Ford accelerates supplier consolidation plans
Automaker plans to halve its supply base by year end
Dave Hannon -- Purchasing, 6/25/2009 11:07:11 AM
Between an ongoing slump in automotive sales and a rash of supplier financial problems, Ford Motor Co. has decided now is a good time to ramp up its plan to consolidate its supply base.
And consolidate it will.
According to a Ford statement only 850 production suppliers will be eligible for new sourcing by the end of this year. That is only about half the number (1,683) of suppliers that were eligible at the end of 2008. Ford's long-term goal is to get its production supply base down to 750 suppliers, although it did not provide a time frame for that goal.
In an interview with the Detroit News this week, Tony Brown, Ford's group vice president of global purchasing, said, "Capacity needs to come out of the system. The issue isn't, 'Does it need to?' It's 'How does it?' Does it come out cataclysmically or in an orderly fashion? We'd certainly like to see it come out in an orderly fashion."
In some respects, the health of Ford's supply base took a downward turn due to the troubles of Ford's competitors, General Motors and Chrysler, emphasizing the inter-relationships within the automotive supply chain. In a meeting Wednesday regarding the supplier financial stress, Brown called the decline of the supply base "breathtaking" and added, "It's the worse I have ever seen in my life. The next three to four months will be critical to the supply base as Chrysler and GM come back online."
As reported last week on Purchasing.com, the Treasury Department rejected a request from the automotive supply base for an additional $8-$10 billion in aid.
At the same time, Ford also said it has added 16 more suppliers to its list of approved suppliers under its Aligned Business Framework, bringing the number of ABF suppliers up to 82. Ford's commitments to ABF companies include sourcing for the life of a program or platform, improved parts commonality and more information sharing of product plans and forecasts. (For details on the ABF plan including a list of Ford's 20 ABF requirements, see Survival lessons from automotive buyers).
Ford also this week held its annual supplier awards banquet. Thirty-six suppliers representing operations in eight countries were recognized in various categories at the 11th annual gathering of the event.
Now Playing: 