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Controlling inventory is one of Ford's most difficult issues

Controlling inventory is one of Ford's most difficult issues. Operating according to a strategy of mass customization and responsiveness, Ford management knows that success is dependent on such factors as tight inventory control, Anything else results in difficulty to deliver product expeditiously, trouble on the assembly line, and a gigantic inventory investment.

Ford finds that nearly 50% of the $40,000 to $100,00 cost of every vehicle is purchased materials. A huge proportion of that 50% is in chassis (purchased from another organization), aluminum (also purchased from another organization), and plywood used for other uses in the products.

Ford tracks these "A" inventory items quite cautiously so as to maintain tight security/control and ordering carefully so as to maximize quantity discounts while minimizing on-hand stock. Because of long lead times and scheduling needs at the other organization, aluminum must actually be ordered as much as 6 months in advance, at least.

Despite a competitive cost advantage compared to the other competitors in the industry, cycle counting in the stockroom is vital to operations. No part can leave the locked stockrooms without appearing on a bill of materials. As one knows, accurate bills of material is a requirement if products are going to be built on time. Additionally, because of the custom nature of each vehicle, most orders are won only after a bidding process. Accurate bill of materials are important to cost estimation and the resulting bid. For these reasons, Ford should maintain sufficient inventory control.

1. If you were to take over as inventory control manager Ford, what policies and techniques would one implement to ensure accurate inventory records?

2. How would one go about putting these suggestions in practice?

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1. If you were to take over as inventory control manager Ford, what policies and techniques would one implement to ensure accurate inventory records?

Ford is one of the largest carmakers and has a product line of eight different carlines which holds to be very impressive to the vehicle consumer. Some of these brands include Jaguar, Aston Martin, Land Rover etc. It is also involved in financing its products through its subsidiary Ford Motor credit. ( The major competitors of Ford are GM, Toyota, Daimler Chrysler, Honda, and Hyundai. Since few years it's facing lot of challenges and its financial performance has also gone down.

Inventory is defined as store of goods. Inventory is often discussed in terms of goods for sale; organizations - manufacturers, service-providers - also have inventories. Inventories are not only intended for sale to customers it may also be held in any premises an organization for use. Stock ties up cash and if uncontrolled it will be impossible to know the actual level of stocks and therefore impossible to control them.
Most Manufacturing organizations usually divide their "goods for sale" inventory into:

? Raw materials - materials and components scheduled for use in making a product.
? Work in process, (WIP) is made up of all the materials, parts (components), assemblies, and those is being processed or are waiting to be processed. This generally includes all material and components that have begun their transformation to finished goods.
? Finished goods - goods ready for sale to customers.

A manufacturer must maintain some inventory of raw materials and work-in-process in order to keep the factory running.

As said by, L.K Brown- Atlope International ,Inventory control problems often result in record and physical count inconsistency which may ultimately lead to higher than preferred inventory levels. Conversely, accurate inventory records result in lower inventory investment and are the foundation for forecasting, ordering, tracking, vendor evaluation, and dead stock administration programmers. Some of the techniques for ensuring better inventory ...

Solution Summary

1200+ words, with references, on Ford's inventory control techniques.