Case Study: Ford Motor Company Aligned

Business Framework
by Becky Salmond

INTRODUCTION

PURPOSE

Competitors in the automotive industry face high levels of competition. With

so many brands and models to choose from, buyers wield a great amount of
power with their selection. To remain competitive, firms must grow and
utilize not only their own core capabilities, but also their supply chains. As
suppliers have the ability to greatly impact production, building strong
supplier relationships is imperative to an organizations survival.

To understand the benefits and risks of a rationalized supply base and longer
more cooperative supplier relationships, and how these can lead to cost
savings.

KEY FACTS
In 2005, Ford Motor Company (Ford) had recently recorded a $1.1 billion
operating loss in their most recent quarter. While they were Americas no.2
automaker, they also had recently ranked second last in a North American
supplier survey with a score of 157/500.
An initiative was brought forward called the Aligned Business Framework
(ABF) that sought to rationalize the supplier base from 2,700 to 1,100. The
remaining preferred suppliers would receive long-term contracts, more
business, access to Ford forecast volumes and product plans, and early
involvement in developing new products. In return, Ford asked suppliers to
commit to sharing their financial data, technological innovations, and
sourcing of women- and minority-owned suppliers.

LESSONS LEARNED
Benefits of the ABF program to Ford would be through cost savings. By
working closely with suppliers, Ford can capitalize on innovative ideas to
improve on delivery, cost, and quality. A smaller supplier base would lower
administrative costs. Receiving larger shipments from fewer suppliers would
result in lower transportation costs. Earlier cooperation in the design process
could result in identifying costly issues sooner rather than later.
Suppliers must be approached in a way that allows them to see the benefits
while addressing their concerns. Increased sales volume and the abolishment
of the current year-to-year contracts will be a major selling feature of the ABF
program. Fords willingness to offer their own forecast and product information
helps to establish trust with the supplier in giving their own financial and
technological information. This data transparency and shared risk helps to
broker confidence in each other.
Strengthened and improved supplier relationships will allow Ford and
their suppliers to compete not just with other automakers, but with other
supply chains as well.