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Tuesday, 28 June 2016

Rationale for an international supply chain at FORD Motor Company

FORD runs an international supply chain. This could appear to be an obvious choice for the organisation since its 77 manufacturing plants are located in different parts of the world. But when reviewed critically, it is possible for an international company to source for its supplies from the same market. A focused strategy in sourcing where all supplies come from the same market can present the organisation with the benefit of enhanced coordination between the suppliers. The sourcing would also be in bulk and this could help with negotiation of better discounts. But it is quite uncommon to find a single market that can comfortably produce a wide range of supplies. FORD uses in excess of 100,000 materials in production. It is highly unlikely that all these could be available in a single market. The main merit of international sourcing is therefore the fact that variety can be obtained.

The second merit for an international supply chain network is that it tends to be very resilient. Catastrophes and economic upheavals in one region would often be overcome by focusing more on suppliers in different regions. This helps in operational efficiency being maintained around the year. The international network also helps the organisation to benefit from obtaining the best supplies available. Where the supplies are being sourced from a wider scope, the probability of getting the best supplier is much higher. This is important for promoting quality and innovation.

The only weakness in the international supply chain is the risk of poor coordination and supplies. Having suppliers that are geographically remote increases the lead times needed for the delivery of supplies. Besides, the long distances could prove to be very costly where the price differences are not sufficient to offset the projected increase in the cost of transportation of supplies. This demerit is overcome by FORD through enhanced coordination where the regional offices help in ordering in bulk and distributing the supplies to the manufacturing plants. The overall assessment is therefore that the international supply chain is the appropriate model for the organisation. 

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