Information systems of ford motor company
Since Information System is a concept for competitive advantage which defined in the early 80s, there are lots of companies invested at information technology. Until now, there is a survey shows that information technology investment is being more and more in every company. It is showing that, Information system is a foundation for conducting business today. In many businesses, survival and the ability to achieve strategic business goals is difficult without extensive use of information technology. It is because information technology can help a company more easy to gain competitive by achieving operational excellence, developing new products and services, enhanced customer and supplier intimacy and exploiting digital markets. So nowadays, information system is very important for every company.
This essay will discuss how useful of information system in business, by using Ford Motor Company as an example which using information system to enhanced customer and supplier intimacy in customer relationship management system (CRM).
Ford Motor Company’s organization and environment
The Ford motor company was formed in 1903 by Henry Ford whose aim was to provide the people with a cheap and affordable car that any middle class employed person could own. Ford Motor Company is a famous company which selling automotive. It is also a global automotive industry leader based in Dearborn, Michigan. It manufactures or distributes automobiles across six continents.
In 1995, Ford had embarked on an ambitious restructuring plan called Ford 2000, which included merging its North American, European, and international automotive operations into a single global. Ford 2000 helps company reduce the cost by reengineering and globalizing corporate organizations and processes. The major reengineering projects were initiated around major company processes such as Order to Delivery (OTD) and Ford Production System (FPS), with goals such as reducing OTD time from more than 60 days to less than 15 days.
Ford also launched a public Internet site in mid- 1995; by mid- 1997 the number of visits to the site had reached more than 1 million per day. A companywide Intranet was launched in mid- 1996. And by January 1997 Ford had in place a business-to-business capability through which the Intranet could be extended in a secure manner beyond company boundaries into an Extranet potentially connecting Ford with its suppliers. Ford teamed with Chrysler and General Motors to work on the Automotive Network Exchange, which can help suppliers to manage different means of interaction with each automaker to be consistency in technology standards and processes in the supplier network.
In the supply chain area, there was general agreement that information technology also could be deployed to dramatically enhance material flows and reduce inventories, substituting information for inventory, as the expression went. So in the plan of Ford 2000, for meeting the aim on reengineering projects, having a nice supply chain management systems and customer relationship management systems can help the company more close to suppliers and customers which can easy to reduce the cost on order to delivery system and ford production system. As that time Internet revolution unfolded in parallel, Ford Motor Company created new possibilities for reengineering processes within and between enterprises by using Internet.
– Ford’s Existing Supply Base
The existing supply base was in many respects a product of history. Start in early 1990s, Ford had begun to try actively to decrease the number of suppliers the company dealt with directly. Rather than using a large amount to buy individual components, it shifts to have long-term relationships with a subset of very capable suppliers who would provide entire vehicle subsystems. By doing that, Ford can easier to have a well link with major suppliers which can help Ford easier to improving a range of techniques such as just-in-time and total quality management.
– Ford Motor Company’s SCM and CRM technology of Information system
– Ford Production System
In restructuring plan, Ford 2000, the most important is reengineering projects; one of these projects is Ford Production System, it is an information system to achieve a close relationship to suppliers. Its aim is that improve the process on making motor to be more pull-based system, with synchronized production, continuous flow, and stability throughout the process. To achieve that, Ford could tell suppliers exactly when and where certain components would be needed days in advance, and buffer stocks thus could be reduced dramatically. If this system can work successfully, the benefits would be felt throughout the supply chain.
– Order to Delivery
For another key process Ford reengineering projects is looking for improve the customer relationship management system. The information system to do that is Order to Delivery, the purpose of this system was to reduce to 15days the time from a customer’s order to delivery of the finished product. The Order to Delivery vision was to create a lean, flexible, and predictable process that harmonized the efforts of all of Ford’s components to enable it to provide consumers with right product in right place at right time, which means that it can help Ford Motor Company meet the just-in-time technique. By achieving Order to Delivery, Ford believed that it would provide better quality, higher customer satisfaction, improved customer selection, better plant productivity, stability for its supply base, and lower dealer and company costs.
– Ford Retail Network
On 1 July, 1998, Ford Motor Company launched the first of its Ford Retail Network ventures in Tulsa, Oklahoma, under the newly formed Ford Investment Enterprises Company. The principle of Ford Retail Network was that giving consumers the highest level of treatment and create an experience they would want to come back to again and again. The showrooms would be consolidated to focus resources on creating a superior selling experience, while the number of service outlets would increase to be closer to customer population centers. Then Ford can reduce the cost on advertising as well as more and more on using Internet to provide the service to the customers as the information system can analysis the needs for customers effectively.
– Using SAP® software
Until now, Ford not only just follows the web-site to provide the service to customers, for achieving total supply chain visibility in real time, increasing dealer and customer service satisfaction and minimizing costs, especially ongoing IT costs, Ford also using SAP® software, to improve the performance on supply chain management and customer relationship management.
Business models for Ford Motor Company
– Three generic strategies – Cost Leadership
Under Porter (1985), he regarded the selection of a defendable position within an industry as the end result of a competitive strategic analysis. He argued that successful, profitable companies generally choose to compete on either low costs or by differentiating their products to meet specific customer needs. Although these two strategic options are mutually exclusive, he added a third category of firms as niche players that serve a specific market or product segment. Porter’s three generic strategies are: cost leadership, differentiation and focus.
“Henry Ford was a farmer’s son whose manufacturing genius transformed life around the globe” (Ford Motor Company, 2010). So that Ford Motor Company is following the business models which Henry Ford want to be. It is the cost leadership.
In the automobile industry, Ford Motor Company can meet its business model, cost leadership. As Porter (1985) stated that cost leadership is about being the lowest cost producer in the industry. For an organization to gain competitive advantage, it must achieve overall cost leadership in an industry it is competing in. To lowest the cost, there are many techniques and methodology for organizations to use. Among the popular and successful techniques used by successful organizations worldwide in enhancing quality, productivity, lowering cost are six methodology, Total Quality Management (TQM), Benchmarking Competitors, Just-in-Time (JIT), Supply Chain Management (SCM), Total Productive Maintenance (TPM) and MRP solutions.
When Ford Motor Company developed the information system, it is easier to achieve this business model. It is because Ford using information system to improve the relationship to customers and suppliers. Ford develop the Ford Production System can help it to improve Supply Chain Management system to be a competitive advantage. And also, the Order to Delivery system can reduce the time, which means Ford can easier to achieve the just-in-time techniques.
Not only these two reasons, but also the major reason of Ford can achieve this business model, cost leadership, is that Ford through developing information system to get a power on using a cheaper price to buy the material from suppliers. By that, Ford can reduce the cost effectively, that’s why Ford Motor Company can achieve cost leadership.
Ford developed the information system is focus on enhanced customer and supplier intimacy, it is looking for what customers want to, not for what company what to develop. So that means, Ford is not just focus on narrow target. It is because different customers need different type of cars.
– Value Chain
Porter (1985) stated that value chain model is a systematic way of analyzing all the firm’s activities and evaluating how they interact with each other. Such an examination is necessary in order to identify potential sources of competitive advantage. For Porter, the value chain can be consisted for five primary activities (including inbound logistics, operations, outbound logistics, marketing and sales, and service) and four support activities (including firm infrastructure, human resource management, technology development and procurement).
The value chain of the Ford Motor Company is not all that different from other manufacturers in the automobile industry. However, when Ford Motor Company developed information system, it helped Ford to improve its value chain. In one of support activities, Procurement, Ford through its information system, Ford Production System, to improve the relationship of suppliers, it is not only helping Ford to reduce the cost for buying material, but also working closely with its suppliers to eliminate waste and thereby lower costs for both organizations. This should be a “win-win” situation for both companies and should help lift Ford from its near-last ranking in supplier relations.
The next activity for information system to improve is technology development. Ford through the information system, Ford Retail Network, to understand the value of consumer input and what consumer needed, which can help Ford easier to design a successful modern design technologies. They have initiated tailoring design models after public demand. This method has proven highly successful in recent financial periods.
Marketing is also a very important aspect of the Ford. By using Ford Retail Network system, Ford has been working together with dealers or buys all dealers to collect more information to create marketing strategies that help boost sales. This is proven to be the primary basis for the consumers’ perceived values.
Ford has also teamed-up with Caterpillar Logistics and SAP to improve warehousing and its Daily Parts Advantage network for getting spare parts to their dealers. Their hope in partnering with Cat Logistics was “to secure a partner with expertise in the automotive supply chain, laying a foundation for development of a new information system. The goal was to obtain end-to-end visibility of service parts, increase the speed of time to market, optimize inventories at each location, and do a better job serving the customer” (Supply Chain Brain).
Along with Cat Logistics and SAP, Ford is also using an SAS platform that supports customer relationship management (CRM). This SAS platform enhances Ford’s existing customer relationship database and provides a powerful base for information analysis, data mining and predictive modeling thus enabling highly effective reporting, trending, segmentation, customer scoring, and customer life-cycle analysis all of which support key activities for CRM.
As information system can improve lots of activities in value chain, it can help the company to gain the competitive advantage.
Problems and challenges in the development of the Information System
When Ford Motor Company developed the information system, it needs to face lots of challenges. Here are some of them.
– Costly and timely
As Ford is a large company, it is very costly on developing information system. There are complex pieces of software which Ford developed to achieve its competitive advantage. To develop these large system, Ford need to spend its recourses. Not only the cost on buying software and hardware of the system, but also other cost such as consulting fees, personnel costs, training. Also, most of them need to spend time to develop. For Ford Motor Company, it has large team on Information Technology, which needs to hire lots of employees to work. There are costly on the salaries and also it needs spend over one mouth to train the employees to understand the system and use the system.
As Ford adopts an enterprise application from SAP, it is very costly to switch SAP and it become dependent on SAP to upgrade its product and maintain its installation.
– Hard to collect information
Some of the information systems which developed by Ford focus on supply chain management. These systems require multiple organizations to share information and business processes. It is difficult for each participant to change of its process and the way it uses information to create a system that best serves the supply chain as whole. Also, there are different policies in different company; Ford cannot collect the information fully for its suppliers as some of the information may be the secrecy.
– Hard to handle the technology
As the technology of information system such as internet is growth quickly, it is not easy for Ford Motor Company to understand clearly about the technology, it will be a risk on losing money when develop that technology. So when developing the information system, Ford needs to make sure it understands what is its usage clearly.
In short, Ford uses information technology on business manager, SCM and CRM, for enhanced customer and supplier successfully. It can see that information system can help Ford achieve its business model.
Nowadays, every company will develop the information system to achieve competitive, most of them have the e-business, too. It is surly that information system is a very useful and major tool to help company to meet their aims. However, it does not mean have information system can help the company to do a successful business, because the most important is that company have a correct business strategy. As the example on Ford, its business model is cost leadership; it is a great competitive advantage at early 1900s when Ford provided Model T cars. However, following the change of environment, it is not work now. So, if a company want to achieve competitive, it is not only focusing on develop information system, but also focusing on the business strategy.Order Now