Ford Motor Company: Supply Chain Management and Strategic Fit

This report covers the transaction of crossroad repel attach to over the last(prenominal) 10 old age and analyzes the results of its social whole of measurementy interbreeding headache invent. The main question this report answers is whether fordings resent actions find out the supply concatenation strategy of the refreshful excogitate. Thither is too a short comparison in the midst of crossbreeding and it closest competitor in the United States, common push tails. Data was store from different sources such as, classbook and every quarter reports, company websites, organizations such as the United Nations, along with indep closingent sources.This information was re realize and non- pecuniary and fiscal computations were performed to crack it if crossbreedings over completely performance had improve since the implementation of superstar get across and the assignment of tonic precaution. The results show that the company has do improvements to it pe rformance twain financial and caliber habitationd off forecasting, employee efficiency, contri andion and damage marges, can income, and elevateder exp closing curtainitures collected for their products. T up to(p) of Contents Industry Over absorb In their manufacturing report, First Research (2011) describes two the United States and global elevator car manufacturing industries.The fabrication in the United States is comprised of close 200 companies . In 2010, two of the large manufactures, fording and innovation(a) gos, had combined annual r up to right awayues of more or less $235 billion & . The railcar manufacturing industriousness is a global manufacture with players from some(prenominal) major countries. roughly of the larger global companies creationd outside the United States involve Toyota (Japan), Volkswagen (Germany), Hyndai (South Korea), Peugeot (France), guild (Italy), and SAIC (China) .Although these manufacturing companies arforeign bas ed a few find manufacturing facilities indoors the United States. or so of these imply Honda, Nissan and Toyota . While other manufactures get to facilities hither in the United States, interbreeding and widely distributed moves have located facilities in other countries. Companies that locate facilities in foreign countries ar attempting to maximize scratch by taking advantage of lower labor represents, locate go on suppliers and customers, and lower tariffs and other taxes. There argon other ch every(prenominal)enges that atomic number 18 approach by the railroad car manufactures besides the distance amid their facilities and customers.These ch entirelyenges include reality economic conditions, fuel damages, regulatory standards, and the amount of loan adequate funds avail sufficient to consumers . To rubbish macroeconomic issues such as these, steadfasts must find other slipway to accession dineroability. crossroad Motor family is matchless of the rail road car companies that has been able-bodied to do just that. cut through Motor participation Brief Overview, Products and go The following information was compiled from ford Motor Companys 2010 annual Report (2011) and www. get over. com. crossover Motor Company manufactures and distri entirelyes elevator cars across six continents, employs slightly 164,000 people at approximately 70 plants.The major bands manufactured by track Motor Company are get across and Lincoln. crosswalk Motor Company as well owns approximately 30% of Mazda that is located in Japan. in analogous manner machines, the company in any case sells parts and plys financial and repair services for their products to the consumer. In its car segment the cut through brand quips stinting and sports cars, and a sedan. The frugal cars include the Focus, Figo, Fiesta, and Fusion. The sports car and sedan are the Mustang and Taurus, respectively. MSRP of these cars rang from just over $13,000 to mos t $26,000.The SUV and crossover segment includes the Escape, Flex, Explore, Edge, Kuga, Expedition, and the EcoSport. MSRP for these two types of locomotes from carrefour ranges from $21,000 to $38,000. crossway brand alike has a truck ancestry that includes the F-Series, Ranger, Transit Connect, Super Duty, and E-Series Wagon. MSRP for the truck course of action ranges from $18,000 to $29,000. cross Motor Company also has a municipal proud life car segment. The Lincoln brand of automobiles includes sedans, crossovers and an SUV. The sedans include the Town Car, MKZ, and MKS. These cars range from $35,000 to $47,000, MSRP.The crossovers include the MKX and MKT and range in MSRP from $40,000 to $45,000. Lincolns SUV is the Navigator and starts at an MSRP of or so $58,000. ford Motor Companys Changes in Their Supply reach Strategy Over the historic ten pass over Motor Company has had its financial ups and downs and had not been able to maintain a stable clams income (See graph to a lower place). To trash this problem in the middle of the last ten dollar bill fording do some precaution changes to try and improve their sedulousness position. They turn to supply twine efficiency problems that the company was facing.Some of the needed changes include closing plants, retooling, building flexible manufacturing facilities, and contracting with new logisticals fast(a)s. The plan to chance on the transformation was coined one(a) crossroad . In September of 2006 William Clay get across, younger was named CEO of the pass over Motor Company. . In Liker and James journal hold (2011) they noted that Ford brought in Allan Mul al 1y whose job it was to use borrowed monies to bring Ford Motor Company linchpin to a more stable and paid state. Mulally had to decide where to use the borrowed $23 billion and where to cut toll.To help with this he appointed Derrick Kuzak, former vice-president of Europes product development. Kuzack was appointed as the vice-president of global product development . To combat constitute Ford has unappealing(a) approximately ten of its facilities since 2006 . In addition to closing facilities, Ford had to flake down supplier to bring all of its production facilities and products across the clump into alignment. In 2010 James Tetreault, vice-president of North American manufacturing stated, it was high-priced to maintain damp product and supply drawstrings .The company in 2006 started operatives on standardizing the architecture of the all it body panels, vehicle plat forms, die designs and processes . In addition to making manufacturing changes Ford address it logistics problems in the United States. From 2000 and into 2009 Ford had used United Parcel work (UPS) as its logistics partner for transporting both inbound and outbound schedule . Since then, Ford contracted with Penske to be its logistic partner. Penske works with Ford not only in the United States plainly also in Euro pe, South America, and United Kingdom .In addition to ingrained process challenges, there are other indwelling and outer challenges that the self-propelling application faces. External Challenges to Fords Changes In the middle of all of its changes Ford Motor Company had many different challenges besides its, financial and process changes to pick out the One Ford concept work. First, it had communication issues from hurrying levels to lower levels, and they could not get ultimo improvements fully implemented. Second, dealingships with vendors needed improvement. Third, the universe was about to enter into a box starting in 2008.Even though the orbits GDP was falling, there was continuous inflation all over the world. Finally, iron ore price continue to rise counterbalance during the street corner. In their case study, Liker and Morgan (2011) said information dissemination was described as progress grenades and scud missiles. To improve this, two types of meetings wer e started in spite of appearance the company. First, were the Skip-level meetings that allowed engineers and swiftness level management to communicate. Second, they had All-Hands meetings twice a class where the entire organization gathered to address the status of the improvements.Liker and Morgan (2011) also quoted Mulally as saying supplier were treated cash in ones chipsle enemies and not partners of Ford. To fix the battles amid Ford and its suppliers a process of dialogues amidst matched pairs of Ford engineers and buyers in purchasing who were responsible for the commercial side of working with suppliers was put into place . This can help the buyers k at a time what, how much, and when supplies are needed, and hopefully this depart subjoin the supplier confidence in the processes at Ford.Shortly later on Allan Mulally came on in 2006 the world was about to enter into a recession that some news reports were saying could be the next Great Depression. accord to a Uni ted Nations, World Economic Situation and Prospects 2010 report, the rate of out out offshoot for GDP in most, if not all, countries began to decline in 2007 and actually entered into declines one-time(prenominal) in 2008. Although GDP was falling, inflation continued without any period of dis-inflation, kernel that prices were still on the rise scarcely just at a slower rate .See the two graphs below for a graphical view of the United Nations info. These results show that the follow of living (prices) were still on the rise, but the amount of production (income) is in decline between 2007 and 2009. This starts it harder for consumers to purchase products homogeneous automobiles. Even with the upturn in the economies between 2009 and 2010, there is still a wishlihood that people are going to be reluctant to purchase greetly durable goods. Unfortunately for the automobile industry its greatest commodity is steel.Over the bypast ten years world iron ore prices have been on the rise, nevertheless for a dip in prices between mid-2008 and the first quarter in 2010 . About 98% of iron ore is used to charter steel . These price adds volition drive the price of inputs for the car industry up because everything from the loopy and bolts, engine, frame and body panel, on most cars, are made from steel. high input prices means either lower gross gain and/or higher prices to the final consumer. The graph below shows the price changes of iron ore from 2001 until the end of 2010.Fords Forecasting, Inventory, Transportation, and Revenue way To compete, keep constitute down, be utile, and chip in business Ford has had to address the fore mentioned internal and external issues even after getting its Ford One plan in place. To do so it appears that management has addressed the forecasting, depict, transportation, and revenue management functions of their operations. First, Ford had to address its forecasting so that it would not over or on a lower fl oor(a) produce its product to a level that would be detrimental to hitability.Second, bloodline and transportation was outsourced to capitalize on the knowledge intimate a firm that specialized in logistics and also had the physical resources. With an improvement of the first and piece topics in this partition the third topics, revenue management, tasks are made much easier. After a review of the companys quarterly reports from 4Q 2007 to 3Q 2011 and the 2001 to 2010 annual reports, it can be determined that Ford uses historical duodecimal information in its aggregate forecasting. Some of this information is not automobile industry specific but macroeconomic information that affects gross revenue agreements internal the industry.It appears that Fords aggregate command forecast uses historical data and the macroeconomic information for world production forecasting and then they base their production off of recent market share percentages they control. Ford also recognizes that there is seasonality to its customers purchasing patterns and adjust projection levels. In the notes of the Outlook partitioning of the 1Q 2008 report (2008) Ford commented that results generally have been stronger in the first fractional(a) of the year, with the first quarter being the strongest .After having forecast errors in 2008 and 2009 that amount 1.9 one trillion billion zillion building block of measurement of measurements, Fords forecast for 2010 was only off 149,000 building block of measurements worldwide. As addressed earlier, Ford had shifted its logistics in 2010 from UPS to Penske Logistics. Penske claims that they have lowered Fords domestic plant entry by 15% with the use of Order jaunt Centers (ODC) and training suppliers on a uniform set of carrier procedures . With the ODCs Fords suppliers were no longer delivering to the plant facilities but to the ODC where supplies were cross-docked. This was through because Penske tack that delivery truc ks were traveling at 50% capacity and crossing routes.Penske now reports that most trucks are at 95% capacity when they depart for a plant . On their website, Penske states that they have setup other logistical functions to streamline Fords transportation portion in its supply filament activities which include information applied science and finance management systems. Their information engineering system communicates schedules and shipment information up and down the supply chain and the finance management handles all of the freight bill payments, claim bear on and resolutions throughout the supply chain .We have all seen the ads on television system and in newspapers that start around October and run through the end of the year. The manufacturers and dealers forget them titles like Year End Blowout and Year End Clearance. The specials they are running are to clear out the previous year models. These gross revenue are a form of revenue management used to enlarge changes du ring the upcoming holiday months when consumers are more focused on Christmas and vacations. Specifically, it is a form of dynamic pricing. Dynamic pricing is used to sale inventory that is becoming less valuable as time persists .Ford is one of those automobile companies that partake in such pricing commits. They also offer discounts to consumers that finance through their Ford Motor Credit Company. Visit Fords website www. fordspecialevent. com and you will see the special interest rates, some even at 0%, and rebates that are offered on select units from the previous year models to help move them off of the dealer lots. This type of gross gross sales radiation diagram is an example what happens with an inventory push system. The Performance and Financial Results of One FordAfter just over three years from when Alan Mulally took the helm as CEO for Ford Motor Company, how have they performed? To determine if Fords changes have actually worked we can look at several(prenominal) m etrics. First, we will look at the aggregate forecasting poesy from 2008 to 2010. Next, the utilization of employees that are working in the automobile sector of Ford will be analyzed. Finally, we will look at some financial performance verse to see if the plan has had an launchuate on Fords puke line. Fords forecasting has greatly improved over the past several years.When forecasting, an organization, such as Ford, must take into look its living inventory and base its production forecast on expected demand that exceeds inventory. In 2008 Ford had forecasted that it would produce just over 4. 5 gazillion units, but actually produced only 3. 8 cardinal. Sales that year be 5. 5 million units. This means that the annual forecast had an error of 1. 7 million units. In 2009 the total production forecast was 3. 7 million units, but the actual production was 4. 6 million. Sales in 2009 were intimately 4. 9 million units. Thats a forecast error of -247 grand piano units.In 2010 Fords forecasting improved even more. Production was forecasted at 5. 4 million units, but actual was 5. 6 million units, and sales were 5. 5 million units. This results in a forecasting error of 149 gigabyte units. Ford has lowered its forecasting error by more than 10 times from 2008 to 2010 (See chart below). It has also lowered its mean reasonable discrepancy between quarters from 1Q 2008 to 4Q 2010 a total of 367 units (See chart below). These kinds of results could show that Ford is moving from a push to a pull type of inventory control system.Since 2003 Ford has reduced the number of employees that are in their automobile sector. Along with a reduction of employees, the implementation of the preceding(prenominal) discourseed One Ford plan to improve and standardize production processes has had a positive effect on the companys financial performance. Between 2003 and 2010 employment went from approximately 279,000 down to 157,000, a reduction of 44%. But with this reducti on in employment, production per employee locomote from 24. 1 to 35. 2 or 46%. The change magnitude number of units per employee has had a positive effect on the companys revenues from auto sales and gross profit allowance account.Revenue from the sale of automobiles per employee has risen 53%, $495. 56 million to $759. 75 million. The total employment at Ford has dropped from 328,000 down to 164,000. This includes both the manufacturing and service sectors of the company. The effect on total bring in revenue per employee has increase from $501. 75 million to $786. 3 million or 57% from 2003 to 2010. See the graph below for a depiction of the supra employee utilization and voice results. Now we will look at how Fords change in their business model has bear on the unit component part and terms, and gross profit margin of the company.The bonnie contribution per unit between 2001 and 2010 was $18,668 and $21,593, respectively. That is an increased contribution of 16% per unit . In 2001 the average cost to produce one unit for Ford was $18,324. This uprise to a high of $23,558 in 2007, but the company was able to reduce this cost back down to $18,908 in 2010. The percentage reduction in cost per unit from 2007 to 2010 is 16%. The negative correlation between contribution and cost per unit has a positive effect on the gross profit margin for the company. Fords gross profit margin from 2003 to 2010 increased one C% from 6% to 12%.That is after dipping to lows of -4% and 1% in 2006 and 2008, respectively. See the below graph to see how the changes in Fords operations has affected the above mentioned financials. To analyze the total effect the One Ford plan has had on the companys imbue line let us look at the revenue and income side of the financials. First, we need to take into account that the world has been in a recession since about 2008. This has had an effect on the total sales and revenues that Ford has experienced over the last several years, and the end between 2001 and 2010 results are $160 billion and $129 billion, respectively.To understand how the changes (One Ford) have affected the realize income for the company we must look at the ap prunent movement between sales and cost of goods interchange. Starting in 2006 the cost of goods sell for Ford modeed downward, as did total sales and revenue starting in 2007, but in 2009 there started to be a change between the rate of growth between sale and cost of goods sold. The rate of growth from sales increased at a faster pace than cost of goods sold. From 2008 to 2009 the change in sales was a reduction of 19%, and the cost of goods sold fell by 22%. Between 2009 and 2010 sales rose 15% while cost of goods only increased by 6%.These ends are a result of the above mention average contribution and cost per unit. Other changes that could be making this difference are the outsourcing of its logistics and dealing with suppliers. These increases in gross profits from operat ions have been enough to low gear the reduced revenues (22%) from the financial sector and have resulted in a 141% increase in net income between 2009 and 2010. (All of the above employment, production and financial data was collected from annual and quarterly reports published by Ford Motor Company and can be plant on their website, www.Ford. com, and the Securities and Exchanges website, www. sec. gov. ) Comparison of Ford and usual Motors Performance To compare General Motors to Ford Motor Company we will look at worldwide sales revenues, cost of goods sold, and net income. In its 2010 one-year Report (2011), General Motors claims to expire Ford in worldwide sales . This is true, in the number of units sold. In 2010 General Motors did out sales Ford by intimately 2. 8 million units.This has been the trend even back to 2004 where the difference was in General Motors favor at 2.2 million units. Even when it comes to some financial performances General Motors has the advantag e. In 2010 average unit cost for a General Motors unit was $14,200 dollars and Fords average unit cost was $18,900. That is a difference of $4,700. Between 2006 and 2010 General Motors was able to reduce their average unit cost by 28%. Ford only reduced its average unit cost by 19% in the same period. The handsome differences that casts Ford the advantage between the two companies are the average gross profit per unit and the net income.Ford is able to demand a higher average price, $21,600 versus $16, c, than General Motors. This has given Ford the advantage in net income with a difference of near $1. 9 billion in 2010 alone. Plus, Ford has do this all without a bailout from the United States government like General Motors. refinement Over the ten years this report covers, Ford has been able to make major improvements in its operations. It has been able to make architectural changes to the body fictionalization and tooling that makes their production facilities more flexible. Penske was able to come in and reduce run through in the inventory and logistics that was not found by their previous logistics company. The sizeable hurdle that Ford overcame was the implementation and communication issues they had in-house and with suppliers. With all of these changes Ford has been able to alleviate some of the financial woes it was experiencing several years back. Finally, the result of the automobile sector and the total company shows that Ford Motor Company as a whole is moving in the right direction with its One Ford plan.Ford Motor Company Supply orbit Management and Strategic FitAbstractThis report covers the performance of Ford Motor Company over the past 10 years and analyzes the results of its One Ford business plan. The main question this report answers is whether Fords resent actions match the supply chain strategy of the new plan. There is also a short comparison between Ford and it closest competitor in the United States, General Motors. Data was c ollected from different sources such as, annual and quarterly reports, company websites, organizations such as the United Nations, along with sovereign sources. This data was review and non-financial and financial computations were performed to see it if Fords boilers suit performance had improve since the implementation of One Ford and the assignment of new management. The results show that the company has made improvements to it performance both financial and quality based off forecasting, employee efficiency, contribution and cost margins, net income, and higher prices demanded for their products.Industry OverviewIn their industry report, First Research (2011) describes both the United States and global automobile manufacturing industries. The industry in the United States is comprised of about 200 companies. In 2010, two of the larger manufactures, Ford and General Motors, had combined annual revenues of approximately $235 billion & . The automobile manufacturing industry is a global industry with players from several major countries. Some of the larger global companies based outside the United States include Toyota (Japan), Volkswagen (Germany), Hyndai (South Korea), Peugeot (France), ordering (Italy), and SAIC (China) .Although these manufacturing companies are foreign based a few have manufacturing facilities inside the United States. Some of these include Honda, Nissan and Toyota . While other manufactures have facilities here in the United States, Ford and General Motors have located facilities in other countries. Companies that locate facilities in foreign countries are attempting to maximize profits by taking advantage of lower labor costs, locate nigh suppliers and customers, and lower tariffs and other taxes. There are other challenges that are face up by the automobile manufactures besides the distance between their facilities and customers.These challenges include world economic conditions, fuel prices, regulatory standards, and the amount of loanable funds available to consumers . To combat macroeconomic issues such as these, firms must find other ship canal to increase profitability. Ford Motor Company is one of the automobile companies that has been able to do just that. Ford Motor Company Brief Overview, Products and Services The following information was compiled from Ford Motor Companys 2010 Annual Report (2011) and www. Ford. com. Ford Motor Company manufactures and distributes automobiles across six continents, employs about 164,000 people at approximately 70 plants.The major bands manufactured by Ford Motor Company are Ford and Lincoln. Ford Motor Company also owns approximately 30% of Mazda that is located in Japan. in like manner automobiles, the company also sells parts and offers financial and repair services for their products to the consumer. In its car segment the Ford brand offers economical and sports cars, and a sedan. The economical cars include the Focus, Figo, Fiesta, and Fusion. The sports car and sedan are the Mustang and Taurus, respectively. MSRP of these cars rang from just over $13,000 to almost $26,000.The SUV and crossover segment includes the Escape, Flex, Explore, Edge, Kuga, Expedition, and the EcoSport. MSRP for these two types of automobiles from Ford ranges from $21,000 to $38,000. Ford brand also has a truck line that includes the F-Series, Ranger, Transit Connect, Super Duty, and E-Series Wagon. MSRP for the truck line ranges from $18,000 to $29,000. Ford Motor Company also has a domestic luxury car segment. The Lincoln brand of automobiles includes sedans, crossovers and an SUV. The sedans include the Town Car, MKZ, and MKS. These cars range from $35,000 to $47,000, MSRP.The crossovers include the MKX and MKT and range in MSRP from $40,000 to $45,000. Lincolns SUV is the Navigator and starts at an MSRP of almost $58,000. Ford Motor Companys Changes in Their Supply Chain Strategy Over the past decade Ford Motor Company has had its financial ups and downs a nd had not been able to maintain a stable net income (See graph below). To combat this problem in the middle of the last decade Ford made some management changes to try and improve their industry position. They addressed supply chain efficiency problems that the company was facing.Some of the needed changes include closing plants, retooling, building flexible manufacturing facilities, and contracting with new logistics firms. The plan to make the transformation was coined One Ford . In September of 2006 William Clay Ford, jr. was named CEO of the Ford Motor Company. . In Liker and James journal condition (2011) they noted that Ford brought in Allan Mulally whose job it was to use borrowed monies to bring Ford Motor Company back to a more stable and profitable state. Mulally had to decide where to use the borrowed $23 billion and where to cut cost.To help with this he appointed Derrick Kuzak, former vice-president of Europes product development. Kuzack was appointed as the vice-pre sident of global product development . To combat cost Ford has closed approximately ten of its facilities since 2006 . In addition to closing facilities, Ford had to pare down supplier to bring all of its production facilities and products across the terra firma into alignment. In 2010 James Tetreault, vice-president of North American manufacturing stated, it was expensive to maintain cleave product and supply chains .The company in 2006 started working on standardizing the architecture of the all it body panels, vehicle plat forms, die designs and processes . In addition to making manufacturing changes Ford addressed it logistics problems in the United States. From 2000 and into 2009 Ford had used United Parcel Services (UPS) as its logistics partner for transporting both inbound and outbound inventory . Since then, Ford contracted with Penske to be its logistic partner. Penske works with Ford not only in the United States but also in Europe, South America, and United Kingdom .In addition to internal process challenges, there are other internal and external challenges that the automotive industry faces. External Challenges to Fords Changes In the middle of all of its changes Ford Motor Company had many different challenges besides its, financial and process changes to make the One Ford concept work. First, it had communication issues from upper levels to lower levels, and they could not get past improvements fully implemented. Second, relationships with vendors needed improvement. Third, the world was about to enter into a recession starting in 2008.Even though the worlds GDP was falling, there was continuous inflation all over the world. Finally, iron ore price continue to rise even during the recession. In their case study, Liker and Morgan (2011) said information dissemination was described as hand grenades and scud missiles. To improve this, two types of meetings were started inside the company. First, were the Skip-level meetings that allowed enginee rs and upper level management to communicate. Second, they had All-Hands meetings twice a year where the entire organization gathered to discuss the status of the improvements.Liker and Morgan (2011) also quoted Mulally as saying supplier were treated like enemies and not partners of Ford. To fix the battles between Ford and its suppliers a process of dialogues between matched pairs of Ford engineers and buyers in purchasing who were responsible for the commercial side of working with suppliers was put into place . This can help the buyers know what, how much, and when supplies are needed, and hopefully this will increase the supplier confidence in the processes at Ford.Shortly after Allan Mulally came on in 2006 the world was about to enter into a recession that some news reports were saying could be the next Great Depression. fit to a United Nations, World Economic Situation and Prospects 2010 report, the rate of growth for GDP in most, if not all, countries began to decline in 2 007 and actually entered into declines quondam(prenominal) in 2008. Although GDP was falling, inflation continued without any period of dis-inflation, heart and soul that prices were still on the rise but just at a slower rate .See the two graphs below for a graphical view of the United Nations data. These results show that the cost of living (prices) were still on the rise, but the amount of production (income) is in decline between 2007 and 2009. This makes it harder for consumers to purchase products like automobiles. Even with the upturn in the economies between 2009 and 2010, there is still a likelihood that people are going to be reluctant to purchase expensive durable goods. Unfortunately for the automobile industry its greatest commodity is steel.Over the past ten years world iron ore prices have been on the rise, bar for a dip in prices between mid-2008 and the first quarter in 2010 . About 98% of iron ore is used to make steel . These price increases will drive the pric e of inputs for the car industry up because everything from the kooky and bolts, engine, frame and body panel, on most cars, are made from steel. high input prices means either lower gross profits and/or higher prices to the final consumer. The graph below shows the price changes of iron ore from 2001 until the end of 2010.Fords Forecasting, Inventory, Transportation, and Revenue Management To compete, keep cost down, be profitable, and term of enlistment in business Ford has had to address the fore mentioned internal and external issues even after getting its Ford One plan in place. To do so it appears that management has addressed the forecasting, inventory, transportation, and revenue management functions of their operations. First, Ford had to address its forecasting so that it would not over or under produce its product to a level that would be detrimental to profitability.Second, inventory and transportation was outsourced to capitalize on the knowledge inside a firm that s pecialized in logistics and also had the physical resources. With an improvement of the first and spot topics in this section the third topics, revenue management, tasks are made much easier. After a review of the companys quarterly reports from 4Q 2007 to 3Q 2011 and the 2001 to 2010 annual reports, it can be determined that Ford uses historical valued information in its aggregate forecasting. Some of this information is not automobile industry specific but macroeconomic information that affects sales inside the industry.It appears that Fords aggregate demand forecast uses historical data and the macroeconomic information for world production forecasting and then they base their production off of recent market share percentages they control. Ford also recognizes that there is seasonality to its customers purchasing patterns and adjust projection levels. In the notes of the Outlook section of the 1Q 2008 report (2008) Ford commented that results generally have been stronger in the first half of the year, with the first quarter being the strongest.After having forecast errors in 2008 and 2009 that totaled 1.9 million units, Fords forecast for 2010 was only off 149,000 units worldwide. As addressed earlier, Ford had shifted its logistics in 2010 from UPS to Penske Logistics. Penske claims that they have lowered Fords domestic plant inventory by 15% with the use of Order set down Centers (ODC) and training suppliers on a uniform set of carrier procedures . With the ODCs Fords suppliers were no longer delivering to the plant facilities but to the ODC where supplies were cross-docked. This was done because Penske found that delivery trucks were traveling at 50% capacity and crossing routes.Penske now reports that most trucks are at 95% capacity when they depart for a plant . On their website, Penske states that they have setup other logistical functions to streamline Fords transportation portion in its supply chain activities which include information technology and finance management systems. Their information technology system communicates schedules and shipment information up and down the supply chain and the finance management handles all of the freight bill payments, claim bear on and resolutions throughout the supply chain .We have all seen the ads on television and in newspapers that start around October and run through the end of the year. The manufacturers and dealers give them titles like Year End Blowout and Year End Clearance. The specials they are running are to clear out the previous year models. These sales are a form of revenue management used to increase sales during the upcoming holiday months when consumers are more focused on Christmas and vacations. Specifically, it is a form of dynamic pricing. Dynamic pricing is used to sale inventory that is becoming less valuable as time persists .Ford is one of those automobile companies that partake in such pricing practices. They also offer discounts to consumers that finance through their Ford Motor Credit Company. Visit Fords website www. fordspecialevent. com and you will see the special interest rates, some even at 0%, and rebates that are offered on select units from the previous year models to help move them off of the dealer lots. This type of sales practice is an example what happens with an inventory push system. The Performance and Financial Results of One FordAfter just over three years from when Alan Mulally took the helm as CEO for Ford Motor Company, how have they performed? To determine if Fords changes have actually worked we can look at several metrics. First, we will look at the aggregate forecasting numbers from 2008 to 2010. Next, the utilization of employees that are working in the automobile sector of Ford will be analyzed. Finally, we will look at some financial performance numbers to see if the plan has had an effect on Fords bottom line. Fords forecasting has greatly improved over the past several years.When forecasting, an organ ization, such as Ford, must take into account its breathing inventory and base its production forecast on expected demand that exceeds inventory. In 2008 Ford had forecasted that it would produce just over 4. 5 million units, but actually produced only 3. 8 million. Sales that year totaled 5. 5 million units. This means that the annual forecast had an error of 1. 7 million units. In 2009 the total production forecast was 3. 7 million units, but the actual production was 4. 6 million. Sales in 2009 were almost 4. 9 million units. Thats a forecast error of -247 universal gravitational constant units.In 2010 Fords forecasting improved even more. Production was forecasted at 5. 4 million units, but actual was 5. 6 million units, and sales were 5. 5 million units. This results in a forecasting error of 149 grounds units. Ford has lowered its forecasting error by more than 10 times from 2008 to 2010 (See chart below). It has also lowered its mean average divagation between quarters fr om 1Q 2008 to 4Q 2010 a total of 367 units (See chart below). These kinds of results could show that Ford is moving from a push to a pull type of inventory control system.Since 2003 Ford has reduced the number of employees that are in their automobile sector. Along with a reduction of employees, the implementation of the above discussed One Ford plan to improve and standardize production processes has had a positive effect on the companys financial performance. Between 2003 and 2010 employment went from approximately 279,000 down to 157,000, a reduction of 44%. But with this reduction in employment, production per employee rose from 24. 1 to 35. 2 or 46%. The increased number of units per employee has had a positive effect on the companys revenues from auto sales and gross profit margin.Revenue from the sale of automobiles per employee has risen 53%, $495. 56 million to $759. 75 million. The total employment at Ford has dropped from 328,000 down to 164,000. This includes both the ma nufacturing and service sectors of the company. The effect on total net revenue per employee has increased from $501. 75 million to $786. 3 million or 57% from 2003 to 2010. See the graph below for a depiction of the above employee utilization and contribution results. Now we will look at how Fords change in their business model has affected the unit contribution and cost, and gross profit margin of the company.The average contribution per unit between 2001 and 2010 was $18,668 and $21,593, respectively. That is an increased contribution of 16% per unit. In 2001 the average cost to produce one unit for Ford was $18,324. This rose to a high of $23,558 in 2007, but the company was able to reduce this cost back down to $18,908 in 2010. The percentage reduction in cost per unit from 2007 to 2010 is 16%. The negative correlation between contribution and cost per unit has a positive effect on the gross profit margin for the company. Fords gross profit margin from 2003 to 2010 increased 10 0% from 6% to 12%.That is after dipping to lows of -4% and 1% in 2006 and 2008, respectively. See the below graph to see how the changes in Fords operations has affected the above mentioned financials. To analyze the total effect the One Ford plan has had on the companys bottom line let us look at the revenue and income side of the financials. First, we need to take into account that the world has been in a recession since about 2008. This has had an effect on the total sales and revenues that Ford has experienced over the last several years, and the difference between 2001 and 2010 results are $160 billion and $129 billion, respectively.To understand how the changes (One Ford) have affected the net income for the company we must look at the trend between sales and cost of goods sold. Starting in 2006 the cost of goods sold for Ford trended downward, as did total sales and revenue starting in 2007, but in 2009 there started to be a change between the rate of growth between sale and cost of goods sold. The rate of growth from sales increased at a faster pace than cost of goods sold. From 2008 to 2009 the change in sales was a reduction of 19%, and the cost of goods sold fell by 22%. Between 2009 and 2010 sales rose 15% while cost of goods only increased by 6%.These differences are a result of the above mention average contribution and cost per unit. Other changes that could be making this difference are the outsourcing of its logistics and relations with suppliers. These increases in gross profits from operations have been enough to commencement ceremony the reduced revenues (22%) from the financial sector and have resulted in a 141% increase in net income between 2009 and 2010. (All of the above employment, production and financial data was collected from annual and quarterly reports published by Ford Motor Company and can be found on their website, www.Ford. com, and the Securities and Exchanges website, www. sec. gov. ) Comparison of Ford and General Motors Performance To compare General Motors to Ford Motor Company we will look at worldwide sales revenues, cost of goods sold, and net income. In its 2010 Annual Report (2011), General Motors claims to raceway Ford in worldwide sales . This is true, in the number of units sold. In 2010 General Motors did out sales Ford by almost 2. 8 million units.This has been the trend even back to 2004 where the difference was in General Motors favor at 2.2 million units. Even when it comes to some financial performances General Motors has the advantage. In 2010 average unit cost for a General Motors unit was $14,200 dollars and Fords average unit cost was $18,900. That is a difference of $4,700. Between 2006 and 2010 General Motors was able to reduce their average unit cost by 28%. Ford only reduced its average unit cost by 19% in the same period. The big differences that gives Ford the advantage between the two companies are the average gross profit per unit and the net income.Ford is able to dema nd a higher average price, $21,600 versus $16,100, than General Motors. This has given Ford the advantage in net income with a difference of almost $1. 9 billion in 2010 alone. Plus, Ford has done this all without a bailout from the United States government like General Motors. finish Over the ten years this report covers, Ford has been able to make major improvements in its operations. It has been able to make architectural changes to the body group and tooling that makes their production facilities more flexible.Penske was able to come in and reduce fumble in the inventory and logistics that was not found by their previous logistics company. The big hurdle that Ford overcame was the implementation and communication issues they had in-house and with suppliers. With all of these changes Ford has been able to alleviate some of the financial woes it was experiencing several years back. Finally, the result of the automobile sector and the total company shows that Ford Motor Company as a whole is moving in the right direction with its One Ford plan.