Ford will knock another vehicle platform off its roster and move toward refining its regional manufacturing strategy as it looks to continue to shave product-development time and cost and improve its economies of scale, the company’s top purchasing executive says.
The automaker also will take a more regional approach to its next generation of vehicles, making sure designs are flexible enough to meet cost targets in more price-sensitive emerging markets, Hau Thai-Tang, group vice president-global purchasing, tells attendees at the J.P. Morgan Automotive Conference in New York.
Thai-Tang points to the next-generation Focus platform now under development as an example of Ford’s new thinking on more-flexible architectures. Currently, the Focus is sold around the world with the identical independent rear suspension, a high-quality but costly choice for more price-conscious customers in still-developing markets.
The new model will be engineered with an independent rear suspension for more mature sectors and get a lower-cost, twist-beam solid-rear axle for emerging markets, saving material costs of about $85 per vehicle, while maintaining efficiencies in the supply base.
“If you look at those two suspensions, they’re not alike,” Thai-Tang says in the webcast presentation. “However, if you dig deeper and look at the manufacturing bill-of-process at the supply base, you’ll find the three most investment-intensive operations are common: stamping, welding and e-coating.
“We don’t necessarily need to have the same identical part. (But) by understanding those three critical capital drivers, we’re able to bundle the sourcing for those two parts to the same supplier and allow them to operate at a very high level of efficiency.”
It’s critical for Ford to get suppliers involved earlier in the development cycle, the Ford executive says, adding that’s probably the biggest lesson he’s learned since moving over to purchasing two years ago following 20 years in product development.
“A lot of focus is on scale; scale is very important because we work in a capital-intensive business,” he says. “But having a lot of scale of a design that’s too expensive is probably not the right answer, either.
“For us it’s more critical to make sure we have the right design that is compatible with the customer’s willingness to pay. And then we figure out how we maximize the scale savings.”
Simply taking a Ford-designed part out for bids is not going to get the automaker the best value, he adds. “There’s not much we can do to pay less than what that design will bear. The big opportunity is how do we engage our suppliers much earlier in the process and allow them to provide input to us to achieve the optimal design.”
Ford already has begun that process in work under way for its next-gen B- and C-cars, the executive says. Multiple suppliers are being “engaged” on roughly 80% of the total parts turnover on those vehicles, and many are participating in joint benchmarking with Ford and each other.
“We provide our suppliers with feedback on their competitiveness with their peer set,” Thai-Tang says. “They get a sense of how they’re doing against the best in the industry, and we use that to jointly arrive at the optimal design and set the optimal cost target for the next-generation product.
“It allows (suppliers) to influence our design,” he adds. “And it also allows them to understand how we’ve arrived at the cost target.”
Platform Consolidation, Manufacturing Rationalization
Ford launched 24 new vehicles globally last year and is wrapping up another 16 this year. Counting the start of production of new medium-duty commercial vehicles in Ohio this week, 13 of this year’s rollouts are completed, with two more to come in China and the Shelby GT 350 Mustang due later this month in the U.S.
Since 2007, Ford has been decreasing the number of vehicle platforms underpinning its lineup, from 27 then to just nine now, and increasing the number of carryover parts and commonality across vehicle lines to maximize profitability. It will trim its platform lineup to eight by the end of its current business cycle, Thai-Tang says.
“Global sales volumes are higher. Higher volumes on fewer platforms means a lot of scale globally,” he says. “That translates into much more efficient use of engineering and capital investment. So this is a huge source of efficiency for us. We’ve invested that efficiency into doing more products faster, and also those global products enable us to go into new markets much quicker.”
One of the ongoing efforts at Ford will be to better rationalize production at regional hubs that then will be able to build vehicles in higher volumes for a wider array of markets. He points to Focus production in Russia, Argentina and Thailand, where volumes are low and there are efficiencies still to be gained.
“In those regions, we have to think about how we bundle that sourcing to allow our suppliers to operate more efficiently,” he says. “One of our key learnings is looking at our manufacturing hubs and consolidating (them) to allow us to have greater regional scale.”
One example of that is Ford’s B-car production. Half of the volumes for that platform are in the Asia-Pacific region, so the automaker has consolidated its manufacturing footprint in India, Thailand and the ASEAN region for both local and export markets around the world, Thai-Tang says.
Asked if Ford watches supplier profits closely and will insist on taking a bigger share if margins get too broad, the purchasing chief says, “The One Ford goal is profitable growth for all. We want a healthy supply base.
“The supply base is at a really good place. They’ve right-sized capacity in line with demand, and they’re in a much better position to decide who they want to do business with. We want Ford to be a customer of choice.”
