New Ford Purchasing Chief Leveraging Engineering Background

DEARBORN, MI – The One Ford plan instituted by CEO Alan Mulally focuses on leveraging the automaker’s global resources, but in some regions of the world the strategy doesn’t make sense, says Hau Thai-Tang, group vice president-purchasing.

Thai-Tang, former vice president-engineering, was appointed to his new job in July, a role in which he had no previous experience. An accomplished engineer, he now oversees all of Ford’s $100 billion in global purchasing, ranging from car parts to toilet paper for the automaker’s facilities around the world.

Despite his inexperience as a purchaser, Thai-Tang says he is charged with determining where One Ford works and where other options make better business sense.

As Ford whittles down the number of global platforms and standardizes more parts, it is able to leverage economies of scale and reduce engineering complexity. That works well in areas such as North America, where a single assembly plant cranks out hundreds of thousands of units annually, but not in developing regions such as Russia and India, where fewer than 40,000 cars may be produced at a single facility in a year.

“We’re going to those regions and talking to suppliers who are saying our global scale is not helping because they’re only producing 40,000 (units),” he says during a media briefing here. “So we’re asking ourselves, ‘Can we do a better job in those regions of getting more commonality to get the right level of scale?’”

In areas where it doesn’t make sense to import parts used globally, Ford either works with local suppliers to develop a new component or seeks to share parts with another vehicle built at the same locale.

Ford’s large number of joint-venture partners help with finding the best local suppliers for the job, while Thai-Tang’s engineering background aids in determining the best way to standardize parts.

“Not one size fits all,” he says. “Global design doesn’t always translate to efficiency.”

If the vehicle is a “good shipper,” meaning it’s low-priced and has appeal in all global markets, Ford builds it in one low-cost country and exports it around the world.

Despite circumventing the One Ford plan in certain situations, Thai-Tang is quick to point out Ford is not reverting to being a regional company, where different business units operate autonomously.

In fact, he says Ford already has reduced its number of global platforms from 27 in 2007 to 14 today. The ultimate goal is to have only nine by 2017, he says.

Like automakers, suppliers are stretched thin on capacity following huge cuts during the height of the recession, Thai-Tang says. The situation has led to a number of issues, including quality problems.

When capacity was plentiful, suppliers could work out system glitches on days they weren’t manufacturing parts, a luxury no longer available.

“The supply base in some cases is not doing preventative maintenance, because they’re running flat-out,” he says. “So we’re looking at supplier operations for capacity per week and trying to avoid where suppliers are operating at max all the time.”

To avoid overloading suppliers, Ford has developed a ranking system. Suppliers deemed capable of handling extra capacity are labeled green, while those operating at maximum production too frequently are yellow.

“We’re looking at reducing that (yellow) number,” Thai-Tang says.

Because suppliers have all the business they can handle, they often have the upper hand when inking contracts with OEMs.

That poses a challenge for automakers asking suppliers to set up operations close to their manufacturing facilities.

To circumvent the situation, Thai-Tang has maintained the Ford’s Aligned Business Framework, a network of preferred long-term suppliers developed by his predecessor, Tony Brown.

Today there are 65 ABF members out of Ford’s total 1,300-company supply base. ABF suppliers account for 60% of Ford’s overall business, while the top 100 parts makers make up about 80% of the automaker’s $100 billion annual spend.

“We think there are opportunities to get to 750 suppliers and still have plenty of competition, because you get the best ideas from innovative suppliers,” Thai-Tang says.

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