This is the third installment of a Ward’s 7-part series stemming from interviews with the purchasing departments of GM,, , Toyota, and Nissan.
Motor Co.’s purchasing operations are being transformed under CEO Alan Mulally’s “One Ford” strategy, which calls for all divisions to operate on a collaborative global basis.
To align North American purchasing with the rest of the world, Ford last year called on Paul Stokes, former head of European purchasing. Stokes succeeds Andrew Hinkly, who has left the company, and reports to Tony Brown, senior vice president of global purchasing.
Under Ford’s new “matched-pairs” system, which teams product-development personnel with those from purchasing, Stokes works with Paul Mascarenas, vice president-product development-The Americas. Together, they are responsible for all the components that go into Ford’s global lineup.
Other matched pairs include Derrick Kuzak, group vice president-global product development, and Brown; Burt Jordan, executive director-global powertrain purchasing, and Barb Samardzich, vice president-global powertrain engineering.
Stokes faces numerous challenges, including escalating commodity prices, poor supplier relations and falling sales, at the same the auto maker is undergoing a massive restructuring as consumers shift from large trucks and SUVs – long Ford’s cash cows – to small, more fuel-efficient cars.
If Stokes is daunted by the task at hand, the personable and soft-spoken executive does a good job of hiding it during a recent interview with Ward’s.
Stokes leverages much of the knowledge gleaned from his stint in Europe in his new post in North America, although he admits there are significant differences between the two regions.
“In Europe, the market is buoyant,” he says. “Ford is doing particularly well in Europe. Most of the conversations start with, ‘Can you produce some more components?’ Which is not a bad way to start a conversation. Here in North America, unfortunately, most of the conversations start with, ‘We’re cutting the volume.’”
Fortunately, the majority of Ford’s key suppliers operate on a global basis, which allows for lost production in North America to be offset by the auto maker’s gains overseas.
Ford does not rely solely on global suppliers for its parts due to regional differences that cannot be avoided. Still, the concept of a global supply base is the crux of its “Aligned Business Framework,” which rolled out in September 2005 to “develop a sustainable business model to drive mutual profitability and technology advancement.”
The program also is intended to cut Ford’s key supplier base 50%, while strengthening relationships with select preferred suppliers and improving quality.
The methodologies behind ABF, the One Ford strategy and the matched-pairs system are closely aligned, and Stokes and his team are taking advantage of their global focus.
Unlike the past, when global suppliers had to deal with different Ford personnel in different regions, today they speak to one of the matched pairs, which simplifies their business plans, improves communication and allows for personal relationships to be cultivated.
“It’s been complicated for (suppliers) because they’ve been talking to different people,” Stokes says. “At least now when they come to have a conversation, we can give them a global impression of what’s going on.”
Stokes cites Ford’s upcoming C-car – reportedly a global version of the Focus – as an example of how the worldwide approach streamlines interaction between the OEM and its suppliers.
Earlier this month, Stokes, Brown, Kuzak, Samardzich and Jordan invited a small group of suppliers to Europe to review the C-car, Stokes says.
“We explained exactly where we want to make the C-car, what the global volume will be and the suppliers we want to work with,” he says. “We invited them to see the new models in the studio, which is something we’ve never done before at this stage, so they can actually start to get some excitement as well.”
Stokes admits there are some cases where operating globally makes no sense, especially for a unique component that only a handful of suppliers produce.
“This idea that we’re going to end up only with global (suppliers) will never be the case,” Stokes says. “In some areas, we will be able to use global suppliers, but we’re not asking every supplier to go build factories all over the place. I think we tried to do that once or twice before in the past and it wasn’t necessarily a good idea, was it?”
Stokes says Ford is working with the ABF group of suppliers, which includes more than 59 companies, on a “cross-functional, cross-global” review to develop its commodity business plan that covers 112 sets of components.
“We’re looking at where we are with certain components and what is the likely footprint of these components, and not (necessarily) the suppliers,” he says, adding Ford plans to launch a 12-week review to discern what’s “happening in terms of technology.”
Once the review is complete, Ford’s team will present the findings to people spanning all its divisions from top to bottom.
“We’ve arranged eight of those visits this year. The information (will be put) into our commodity business plan, which forms part of our road map to the final reviews,” Stokes says. “And at that point, we start looking at the suppliers and saying, ‘How many (suppliers) do we think we need globally on these commodities?’ and ‘which ones are we going to make ABF?’”
Jordan describes the commodity business plan as the “essence of how we run our business.” The initiative is “about reducing complexity and what is the migration plan with our suppliers,” he says. “It covers technology, the supply base and what our manufacturing footprint needs to look like.
“It is our gospel and the fundamental basis of how we operate in terms of matched pairs, which is the essence of what Alan (Mulally) is trying to do when you hear him saying he wants Ford to look alike around the world.”
Both Stokes and Jordan decline to reveal specifics on the inner workings of Ford’s commodity business plan, calling the strategy a “competitive advantage.”
While the ABF was designed to cut back on the number of suppliers, in some cases more than one supplier per commodity is needed, especially as new technologies emerge, Stokes says, citing tires as an example.
“How many times have we seen tire technology leapfrog? One company will lead for a while, then another,” he says, adding four or five tire suppliers are needed to cover a product portfolio that ranges from high-speed tires for the Autobahn to rugged tires for the poor roads in emerging markets.
As for brake suppliers, two or three would be an ideal number to supply 100% of the global market, Stokes says. “There may be a debate as to whether you would want three, but you certainly want two.”
Improving relationships with suppliers is a must, as Ford has ranked poorly in surveys measuring the level of trust between OEMs and parts makers.
Stokes and Jordan, who spent years working for Ford’s Asia/Pacific operations, say they have developed close relationships with suppliers over the years that should serve them well moving forward. “We’re going to continue to improve that,” Jordan says.
In-sourcing the production of certain components also factors into the auto maker’s future plans, Stokes says, noting he meets regularly with Joe Hinrichs, group vice president-global manufacturing, to discuss possibilities.
Where it makes sense, Ford looks at ways to in-source components, especially larger ones. “There are some things we are looking at bringing in-house because we have the capacity to do that,” he says, citing the machining of powertrain components as one example.
“We’ve ended up with some machining capacity and, prudently, we wouldn’t leave it idle. We’re looking at a lot of stuff with Joe (Hinrichs). Where he’s got open capacity, we would like to fill it for him, because we’d like to keep jobs for the guys in the UAW (United Auto Workers union) and make sure they’re supported properly.”
In addition to in-sourcing components where necessary, Stokes also wants to take a look at parts produced by Ford’s Automotive Components Holdings LLC subsidiary.
ACH is composed of orphaned manufacturing plants and other facilities the auto maker acquired from former subsidiaryCorp. in 2005. Ford wants to sell or shutter the eight remaining ACH plants by year’s end.