DETROIT - Ford Motor Co. has put suppliers at the center of its cost-cutting campaign.
The automaker's new Total Cost Management Center furthers Ford's efforts to make suppliers more efficient by getting rid of waste.
True, in many ways the center is simply a new house for existing programs. But the building, which opened last month, also symbolizes the company's efforts to improve.
'We must cut costs continually and strongly,' said Germinder Bedi, Ford vice president of truck vehicle operations. He was speaking to representatives from Ford's biggest 150 suppliers this month at the grand opening of the center in Dearborn, Mich. 'This is not discretionary or nice; it is a necessity.'
Bedi sees the center and its programs as the key to Ford's ability to provide better products without continually raising prices.
The center dates back to 1987, when Ford used a concept called 'value management' in conjunction with Mazda to build the Probe coupe. Other Ford departments later adopted similar efforts to cut costs. In 1993, a Value Analysis Center was opened in Livonia, Mich. Livonia became the heart of the Total Cost Management program. Ford now has seven Total Cost Management offices worldwide, including the new one in Dearborn.
Commodity reviews. Under them, suppliers and Ford look at a specific component or material - such as seats, steel or instrument panels - and explore ways to reduce waste. The effort has cut the number of basic seat architectures used by Ford from 22 to six. By mid-2000, most Ford suppliers are expected to take part in the reviews.
The garage. This new structure lets Ford disassemble and examine its own vehicles and those of the competition. The goal is to identify better ways to manufacture cars and trucks, said Carlos Mazzorin, Ford's vice president of purchasing. 'Any idea we can borrow or steal, we'd love to have it.'
Lean Resource Center. This includes workshops, focus groups and a library on lean manufacturing. Under one aspect of the program, Ford experts move into supplier plants and help them become leaner.
KEY TO CUTTING COSTS
Total Cost Management and its efforts are largely responsible for Ford's cutting $3 billion in costs last year.
Ford purchasing and product development departments encouraged the Total Cost Management center to locate in Dearborn, said Andy Benedict, director of the center. Now most Ford departments are just a short drive away. The Livonia site, also in suburban Detroit, was not nearly as accessible.
Ford's effort has been successful, said Robert Alonzo, vice president for sales and product engineering at Steel Parts Corp. in Tipton, Ind.: 'The opportunity to take out cost is enormous.'
Ford represents 70 percent of his business, so being on the team is critical. But Alonzo said the process saves Steel Parts money because the Ford Total Cost Management approach is extended to Steel Parts' own suppliers - and their suppliers. Ford gains from the added efficiency at Steel Parts and its supply chain. Moreover, Alonzo said this approach has not diminished Steel Parts margins.
'Cost cutting is not part of our lifeblood,' said Alonzo. 'It's something we have to do continuously.'
Staff Reporter Robert Sherefkin contributed to this report