issues. Operating according to a strategy of mass customization and
responsiveness, Ford management knows that success is dependent on such factors
as tight inventory control, Anything else results in difficulty to deliver
product expeditiously, trouble on the assembly line, and a gigantic inventory
investment.
Ford finds that nearly 50% of the $40,000 to $100,00 cost of
every vehicle is purchased materials. A huge proportion of that 50% is in
chassis (purchased from another organization), aluminum (also purchased from
another organization), and plywood used for other uses in the products.
Ford tracks these “A” inventory items quite
cautiously so as to maintain tight security/control and ordering carefully so
as to maximize quantity discounts while minimizing on-hand stock. Because of
long lead times and scheduling needs at the other organization, aluminum must
actually be ordered as much as 6 months in advance, at least.
Despite a competitive cost advantage compared to the other
competitors in the industry, cycle counting in the stockroom is vital to
operations. No part can leave the locked stockrooms without appearing on a bill
of materials. As one knows, accurate bills of material is a requirement if
products are going to be built on time. Additionally, because of the custom
nature of each vehicle, most orders are won only after a bidding process.
Accurate bill of materials are important to cost estimation and the resulting
bid. For these reasons, Ford should maintain sufficient inventory control.
1. If you
were to take over as inventory control manager Ford, what policies and
techniques would one implement to ensure accurate inventory records?
2. How would
one go about putting these suggestions in practice?
