This high level of complexity combined with other external and internal factors. These factors push Ford to search for the best solutions in order to overcome the costly supply chain issues that they are facing and may continue encounter in the future. Ford’s major challenges in their current supply chain system is:

competitors’ and continuing to look for cost reductions even when the business is profitable is key.

Enterprises around the world have a need to keep up with the technology, not only within the office walls but also throughout the supply chain. IT has become an integrated part of any system because people these days rely on technology for almost everything they do. Customers can search, compare and order goods via internet.

Restructuring enough to operate the business profitability in context to changing model mix and customer demands.

Increased competitiveness - Competition from other firms will force a manufacturing firm to develop better relationships with its suppliers to