Ford Motor Company
Operations Management is a concept born during the advent of manufacturing processes more specifically during the industrial revolution; it has since grown to encompass activities like service provision. Operations management can be defined as all the activities and processes designed to achieve coherence and effectiveness at the input stage ensuring that the yields are profitable. Ford Company is one multinational that is considered successful as a result of having a strong operations management system. The company was founded at the onset of the 20th century by Henry Ford.The American based automobile firm has survived what is considered the worst economic times in history. Prior to 2008, the company had lost a considerable market size to its competitors. The company’s expenses had also increased tremendously while profits had taken a downward spiral (Hoffman, 2012). This turn of events led to what is currently known as the One Ford Plan (Taylor, 2009). Since then, Ford has been one notable success that has managed to combine efficiency and effectiveness at an affordable amount in all its processes including operations, finance, inventory management and supply chain.
The one Ford plan may have been a way to salvage the company but it has ended up making Ford one of the most innovative companies of our time (Hoffman, 2012). The plan had essentially taken into consideration all its stakeholders and included them in the operations management plan. The plan focused on uniting all the stakeholders to encourage innovativeness, flexibility, and profitability through restructuring its operations.
Operations Management is one key ingredient to an organization’s success and survival as is Ford’s case. Managing to combine quality, quantity, and affordability should be the main goal of any business (Hoffman, 2012). The three ingredients famously known as the 3E’s of operation management according to Westcott, (2016) include; efficiency, effectiveness, and economy were part of Ford Operational Management Plan.
Efficiency - This term is used to refer to maximizing the quality and quantity of the output using very minimal input. By being efficient an organization saves on time, finances and all other resources.
Effectiveness - For any given business value optimization is the ultimate goal. This can be achieved by adopting various strategies and processes depending on how effective they are. Effectiveness measures if an organization is on the right track by checking on the outcome.
Economy - In operations management, the economy is considered as a measure of what goes into the production. Economy encourages the use of inputs that act as cheaper alternatives.
Ford Company was able to integrate the 3E’s into its operational management plan and this is a perfect example of how and why operational management processes could help the company’s success.
A thorough analysis of Ford’s Operational Management activities reveals that the company has four key concepts embedded in its One Ford Plan. These concepts include:
Proper Planning and Execution
Success in any activity has always been associated with proper planning and execution. Ford took advantage of this concept over 10 years ago at a time when most automobile companies in the United States were seeking government support as a result of going bankrupt.
The company asked one of its executives to come up with a plan that could salvage Ford from the increase in threats as well as its own weaknesses. The One Ford Plan as it was known was well executed by the then CEO Alan Mulally. Proper planning ensures that activities such as supply chain, production and operations, finance and inventory management can be accounted for through operations management.
As part of the plan, Mulally has restructured the products of Ford in relation to each market in which the company operates. He was able to help Ford develop products that focus more on what each particular customer wants to solve the imbalance between what is supplied and what is requested. Ford regularly reviews all its plans on a weekly basis to determine their viability and future relevance.
Synchronization of activities and processes
The company was experiencing a mismatch between its expenditure and its income in which the former was very high which means the company was operating at a loss. Ford resorted into coordinating all its activities.
The first evidence of synchronization and coordination of all activities is the One Ford plan which united employees across the world and encouraged them to work as a team consistently towards a common goal. Initially, each global office would operate independently but after allowing for open communication across all offices and department it became easier to track activities and trends in each market. The inventory management continues to work hand in hand with the supply chain management department. By coordinating all its activities Ford Company was now able to focus more on innovation as it is much easier to identify replicated work.
Management and Control
Despite the company having so many offices in various parts of the world it still boasts of maintaining a grip of all its activities. Intensive market research and experience has helped the company categorize its clients into three that is those that prefer small automobile, those that are for medium automobiles and the demand for large automobiles.
Maintaining control for each regional market means that the company is flexible enough to respond to changes in each market.
Inventory Management - The Company uses a Just –In –Time Inventory management system. This means that no input resource is wasted as the number of raw materials to be used is dependent on the amount to be produced (Wild, 2017). The company had in the past let go of brands such as Jaguar in an effort to solve its ailing inventory management system which actually worked.
Organization of activities
Activities that do not have a flow may lead to chaos and confusion. By creating a flow it is easier to understand how materials are moving from one location to another.
Schedule - Ford has automated all its processes, meaning that operations can be planned in sequence with each other. Scheduling means that Ford organizes its activities depending on the market through its various offices across the globe.
For efficiency and effectiveness to be achieved, all operation management decision must be made on the basis of the above principles. Planning ensures that resources are mobilized in line with each specific stage of production. Once the materials are organized, personnel have to be coordinated to ensure a smooth workflow.
Efficiency and effectiveness are achieved once the processes have been successful as no resource will be over or under-utilized (Westcott, 2016). Efficiency is said to be attained when the objectives of a task have been achieved in the least costly manner. Effectiveness is achieved when the desired outcome of a task becomes the reality. The concepts above are detrimental to achieving efficiency and effectiveness.
Operation Management has so many benefits to an organization. Planning, control, organizing and coordinating can never be ignored in any institution. When done together in sync these four actions may solve the most unimaginable problems.
Reduction of business risk
Proper planning constitutes making predictions into the future. It ensures that a business is well prepared for uncertainties and can withstand them. Proper planning means that the company has control of its resources and is able to organize them as per the situation at hand (Ferrão et al., 2014). Through planning, Ford realized it had to dispose of brands such as Jaguar and the number of employees so as to acquire enough funds for research and development.
Businesses lose a lot without the proper management of resources. By planning, resources can be organized to be used in particular ways and coordinated to achieve particular objectives. This way the amount of waste is minimized.
Compliance with different rules and regulations
Multinationals like Ford are faced with different challenges with some being the rules and laws applicable to different countries. Putting in place strong operational management strategies is essential to ensuring that the different offices around the globe operate within the specific laws and that customer supply is met as per the specifications without having to inconvenience customers from other regions.
Global Markets may appear to be opportunities for growth for multinational companies; they may also a number of challenges. The companies may even find themselves amidst legal battles. Some of the concerns include:
Having offices globally means that the company is exposed to different cultures. One thing could have very different meanings in different cultures, for some a taboo for others something good.
Rules and Regulations
This poses as a major stumbling block to most multinationals with Ford being one of them. This requires Ford to be vigilant and on the lookout not to be on the wrong side of the law lest they incur huge fines (Vance & Paik, 2015). Compliance in itself is also quite tiresome. Ford has managed to minimize this by giving each global office powers to act within the country’s law but within the company’s framework.
Businesses are faced with this challenge on an everyday basis. Some global markets may have corrupt officials who demand some form of payment in contrast with the rules and regulations of the company. Ford has partnered with locals from the various countries who are conversant with the political environment to work either as tier 1 or tier 2 suppliers.
Businesses must at all times maintain an ethical profile as part of their responsibility. This not only improves the company’s image but also protects those who are around the business. Ford has maintained a great ethical profile by taking care of its environment. The company may be a key contributor to carbon dioxide emissions into the environment in the past but is now more focused on finding a solution to this. The company works in compliance with quality and industry standards.
According to Ford's Sustainability Report (2017/2018), the company produces automotive models that comply with the New Car Assessment Program (NCAP), which means they are safe for human use. The company’s cars have a rating of 5 for all regions which shows that they meet all the industry standards for safety and quality. Protection of safety is explained by that the company is conversant of human rights and takes an effort to ensure it upholds them.
Operations management is not just a theory advanced to guide businesses on how to operate; it is the way that businesses should follow to ensure success. Businesses are not in existence merely to make profits but also to provide goods at the most affordable cost which means that they must also be ready to minimize wastage on resources in the most efficient and effective manner (Vance & Paik, 2015). Ford is a perfect example of how operation management systems put in place are critical to the continuity of a business. Ford used strategies including disposal of brands such as jaguar to ensure a sound inventory and also tightening its conditions on the supply chain and within just two years it was making profits while competitors were running to for government help to get out of insolvent state.