Aligned Business Framework Agreements On Track

Ford Motor Co. is nearly complete with phase one of its plan to enlist suppliers into its “Aligned Business Framework” program, Andrew Hinkly, executive director-Americas Production Purchasing Operations, says.

The ABF, which according to Ford was designed to “strengthen collaboration and develop a sustainable business model to drive mutual profitability and technology development,” is living up to expectations, Hinkly tells Ward's.

“That's beginning to take root. We're getting some traction out of that,” Hinkly says of the ABF program. “And the issues we're facing are handled better in the environment we're trying to create with the suppliers.”

The ABF is designed to cut Ford's key supplier base by 50% while growing business and strengthening relationships with select suppliers. Ford says it currently has 2,500 suppliers in 52 countries.

Once these goals are met, Hinkly says, increased profitability and quality will follow.

To date, there are 36 ABF suppliers, including four named most recently: BASF AG, Sanyo Electric Co. Ltd., Clarion Co. Ltd. and PPG Industries Inc.

Other notable suppliers on the list include Delphi Corp., Johnson Controls Inc., Lear Corp., Magna International Inc., Visteon Corp., Dana Corp., Robert Bosch GmbH, TRW Inc., Autoliv Inc. and ZF Friedrichshafen AG.

More suppliers should be announced soon, a spokesman says, adding that Ford is on track to have its complete list of preferred suppliers by mid-July as originally planned.

In the past, supplier surveys have ranked Ford poorly, but Hinkly says the ABF is beginning to change the perception the auto maker is difficult to work with.

By collaborating and being forthright with its suppliers, Ford says, it is mending fences that some thought were damaged irrevocably.

“The conversations with the suppliers are more aligned, more focused,” Hinkly says. “‘Easier to do business with’ is the feedback I get from the supply base, which is good. That's what we intended it to be.”

As part of its strategy, Ford is choosing one to three suppliers for each of the high-impact commodities, which include axles, brakes, electronic control modules, exhaust, instrument panels, transmissions and wheels.

At the same time it announced ABF, Ford instituted another strategy to streamline the parts purchasing process. By forming “matched pairs” between purchasing and engineering executives, Hinkly says it “changed the metrics.”

“Both purchasing and engineering (now) are measured on the same common metrics throughout the organization, from senior leaders for a product group — such as chassis — down through the design and release engineers and buyers,” he says.

Previously, those management groups “had different and segmented metrics (that) had an impact on the way they separately approached suppliers,” he adds. Now there is a “sort of mirror organization between engineering and purchasing with a single objective.”

In addition to increased collaboration, suppliers entering into an ABF agreement receive a greater volume of business, which leads to a de-emphasizing of “episodic sourcing,” Hinkly says.

He describes episodic sourcing as a fractured relationship that is built from program to program. “It's a question mark whether you have the next program or not,” Hinkly says.

With the ABF agreements, Ford is trying to foster long-term relationships.

Close to $2 billion of incremental or replacement sourcing has been placed with ABF suppliers so far this year, Hinkly says.

“There are many suppliers that have been with us for a long, long time,” he says. “So we take out that risk factor and assume we're going to have this business together indefinitely.”

Ford Purchasing — By The Numbers

• $90 billion annual global budget, including $70 billion for production parts.

• 2,500 suppliers in 52 countries.

• 1,000 staffers in North America, including 400 buyers.