Principles of Supply Chain Management

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Proposal for Application of Just in Time System in Ford

Subject of Course Project

This proposal discusses how Ford Company could use just in time system to manage its inventory in order to reduce inventory costs while at the same time improving customers and supplier’s satisfaction. In just in time systems, companies purchase materials and produce units only when these units are required to meet customer’s demand (Wisner, 2011). If Ford adopts this model, it will reduce its inventory to only a minimum level or zero level. Furthermore, it will be shipping all the cars that it produces to customers immediately. This system relies on a pull approach for its success. In this approach, all the workstations respond to a pull that is exerted by the final stage of production (Lai & Cheng, 2009). The final stage of production responds to customer orders. Thus, in this approach, customer’s priority is the critical driving force for production. Ford will benefit from this system since it reduces wastage in assembling of cars. However, this system will be difficult and expensive to implement since it requires Ford to change all its business process and supply chain.

Business Problem Statement

Mismanagement of inventory underlies the major business problem.  Resolving the issue requires better management procedures for controlling inventory with efficient and effective use of the existing resources.  This will eliminate inventory waste, production delays, and extra cost of storage and disposal.Resolving these kinds of inventory management challenges will lead to positive competitiveness resulting of higher profit in Ford Company.

General benefits it will provide to the organization

After ford implements JIT in its inventory control, it will benefit in the following way

Reduction in wastages

By using just in time system, this company will eliminate the waste of overproduction of cars. This is because this company will only produce cars when customers demand them. Furthermore, it will reduce the transportation costs since it will only order components from suppliers when it requires them and the automation of this system will reduce the wages paid to the drivers involved in the delivery process (Sulivan, 2005). It will also reduce waste arising from the production of defective cars. The automation of the system will help it reduce these defects since machines will be involved in fixing of seats and battery placements. This system will also reduce idle time since employees will be only involved in the production system when the demand for the production of this model of cars increases.

Value Added Production

By using just in time system, this company will improve value in its production system. This is because it will produce the cars when customers require them and thus shortages in supply will be reduced. Furthermore, it will also reduce the lead-time and thus increasing consumer satisfaction. It will also outsource some of the activities that can be produced by other companies at a faster rate and with minimum costs and therefore the quality of its products will improved (Sulivan, 2005). The automation of the whole system will ensure better coordination between different employees involved in the process of production. This automation will help to identify defects in the production and thus employees will eliminate these defects early and thus enabling the production of quality goods. The company will also complete the production process at a faster rate since this process only requires 8 weeks for its successful completion (Ford, 2012).

Improved Supplier’s Satisfaction

Suppliers are interested in signing contracts for the supply of various components to this company (Ford, 2012). This is because the cost that the suppliers will incur in transporting components to the premises of this company will be minimal (Sulivan, 2005). In addition to this, it will allow point of sale payment systems due to electronic data interchange and thus the suppliers will received their payment immediately after they delivered components to this company.

Approach

Determine if Ford’s implementation of  just in time systems as an inventory management model will reduce its cost of producing 2012 Ford Explorer, ensure that it produces 1100 cars each day for the first eight weeks, help in automation of its material handling process, reduce damages and wastages while improving supplier’s and customer satisfaction.

Audience

The completed project is directed towards several people and departments. It is directed to the production department since the production managers are responsible for deciding when to place an order to supplies as soon as customer demands for the production of 2012 Ford Explorer. It is directed to the Information Technology department since they are responsible for designing direct automated delivery and electronic data interchange systems because these systems support the functioning of just in time systems (Wisner, 2011). It is directed to the suppliers since they are responsible for making timely supplies of components required for manufacturing 2012 Ford Explorer as soon as customer demand for this car increases (Lai & Cheng, 2009). It is directed to the customers since Ford will only produce this model when customers place an order. Moreover, this project is directed to shareholders since this system will require a large amount of their invested funds and this may reduce their earnings per share during the initial stages of its implementation.

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