Ford had 1,683 suppliers last year. By the end of this year, that number will be down to 850. This is what Tony Brown, Ford’s group vice president of global purchasing, told reporters, one of them from Reuters. Ford is worried about disruptions by supplier bankruptcies, which are a daily occurrence. Triage time: Ford wants to shore up the healthier ones and leave the not so healthy by the wayside.
“We’ve accelerated our efforts in this regard to try to rationalize the supply base in order to get to profitable growth for all,” Brown said. “There is simply too much capacity in the system. We don’t need that capacity.”
Mass mortality of large suppliers would wreak havoc amongst all automakers manufacturing in North America, including Ford, Toyota and Honda. The supply base is highly intermeshed. Big suppliers are typically served by a large number of subcontractors. The fallout could snowball.
“The next three to four months are going to be critical as GM and Chrysler try to come back up,” Brown said. “As to whether the supplier base will be able to effectively respond to that … we’ve got a critical window here.”
One point of clarification…Ford currently has over 3,300 suppliers. 1,683 will be the number at the end of this year sown to 850 at some point in the future.
The cost of sheer paperwork from managing 3,300 supplier contracts, orders, logistics, quality, and relationships was an un-quantified financial anchor tied to Ford’s neck.
Many of the 3,300 were there as a result of bad business practices…chasing the ‘one-time’ lowest price, niche interior colors and textures that never sold a single extra vehicle, and old, old, old parts that after years of cost reductions became too cheap to re-source but were not making any money for the supplier.
Ford keeps the supplier for those one or two cheap parts, supplier keeps losing money with the hope that it’s the foot-in-the-door to get a larger piece of the pie in the future.
Inefficient for everyone involved and a waste of resources. I applaud Ford’s efforts.
grenb1ood: Thanks for the correction. However, I need to source the report properly, and currently Reuters says:”Tony Brown, Ford’s group vice president of global purchasing, told reporters that the company expected to identify 850 suppliers eligible for its future business by the end of this year, down from 1,683 suppliers last year.”
No problem Bertel. I was using a Freep story that has since been changed to read “Ford launched the effort in 2005 when it had 3,300 suppliers.”
TTAC is correct.
Freep (was) wrong.
What are the chances of that?
: )
Look on the bright side – the good news for the Suppliers that fail to ‘make the cut’ is that they’ll no longer have to do business with Ford Purchasing.
This is a great move by Ford, and needs to be followed by every automaker. Too many suppliers is a headache, and it can not only complicate the paperwork, but it severely complicates repairs.
I currently have a customer whose radio wouldn’t give the CDs back. Well evidently there are 4 different suppliers for the stereo, and depending on which one made hers it could take anywhere from a couple of weeks to several months before the manufacturer fixes the radio and sends the discs back – if they decide to send them back at all. This is just one example of too many suppliers being a problem and making it all the way back to the customer.
Will having less suppliers mean that the remaining suppliers will have more leverage on pricing, thereby getting more dollars for their products? The result is that the suppliers will have more power over Ford?
Perhaps Ford has decided to make money by selling vehicles instead of beating up vendors. Focus on value to the customer requires vendor partners who will work to reduce costs not just cut prices. Getting vendors to accept responsibility for real quality improvement requires a system that rewards them with more business for this effort
It is one of the key elements of the Toyota Production System
Wow… That’s a lot of suppliers biting the dust…
Thank god we spent all those billions to save auto jobs. That’s why we did it right? I get so confused…..
i can´t remember i gave you the permission to use my picture in that article.