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4 Supply Chain Lessons from Ford Motor Company

With a current net worth of more than $48 billion, Ford Motor Company is one of the biggest automotive giants in the world. The American-made company was founded in the early 1900s, and since then, it has remained one of the most successful companies worldwide.

Its success can be attributed to its unique supply chain and ongoing investments in new technology. As the company continues to innovate, many businesses can learn a few supply chain lessons from Ford.

A Brief History of the Ford Motor Company

The first vehicle built by Henry Ford was more of a moving contraption than a traditional car. First built in 1896 before the founding of Ford Motor Company, the Quadricycle featured a four-horsepower engine, a tiller instead of a steering wheel, two gears with no reverse, and it rode on four bicycle wheels.

Henry Ford and 12 others founded Ford on June 16, 1903, with an investment of $28,000. The company sold its first car, a Model A, in 1903. Shortly after that, in 1904, the Ford Motor Company of Canada was founded.

The Model T, often considered the most famous automobile, was introduced in October 1908. The original Piquette Avenue plant only produced 11 Model Ts in its first month, but the vehicle quickly proved itself. With only 18,000 miles of paved roads in the U.S. at the time, it was constructed from a robust but light vanadium steel alloy. Rather than a luxury novelty, the Model T became a reliable, durable, easy-to-maintain "everyman's car."

The First Moving Assembly Line

In October 1913, Ford revolutionized the production line at the Highland Park assembly plant in Michigan. Previously, workers arranged automotive parts on the floor, placed the car (the Model N) on skids, and dragged it down the line.

Ford improved the process by using interchangeable auto parts, separating the assembly process into 84 steps, and specializing workers to perform a single action. Additionally, the line used pulley-powered conveyor belts to power the now-modern assembly line and production of the Model T, the successor to the Model N.

Specialized automotive workers, interchangeable parts, and conveyors drove the "first moving assembly line ever used for large-scale manufacturing." However, Ford did not receive credit for the uptick in production processes.

Despite this, these advancements led to a better, cheaper, more quickly built car, realizing Ford Motor Company's ambition of bringing affordable automobiles to the masses. The assembly line also allowed personalization. Eventually, there would be eleven model T body types, including racers, ambulances, police vehicles, snowmobiles, and milk wagons, with "5,000 custom gadgets that were manufactured by external companies."

Automaking was majorly expedited, improving chassis assembly speed from 12 hours and eight minutes to one hour and 33 minutes. As a result, Ford cranked out 308,162 cars in 1914, significantly surpassing the combined output of all other automotive manufacturers.

Ford’s Domestic and Global Supply Chain

Today, Ford's selected suppliers span the globe, with components originating in the Americas, Asia, and Europe.

The Ford supply chain also relies on various indirect suppliers, including Cisco (CSCO), FedEx (FDX), Penske Logistics, Roush, and Union Pacific. Ford works with approximately 1,400 tier 1 production suppliers who deliver car components made of more than 1,000 materials, creating a successful global supply chain.

In 2021, the automaker established Ford's Supplier Code of Conduct, which ensures suppliers adhere to numerous principles encompassing human rights, environmental impacts, and responsible business and sourcing practices. The company seeks to use raw materials that have only been responsibly produced. Additionally, as of 2015, Ford has operated the largest closed-loop recycling program to handle metal scrap.

There are more than 60 Ford factories around the world, with eight of them in the U.S. Most Ford vehicles sold in America are fabricated domestically "with the help of a few plants in Mexico and Canada." For example:

  • Mustangs and Fusions are built in Flat Rock, Michigan.

  • E-Series automobiles are assembled in Avon Lake, Ohio.

  • The F-150 is made in Kansas City, Missouri.

  • Explorer and Taurus assemblies are located in Chicago, Illinois.

The largest fabrication facility is the Ford Kansas City Assembly Plant, which spans 4.7 million square feet of production space, employs 7,000 workers, and has been supplying the popular F-150 since 1957.

Ford Supply Chain: Issues and Instability

Currently, Ford faces supply chain uncertainty and instability. In an interview in late 2022, Ford CEO Jim Farley reported various Ford supply chain ailments: inventories remained low, there was a parts shortage, product launches were delayed, and challenges constrained V8 engine production.

Workforce shortages also abound as suppliers face labor difficulties and struggle to maintain shipping schedules and quotas. Raw material costs have increased, while semiconductor chips (necessary in every industry and sector) are in short supply. Some of these problems result from the COVID-19 pandemic, and others to inflation.

It may be impossible to predict when such issues may end — Farley says he's "stopped forecasting" and focuses on becoming "more efficient in helping our suppliers find labor" and overcoming other related hurdles. As always, adversity inspires innovation, and Ford has "developed a bit of a rhythm" in dealing with challenges.

Refiguring and Restructuring the Ford Supply Chain

In 2022, Ford announced a restructuring of its global supply chain. The auto giant also reported $1 billion in unexpected, inflation-related supplier costs for the third quarter of 2022. The restructuring will include internal development of "key technologies and capabilities," improved "cost and quality execution," as well as "[more] efficient and reliable sourcing of components."

Global supply chain issues and a recent onus on electric vehicles (EV) drive Ford's restructuring, which has been underway for some time. The restructuring campaign also involves initiating a new chief supply chain officer. On an interim basis, Ford CFO John Lawler will take on the expanded role of managing the automaker’s global supply chain while Ford seeks to fill the position permanently. As well, Jonathan Jennings, the company’s vice president of supply chain, will gain additional responsibility.

4 Lessons from Ford Motor Company

1. Support Efficiency from Multiple Angles

Ford's innovations shaped global work culture. The company created the modernized assembly line and spearheaded the truncated work-week and the abbreviated work-day to boost efficiency from multiple angles.

2. Roll with the Punches

Cliches shouldn't always be observed, but sometimes they reveal essential truths. As Ford CEO Jim Farley says, in response to manufacturing curveballs, "I don't think the labor market's going to ease any time soon … we're kind of running our business now and have developed a bit of a rhythm around [these] challenges that we're seeing." Challenges may be unpredictable and inevitable, so the onus is on adaptability.

3. Continue Evolving

The Ford assembly line was realized by pondering what could be. Ford adheres to this principle today, pushing to achieve ecological accomplishments, and is set to achieve carbon neutrality no later than 2050. From 2017 to 2022, Ford reduced manufacturing facility emissions by 40%, and in 2022, 60% of its electricity was carbon-free. One way it has done so is by conducting "30 supplier audits along select critical mineral battery supply chains at all tiers to the mine site."

4. Embrace the Wave of the Future

Ford is embracing the EV market, sourcing battery capacity and raw materials to manufacture 600,000 new EVs by 2023 and more than 2 million by the end of 2026. The expected run rate for new EVs by late 2023 includes the following:

  • 270,000 Mustang Mach-E SUVs

  • 150,000 Transit EV vans

  • 150,000 Lightning F-150 trucks

  • 30,000 new yet-to-be-specified SUV vehicles

To effect more conscionable manufacturing practices, Ford also proudly partners with multiple sustainability initiatives, including Partnership for a Cleaner Environment (PACE) and Responsible Business Alliance's (RBA) “audit-driven, third-party verified program.”

Like many other major manufacturing movers, Ford hopes to achieve zero emissions and adopt "100% locally-sourced renewable energy for all manufacturing plants globally by 2035" as part of their carbon neutrality by 2050 outlook.

Part of Ford's sustainable shift will also include protecting water security and using recycled, renewable plastics. Ford bolsters its supply chain by working with suppliers across the globe and across various tiers while implementing analytic and predictive tools to avoid bottlenecks, shortages, cyberattacks, economic swings, and disasters like fires.

What's Next for Ford?

From the Mustang and the Thunderbird, Ford has manufactured some of the most popular cars in history — and it’s continuing to innovate. Last month, Ford released its 2023 Integrated Sustainability and Financial Report, which detailed the “company’s progress on its commitment to create a more sustainable, inclusive and equitable transportation future.”

This includes:

  • Accelerating progress to carbon neutrality,

  • Building a responsible EV supply chain,

  • And helping communities thrive.

As Ford plans to lead the EV revolution, other companies can learn a few things from the infamous automaker.


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