Problem:
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?