JIT system uses electronic data interchange (EDI) that will assist it in connecting Ford with all its suppliers and customers. In this system, Ford will be transferring electronic documents and business data from computer systems in its head office to other computers in its branches and suppliers without the need of physical movements (Bragg, 2009). In addition to this, it will be making orders for the supply of components required in the manufacture of 2012 Ford Explorer from its computers as soon as customer demand for this model rises. Before Ford implements Electronic Data Interchange, it will need to agree with its suppliers on the specific information that they will transmit using this system in addition to how they should use this information.
Ford should use value-added networks (VAN) to connect its systems with systems of its suppliers and customers. VAN receives, examines and then routes transactions to a final recipient. Moreover, VAN will enable Ford to retransmit documents to its suppliers if these documents fail to reach systems of its suppliers and audit information received from all its suppliers. This system also provides delivery reports to the supplier immediately after the supplier’s components reach the premises of Ford. Since JIT systems use EDI, Ford will benefit in the following ways. It will save the company costs that it would have incurred if it used manual data entry. In addition to this, it will reduce errors such as billing and shipping errors since when an organization uses EDI, it does not need to rekey documents when they reach the destination (Bragg, 2009). It will also increase the speed at which Ford will be making orders to suppliers and thus there will be on time delivery of the components required to manufacture 2012 Ford Explorer as soon as customer demand rises.
JIT system uses total quality control as a business practice. Most companies use this philosophy in order to improve the quality of products and business processes. If Ford adopts this philosophy, it would be continuously examining all the processes that it is carrying out, learn where mistakes occur in these processes and find ways of reducing these mistakes in future (Kayak, 1997). This practice requires support of management, workers, suppliers and customers in order to identify areas in production that need improvement. The executive management of Ford should ensure that they create a good environment that will help the other employees to adapt to the total quality management model. In addition to this, it should ensure that it trains all its employees on the methods and concepts of total quality control. It should also ensure that the improvement of 2012 Ford Explorer is directed towards customer’s satisfaction. Moreover, it should ensure that it employs more staff in the quality assurance department who will be ensuring that all the stock supplied by suppliers is of high quality and that cars are produced to meet demands of consumers as consumers specified them.
Total quality management reduces inventory wastages. This is because the quality assurance department inspects all the incoming materials and thus suppliers will not supply defective products to Ford. In addition to this, this system relies on quality audits performed on the stock during stock taking exercises and thus management is able to identify ineffective stock control (Kaynak, 1997). Moreover, it carries out failure analysis in order to determine whether product failure was caused by poor inventory systems.
Value of Approach
Just in Time system will add value to Ford in several ways:
Increase in the productivity of Ford Company
If Ford adopts this inventory system, the productivity of this company would increase. This is because this system uses total quality control and thus it is able to improve all the defective processes in its production system. In addition to this, this model uses electronic data interchange and thus it increases the speed at which the supplier’s deliveries reach the premises of Ford (Lai & Cheng, 2009).
Reduction of Inventory Costs in Ford
This system helps in minimizing stock holding costs. This is because if Ford adopts this system, its level of inventory will be zero or at minimum levels as it will order stock only when customer demand for 2012 Ford Explorer rises. In addition to this, it will not tie most of its funds in stock since stock will be purchased only when it requires using it in the production process (Sulivan, 2005). The warehouse charges such as rent, lighting and maintenance costs will also reduce since Ford will not need to hire space for storing inventory in anticipation of production. Moreover, Ford will not need to insure the inventory since it will be using its supplies as soon as they reach the premises of this company.
Improved Job Satisfaction
If Ford adopts this system, it would improve the level of job satisfaction of its employees. This is because this system requires employees’ participation in major processes and decision-making. Employees will thus feel that the management of this company appreciates their efforts and contributions. In addition to this, the implementation of this system requires extensive employee training programs so that all the employees understand the implementation of this system (Bragg, 2009). These training programs further improve skills of these workers and thus the employees feel more motivated. Success of Just in Time system requires participation and co-ordination of all departments in Ford. Since all the employees will be coordinated to archive goals of Ford, employees’ morale will improve thus increasing job satisfaction of all the employees.
Improved Competitive Advantage
Just in Time system concentrates on improving the business processes through total quality control. It also concentrates on designing products according to consumer’s specifications and thus it will design 2012 Ford Explorer according to the needs of its consumers. This will increase consumers brand loyalty and thus Ford will make more sales. This system also requires good communication and relationship between Ford and its suppliers. Suppliers will thus want to enter into contracts with Ford due to good mutual understanding (Sulivan, 2005).
Reduction in Wastages
By using Just in Time system, this company will eliminate the waste of overproduction of cars. This is because this company will produce cars only when customers demanded them. Furthermore, it will reduce the transportation costs since it will order components from suppliers only when it requires them and the automation of this system will reduce the wages paid to the drivers involved in the delivery process (Sulivan, 2005). It will also reduce waste arising from the production of defective cars. The automation of the system will help it to reduce these defects since machines will be involved in fixing of seats and battery placements. This system will also reduce idle time since employees will be involved in the production system only when the demand for the production of this model of cars increases.
Business Process Changes
Ford needs to change its businesses process and adopt a Kanban pull system. In this system the business processes are based on customer’s demands. If Ford adopts Just in Time, it will need to ensure that each production process is designed to produce what it can deliver and thus its business becomes leaner. Kanban pull system utilizes visual aids which show whether each department has finished a process or if it needs more supply of labor and raw materials (Louis, 2005). It triggers the production process in a backward motion. Moreover, it uses cards and containers as a signal media. By adopting this business process, Ford will achieve improved quality in material handling skills that will help in ensuring that parts are moving in synch from its inventory to the production departments. In addition to this, this system requires continuous sales forecast for its success and thus production will be in line with the market demand. This system also achieves a balanced inventory that will help Ford to meet the commitments of the customer’s lead-time (Louis, 2005). Moreover, it reduces inventory cycle time and thus reducing the level of buffer stock inventory.
It should also consider adopting the model of business process management proposed by Kohlbarcher. This model groups process management activities into six categories that include vision, design, modeling, execution, optimization and monitoring (Jeston & Nelis, 2008). Furthermore, this model designs its functions according to the strategic visions and goals of the organization. Ford should adopt this business process change due to several reasons. This process increases accountability in each department of the organization. This is because it tracks and monitors expenditures to ensure that departments meet all the deliverables according to their budget constraints. It will also avoid wastages in operations of Ford’s processes since it involves the assigning and tracking of corporate resources. Moreover, it will promote safe working condition for all the workers implementing JIT systems.