Ford Mondeo production story
In 1992, Ford Motor Company decided to produce a world car, that is, a car that would be produced and sold internationally with little variation in the vehicle between markets. This world car was named the Ford Contour and Mercury Mystique for the North American market and the Ford Mondeo for the European Market. All of these models were built with a 90% similarity due to body design differences, local conditions and mandates.
Ford decided to expand internationally to increase sales, spread production sites, and to increase their research and development. The company believed that economies of scale and supplier flexibility would improve cost efficiency and supplier efficiency. Ford felt that these factors would help its global image and improve its position within the auto industry.
One of the major issues that Ford had to face was the international integration and selection of suppliers, production scheduling, and supplier relationships. Ford’s goals with suppliers were to select suppliers based on merit and also reduce the number of suppliers for their world car. Ford successfully reduced the numbers of suppliers to 227 with a worldwide supplier office and selected these suppliers based on ‘best-of-class’ components within a worldwide scale. The company also used a tiering system of their suppliers by approaching them long before the production of the Mondeo, which allowed for plenty of time for extensive communication of the vehicle’s components. Ford strived for just-in-time production scheduling in order to reduce inventory holding costs, however this method of production was impractical. So, the new assembly sites were positioned within 30 km of suppliers for quick delivery. Ford estimated that their high-volume ordering would save the company $150 per car, and attempted to maintain that savings by asking that all suppliers absorb the costs of all future cost increases. This posed a major threat between Ford and its suppliers.
The second major issue with the world car project was the demands for information technology. Ford needed IT to support and replace manual forms of design and engineering due to the technical demands and cost pressures within the modern auto industry. IT was to be used for structured calculations and design improvements. Some calculations involved were for the structure and body limitations of the vehicle, and the design involved relied on programs such as Computer Aided Design and Computer Aided Manufacturing. Ford had to setup a large and powerful computer to meet the demands of these calculations and design software, so the purchased a new Cray 4MP super-computer during the Mondeo. The Cray 4MP was kept at the headquarters in Dearborn, Michigan. Project IT was also needed to support long distance communication and to integrate geographically remote areas of the Ford organization and its suppliers. In order to meet the demands of these important communicational tasks, Ford needed a system that could communicate in real-time, be in multiple sites, be capable of simultaneous engineering and information transfer as well as the implementation of a global e-mailing system. Ford implemented a transatlantic video link that was capable of video conferencing, and posted large amounts of investments to realize telecommunication and computer equipment to make these tasks possible. Without these means of communication through IT the world car would not have been a realistic project operationally and financially.
It is likely that Ford is struggling because of these management practices in this case, however Ford may also benefit from these trials and tribulations in the long run. Increased globalization is the direction that all major multinational corporations are moving towards. Ford had made a good attempt at making a world car that proved to be partially successful in the beginning of sales. The company has learned that locational specialization is an extremely important aspect to selling globally because of the differing personal preferences and legal demands.
Additionally, the original Ford Model T heavily relied on economies of scale in order to produce a personal vehicle at reasonable prices. This is still an important aspect to the world car and helped Ford produce at a higher cost efficiency and can be implemented in future projects by engineering different vehicles with similar internal components. So, even if Ford’s future goals are not aligned with creating another world car they have still learned important lessons that are applicable to globalized operations.
Finally, the globalized efforts could not have practical without the implementation and usage of information and communicational technologies. While some aspects of IT could not completely solve the physical transportation of individuals, but it helped in many areas of some operational achievements of the world car. These technologies made information exchange, technical calculations, design, and communication much more efficient and practical for the long distances and the large amount of people involved with the project. The use of the Internet was an important step in producing the world car. An evolutionary step to producing the world car is the current private network exchange within the automotive industry that connects major producers called the Auto Network Exchange, which helps connect buyers and suppliers.
While Ford’s world car may have shown to have some flaws, it was nonetheless an important turning point for the automotive industry that has helped evolve the globalization process.