Ford Motor Company’s Supply Chain and Strategy

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In 2006, Ford Motor Company took out loans in the amount of 27 billion dollars, using almost the entire company as collateral, including the blue oval logo. The appeal to the private lenders is that Ford went in a different direction than its competitors, General Motors and Chrysler Group LLC, which took a combined 25 billion dollars in government bailout money. Ford did not reject government assistance altogether, as it asked Congress for a 9 billion dollar line of credit and a 5.9 billion dollar loan from the Department of Energy to build more fuel-efficient vehicles. This strategy did have some conditions, one of which was that Ford's rating with the two major investment rating firms would be downgraded to investment grade. This basically labeled Ford's stock as junk.

This strategy was a significant gamble for Ford, but it seems to have paid off. Ford was able to return its stock to investment grade. Ford had a successful three years of revenue growth, which included a 15.2 percent sales increase in 2010. Ford was able to reduce its current debt by 40 percent. They have chalked it up to the tight management of its supply chain as a major factor in its success. Given Ford's overall size, this is a gigantic undertaking, as Ford produces approximately 6 million vehicles annually at 70 plants worldwide, using 35 million parts sourced globally.

A key strategy for Ford was platform management, in which it built base vehicles on a smaller scale, streamlining the process. However, even with the implementation of these new efficiencies, Ford still had some challenges as its supply chain seemed to grow longer every day. New vehicle models require a 13 percent increase in remote suppliers, 34 percent of which have a distance of 2,500 miles or more from the factory. Good risk management plays an important role in supply management as you have to manage disruptions in the supply chain due to events such as fires, floods, and delays in shipping due to weather.

Good risk management has allowed Ford to continue to reach its production goals. One of the tools Ford uses is a tracking chart that manages risks for its major suppliers. The tracking chart uses green, yellow, and red as status indications. Interestingly enough, with all of the sophisticated high-tech software and applications, this tool is nothing more than an Excel spreadsheet. Ford works hard to proactively identify areas of greatest risk. This process allows them to drive their source decision-making proactively instead of reactively, allowing them to look closely at suppliers that could possibly bring their production to a halt. Ford has pre-approved qualified vendors as back-ups that they can switch to at a moment's notice to prevent disruptions in the supply chain.

As Ford's supply chain continued to grow longer and more diverse, they started seeing challenges and obstacles in the form of human rights violations. They rely on thousands of workers globally to produce the parts that go into their vehicles. So in 2016, Ford signed the UN Global Compact, a framework of 10 universally agreed upon principles that govern human rights, labor, environment, and anti-corruption, and have incorporated those principles into their policies and procedures. These policy standards are known as Policy Letter Number 24. In policy letter number 24, they set forth guidance for human rights, labor, and environmental standards throughout their global operations. The principles are consistent with and derived from the human rights framework and charters listed below.

  • International Bill of Human Rights (the United Nations Universal Declaration of Human Rights and its two Covenants) 1948
  • The UN Human Rights Council Guiding Principles on Business and Human Rights (2011)
  • The Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises Revision 2011
  • The Global Sullivan Principles
  • The ILO Declaration on Fundamental Principles and Rights at Work
  • ILO Tripartite Declaration on Multinational Enterprises and Social Policy
  • The UN Convention against Corruption (2005)

This framework once again changed the supply chain globally as their people-first campaign was rolled out to Ford employees first, then to suppliers and business partners. Ford strives to maintain a healthy working environment free from harassment and discrimination and without the threat of forced labor, child labor, or human trafficking. As Ford continues its effort to manage their supply chain with this ever-changing global workforce, they seem to mitigate the challenges and obstacles that seem to mire the way for its competition.

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Ford Motor Company’s Supply Chain and Strategy. (2023, Mar 08). Retrieved June 14, 2024 , from

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