DEARBORN - @Ford Online recently sat down with Tony Brown, group vice president, Global Purchasing, to discuss the importance of Purchasing to Ford Motor Company's competitiveness and how the department continues to help the company achieve its One Ford goals.
Q. Can you provide an overview of the role Purchasing plays at Ford?
A. The role of purchasing at Ford Motor Company is really an exciting role. First and foremost, 65 to 70 percent of the cost of a vehicle comes from the outside of the company. In purchasing we have the privilege of managing that for the company. We manage it through all of the phases of product development, up to and including, parts coming into our Manufacturing operations and supporting FCSD. So, every part of the process for making a vehicle and selling a vehicle to our customers as well as servicing that vehicle at the customers, from a Purchasing standpoint we're a part of that process by helping to make it more efficient and more cost-effective.
Q. What does the Ford supplier network look like?
A. Historically, we have had a very large number of suppliers. About six years ago, we kicked off a program called the Aligned Business Framework (ABF). And that process is about rationalizing and reducing the supply base. Our Product Development colleagues have been on the march to increase scale and reduce complexity. Part of what we're trying to do from a Purchasing standpoint, working along with our PD colleagues, is to reduce the supply base so that we can transfer that scale effect from the product factory into our supply base – so that we end up with a more efficient and more effective supply base – giving it more scale, working with fewer suppliers, which allows us to deliver products to the market quicker and more cost-effectively with higher quality.
Q. There have been some supplier surveys this year that show a lot of improvement on Fords part. What is Ford doing to continue the good performance moving forward?
A. The recognition that we receive from the suppliers is really great for the company. There are 20 key principles that we look to when we conduct business with our suppliers. Fundamentally, it's about trust and transparency. Our suppliers have a choice about who they do business with. What we're trying to do with ABF is to position suppliers to chose Ford Motor Company as the company they want to do business with. We've seen our performance index in terms of supplier rankings continue to increase over the past six years. And all of those things allow us to become the customer of choice with our suppliers, which is very, very important to delivering the best product to the marketplace for our customers.
Q. What is Purchasing doing to support our efforts in Asia, Pacific and Africa?
A. The growth that’s going on in Asia, Pacific and Africa is having a huge effect on globalization. Purchasing, along with Product Development, spent the last year working very, very closely with our suppliers in the region. We are helping them to understand the growth plans that Joe Hinrichs and his team are laying down, At the same time, we are understanding the current investments that our suppliers have already put on the ground in the region. We want our suppliers to plan their investments consistent with our growth plans. Again -- so that they can optimize their return on their investments, and make us the customer of choice for them.
Q. Can you share some examples of how Ford has worked with its suppliers to increase the competitiveness of the company?
A. Key to working with our suppliers is the cost of goods sold, which, as I mentioned, are about 65 to 70 percent, of the material in a vehicle. Without us having a competitive supply base, there's little chance that we as an enterprise will be able to be competitive. From a functional standpoint, part of what we do is transfer what Product Development has done -- reducing complexity, reducing platforms, increasing scale -- into the supply base so that suppliers get the benefit of that effective scale at the same time.
We've also started to work on physical-base costing. We look at is what's called an Optimal Cost Estimate or an OCE, to understand what something should cost. We share those physicals with our suppliers and then work with them to deliver those costs consistent with the physicals associated with it. Where there are road-blocks to delivering that OCE, we identify them as a team, and then we agree what our work plan is to reduce costs to achieve the OCE.
Q. Looking toward the future, what will Purchasing do to remain globally competitive?
A. We believe our One Ford plan is the right plan. The translation of that, relative to Purchasing and our ABF strategy, is reducing the supply base, increasing the effective scale, driving physical base costing, and working with PD as a match pair. I believe this is the right strategy to deliver competitive costs for the company long-term on a global basis.
Q. How is working with PD and Manufacturing on a global level helping the company reach its One Ford goals?
A. Competitiveness is a team sport for us. So, along with Derrick Kuzak, who heads up PD and John Fleming, who heads up manufacturing, we meet regularly with our leadership teams on a cross-functional basis. We do this so we understand what John is thinking from a Manufacturing standpoint so we can align the sourcing strategy with that. We understand what's going on in Product Development from a product program standpoint so we can make certain we have supplies aligned to that. And then those three pieces together are what we drive going forward in order to deliver competitiveness for the company.
Q. What are Purchasing's priorities for the rest of the year?
A. Near -term priorities are to make sure that we deliver quality supplies at costs that we need to be competitive. Also, make certain that we have availability of parts so we can produce the vehicles we need for the marketplace.
Q. Do you have any final thoughts you'd like to share with employees?
A. Suppliers are strategically important for a number of reasons. Not simply because they represent a large portion of the cost, but also because they represent a significant portion of the technology that’s in our vehicles. One of the ways that we've approached this, consistent with our ABF principles, is to have what we call an Executive Business and Technology review. This is where the leadership of Purchasing, Product Development and Research and Development meet with our suppliers on a regular basis to share with them the technologies that we're interested in adding to our vehicles. This allows suppliers to align their technology investments so they are consistent with what it is that we're looking for from a technology standpoint on our vehicles. And that helps us to differentiate our vehicles in the marketplace when those technologies show up on our vehicles first, as opposed to our competitors' vehicles.
I would also say to employees that every one of us has an opportunity to influence and shape the relationships with our suppliers. We need to recognize that suppliers are a key, strategic advantage to any company. They contribute more than two-thirds of the parts on our vehicles, and they represent much of the technology that’s on our vehicles. Every one of us has an opportunity to improve our chances of becoming the customer of choice to those suppliers. So anything that you can do to make that a reality, you've helped to advance the competitive position of Ford Motor Company.