Ford Motor Company and Penske Logistics Case Study Essay

Abstract In this case study I would highlight the importance of Penske Logistics to Ford Motor Company, one of the world’s largest automotive manufacturers. Penske has a good reputation and are highly valuable in the logistics field. They are very famous in using a process that identifies and removes errors efficiently with a set of tools that increases productivity in the business called Six Sigma. Penske had many challenges to overcome like developing and implementing and operate a centralized logistics network, also streamline supplier and carrier operations to improve performance and accountability, and finally provide a real time supply chain and financial visibility. Some of the solutions for the decentralized network, was to established 10 distribution centers, 1,200 trailers ship to and from the distribution centers per day with most trucks operate at 95% capacity and reduce plant inventory by 15%. To improve performance Penske trained 1,500 suppliers on a set of procedures in the logistic aspect, also they came up with carrier requirements for performance. Penske established strict accountability procedures for real time visibility of delivery status and routing schedules for the supply chain procedures. For financial visibility, they created a new freight billing system to capture logistics costs. In addition to all of this problems and solutions, Penske wants to be the leader provider of logistics management to Ford Motor Company to be well known out there in the business and to create long lasting alliances for their future benefit. Ford is an enormous company that owns different car brands in today’s market. Lincoln, Mercury, Land Rover, Aston Martin and Volvo make part of an alliance that is run by Ford. Ford was in big trouble with their decentralized logistic operations because they had 20 North American assembly plants run by 20 different logistic management operations. It was a complete mess because aside from all the other important car brands joining they didn’t have any control over their daily operations decreasing funds for material handling and transportation. Ford hired Penske to become a centralized operation run by only one company and not 20 different companies. This will increase both velocity and visibility throughout the network and reduce supply chain products. Penske would manage all 19 assembly plants as well as seven stamping pants. Penske develop a new logistics program called the Penske Logistics Center emphasizing in four different core components: Establish inbound Origin Distribution Centers, reduce premium freight costs, real time visibility of shipments, schedule and orders and improve freight billing and claim processing. After this plan was accepted and processed Penske/Ford started working together to achieve the best for the production of the motor company. They started evaluating the current network design and find out that this plan needed to be changed since it was being inefficient allowing excessive inventory increasing storage costs at plant level. To centralize transportation and distribution centers Penske created 10 ODCs for the purpose of having a central delivery point for suppliers. With this in effect shipments would now be cross-docked into trailers at the ODCs and loads would be delivered on a schedule basis instead of delivering half empty trucks. For carrier and premium freight management Penske goal was to maximize carrier service and minimize carrier costs. Since there were more strict requirements for carriers they would now have to meet safety, technological and equipment specifications, provide experience and certified drivers and most importantly show proven experience of on time delivery and pickups for the customer satisfaction. Carriers would now have a 15 minute window for on time delivery and pickup, also a manager will be on site for proper handling and order accuracy. Now with the new Carrier Rating System in effect all incidents would be recorded in the book and corrective actions for carriers would be in effect as well as carriers that have too many discrepancies in incidents would have a low carrier rating decreasing their chances on participating on future bids. Penske implemented new and advance information technology solutions, but one that caught my attention was the fact that drivers will now be provided with PDA scanners and an electronic driver log to process the claims faster and order receipts. Also every truck need to have satellite communications and engine monitoring systems for load tracking, delivery of individual parts is also scanned by using new innovative cross-dock scanners. With all of this new features developed and the centralized approach working the financial part needed to be clear as mud. Penske would provide drivers with an easy and simple set of procedures for accounting purposes. With the new Freight Billing System Ford can now tell which plant is producing less or which one is producing the most. 700 inbound and 500 outbound trailers move in and out Ford ODCs per day with most loads carrying at 95% capacity, unused docking space is being extremely high resulting in a 15% inventory reduction. The supply chain with the suppliers is now better and the new Carrier Rating System has put carriers in a dark spot by now increasing their service and getting better everyday so that they don’t get a low carrier rating for future bids or future references for other Motor Companies. With ODCs monitoring shipments in and out Ford can now see the overall supply chain costs per plant in case they need to cut expenses in the future they can shorten one plant and leave 19 more to generate revenue. The Penske Logistics center is also a success providing a single point of contact instead of 20 different points for logistics purposes. Penske not only work for their benefit to grow as a company but they have shorten expenses to Ford by reducing six ODCs and leaving four in full capacity so that new assembly plants can be created for production purposes. Ford has honored Penske with many awards like the Q1award which is the highest recognition of superior supplier quality. Recently in May 11, 2012 The European Logistics Association also honored this two companies for the European Logistics Award Excellence. I think that this case study was a definite success not only for Ford Motor Company, but for Penske Logistics. They both worked together and in only 18 months they have done major improvements to the automotive industry that the competition would follow and perform effectively. Penske with 40+ years as a logistic provider would now be a prestigious company that not only the automotive industry will want but the industrial, retail, electrical and many more industries will like to have on their side. I learned that the importance of the Six Sigma concept is really important for a company technological advancements in productivity and competency. Reducing errors to zero and making a complete and perfect order is crucial for centralized operations and to maintain streamline operations. I also learned that without logistics goods or in this case cars can’t be transport it is almost impossible to send a car overseas without the proper tracking, communications and on time delivery and pickup. In a nut shell, I think that only leaving four open for full capacity is a mistake because assembly plants will be more increasing the demand, but on the other hand it decreased expenses and generate revenue. REFERENCES Penske Logistics Providers (2013, January). Ford Motor Company: Six Sigma initiatives streamline operations. Retrieved from http:// www.penskelogistics.com/casestudies/ford2.html SharonVille Organizations (2011, January). Penske Logistics engineering supply chains delivering business results. Retrieved from http://www.sharonville.org/econ/pdf/Presentation/Penske%20Logistics.pdf