Inventory Management

At Ford Motor Company inventory management is definitely not a new idea, as inventory management has some of its developing origions of starting at Ford Motor Company itself.

Ongoing analyses of both inventory management and manufacturing processes have led to innovative management systems, such as just-in-time inventory or the economic-order quantity decision model. Just-in-time inventory is a process developed by the Japanese based on a process invented by Henry Ford.

Henry Ford managed to cut his inventory by forty million dollars by changing how he obtained materials to produce automobiles. Through a process called vertical integration, Ford purchased mines and smelting operations to better control the source and supply of material to produce cars. In this way, he was able to reduce his standing inventory and increase turnover. In the 1950's, Taiichi Ohno, a mechanical engineer working for Toyota Motor Co., refined this process into what we know today as just-in-time inventory.

Just-in-time inventory usually requires a dominant face (or a major partner that has the resources to start the process and keep it organized and controlled) that organizes the flow and communication so that all the parties in the supply process know exactly how many parts are needed to complete a production cycle and how much time is needed in between production cycles. By having and sharing this information, Ford Motor Company and its suppliers are able to deliver just the right amount of product or inventory at a given time. This requires a close working relationship between all the parties involved and greatly minimizes the amount of standing or idle inventory.

In the economic-order quantity decision model, an analysis is made to determine the optimum quantity of product needed to minimize total manufacturing or production costs. In other words, through a complex analysis, management attempts to determine the minimum amount of product needed to do the job and still keep the cost of inventory as low as they possibly can. This analysis considers the amount of time needed to generate an order, to process, manufacture, organize, and ship each product, then to receive, put into inventory at a Ford Dealership store, and then sell each product. Lastly is to process the paperwork upon receipt through the final payment process.

Ford Motor Company, like many companies today employ a mixture of both processes in order to maintain their independence but still have a close relationship with suppliers. Ford Dealerships, for example, work closely with Ford Motor Company to maintain the lowest possible inventories but still have enough cars to satisfy their customers demand. Ford Motor Company has access to information about each of its Ford Dealerships inventory levels, this allows management to further analyze inventories to ensure that each Ford store is carrying the correct amount of inventory in stock to satisfy that markets needs and maintain minimum levels.

The Inventory Management Process at the Able Ford (formerly Oasis Ford) Dealership.

At Able Ford, New Car Inventory is ordered by computer, using a UCS Tracking System, this allows the inventory department to order the cars and then track them through the production system and shipping process. This also allows for them to see what is currently in stock, what is incoming, or what is currently being built. This system utilizes a counter balance so that the department knows that a certain amount of the inventory will be gone by the time the incoming inventory is then in stock. So if a car has been in stock for over 500 days, the system tells them not to reorder it.

Also at Able Ford the inventory department has an inventory sales history, which allows them to properly forecast short-term needs and to also know which cars are not being sold. It provides sales for the past 6 years and will tell the inventory department what type of cars tend to sell the most during a given month. So if every April, Able Ford tends to sell 30 Ford Focuses, and there are only 15 in stock, then they know to order more to have for that given month. This system helps them with control by tying in with the Ford Motor Company sales and manufacturing departments. Whenever a sale is made of a car that has been sold, the car is deleted from inventory and made part of a history file that can be reviewed manually or automatically, and that depends on how the inventory department wishes to keep things organized.