Made by Ford: How much Ford there is in a Ford?

Yes, the title sounds complicated, I know. But it is very simple as such: It is about the discussion “make or buy” and the proportion made/bought in a car. And it is for both parties: The “fans” of outsourcing and those who are sceptical about outsourcing as a business strategy. And it is not just for people liking cars… Let’s start then (and try to build a small car – or imagine how it can be built)


Do you remember (or better: are you familiar with) the famous phrase by Henry Ford: “Any customer can have a car painted any colour that he wants as long as it is black”[1]? Yes, that was said somewhere in the beginning of the 20th century. But the times have rapidly changed since then… Increasing market requirements have caused the explosion in the number of variants and types of cars. For the past ten years the number of car variants has increased by 400%! The product complexity requires more capacity in logistics, R&D and production area.


1910 Ford Model T: A car painted any colour (as long as it is black)
Source: Wikipedia.org, http://upload.wikimedia.org/wikipedia/commons/7/74/1910Ford-T.jpg
There are a few important factors the automobile industry has to challenge with now and in the coming years. These are as follows: High market dynamics, shorter cycles of production which require from companies to make their processes more effective and more efficient. Globalization is also a challenge bringing more competition and requiring companies to improve their cost structures. Therefore such factors as: Capital, people, raw materials, information, innovations and new technologies should be optimized during the production cycle. The crucial competitive factor is customer satisfaction which mainly depends on the product and service quality.


Successful 100% outsourcing
Source: http://peacerebelgirl.files.wordpress.com/2009/03/outsourcing_tcm18...
These companies which have decided to focus on their core competencies and outsource everything which is not their competitive edge, have already got their advantage over competition.

By now the American and European automobile industry could gain the following advantages using outsourcing:

• Cost savings and quality improvement,
• Reduction of the time needed for development of new models to 1.5 years (a few years ago there were 3 years!),
• Reduction of in-house-made portion to 17% at many cars producers (the average ratio is 35%),
• Increase in the number of possible car variants as mentioned before.


Ford Mondeo
Source: http://z.about.com/d/cars/1/7/q/l/ford_mondeo.jpg
But further outsourcing is necessary for companies. The latest financial figures should be one of important factors motivating companies for further outsourcing initiatives. They notice that some functions which have been seen as strategic and not “outsourcable” at all, can also be outsourced. There are for instance the following ones: Accounting, controlling, legal, even some parts of research and development and sales…

And what about the question “How much Ford there is in a Ford”? The question could also be formulated another way: Which country and what company is Ford actually produced by? Is Ford a car, a brand or a producer? The questions obviously holds true for other car models and their producers, too.

Magdalena Szarafin
http://www.szarafin.info