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Wednesday, July 23, 2014

Ford Sets High Standards for Its Elite Suppliers

Carmaker Ford has had one of the most talked-about turnarounds in recent auto industry history. A big part of the reason behind the string of success for the second-largest U.S. automaker is its closer collaboration with its global supply chain.

As noted in last week’s article, Ford’s Aligned Business Framework is primarily a process in which the auto OEM promotes regular communication and collaboration with select suppliers to learn about technologies they are working on and that can be applied to its products and operations.

The payoff for Ford is advanced features and vehicle differentiation from competitors. The benefits for ABF members include long-term supply deals that result in revenue and growth.

membership_fordFord has unveiled an enhanced “2.0 version” of its ABF supplier program. ABF members will account for about 14 percent of the automaker’s global suppliers by the end of the year but supply 70 percent of products. They are the best of the best in quality, technology, product development, and support for Ford.

The ABF program, which was developed by a former chief of global purchasing, shows how much impact a supplier initiative can have in qualifying and building a top-notch supply chain.

For Ford’s suppliers, joining this elite group requires more than innovative technology and best-in-class quality. Kristina Adamski, a Ford representative, says suppliers must also demonstrate financial stability, adherence to good corporate practices, and the ability to promote the carmaker’s values throughout their own supply chains.

Ford, for example, wants good working conditions in every supplier’s plant no matter where it is. The automaker also expects suppliers to adhere to a company-approved code of conduct, one rule of which is to treat employees humanely. The OEM not only wants Tier 1 and Tier 2 suppliers to accept ABF rules but also to make certain that their sub-tier vendors do so, as well.

As an example, Adamski says Ford encourages ABF suppliers to source at least 10 percent of products from companies owned by minorities, women, and veterans. It also wants them to encourage the same out of their own suppliers.

As much as anything, ABF is “a set of business principles that Ford follows,” she says. “It’s a laborious joining process. Many suppliers have to change their key business attributes and accept our code of conduct. ABF is not for everyone.”

Ford works with suppliers that are not part of the program, but in using a family analogy, Adamski says ABF members “are like the wife and kids, while non-members are the nieces and nephews.”

One benefit of the program is that it provides alternate supply sources if one part of the global supply chain has problems. The 2011 Thailand floods, for example, knocked some suppliers there out of commission. Suppliers in other parts of the world with excess capacity were able to pick up the slack and deliver the parts.

Ford has secured a long-term position in innovation and product development through ABF, Adamski says. She has seen concepts for vehicle features that are being developed with supplier input and which aren’t slated to appear before 2022.

The OEM is also committed to investing in its supply chain for the ongoing improvement of its vehicles. The bond it has created with ABF suppliers will continue to be a big part of the success Ford has had in delivering innovation to an increasingly competitive global car market.

 

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