Ford Production Woes Teach Supply Chain Lessons

On May 9, Ford hit the headlines when it had to halt production on its popular F-150 pickup truck. The issue was caused by a factory fire at one a supplier plant on May 2nd .  The automaker wasn’t alone as the fire also slowed production for General Motors, Fiat Chrysler and Mercedes as well.

Ford was forced to shut down the truck side of its Kansas City Assembly Plant in Missouri, which sent 3,400 workers home, according to a report in the Detroit Free Press. Workers were also sent home from the the Kansas City Assembly Plant and the Kentucky Truck Plant in Louisville, affecting Ford 7,600 employees in all.  

Image courtesy: Ford

Image courtesy: Ford

The shutdown was linked to a parts shortage caused by the fire at Meridian Magnesium Products in Eaton Rapids, said Kelli Felker, Ford spokeswoman. For Ford, Meridian Magnesium was a key supplier, as the company bought about one-third of the parts built by Meridian.

“The Ford shutdown is one more example that even with a pretty solid supply chain infrastructure and planning in place, you can still have stuff happen,” said Ronnie Gibson, vice president, innovation for insurance provider FM Global. “Our collective task is to try to understand a supply chain at level and depth that those sleepers don’t take us by surprise.”

Although the calamity was predicted to cause delays that would last weeks, the truck manufacturer managed to turn things around in just under two weeks.  Ford reported that, despite fire-related shortages of a number of key components, it will begin producing the F-150 pick up again tomorrow as it resumes production at its Dearborn, MI plant, according to USA Today. Production of F-150 trucks at the Kansas City assembly plant and of the heavy-duty version of the F-150, called the Super Duty, at the Kentucky Truck Plant, will restart on Monday,

“Ford marshaled a global team of experts, that included partners and suppliers, following a May 2 fire at Meridian Magnesium Products in Eaton Rapids, Mich., to quickly refurbish and relocate tooling needed to produce parts for the Ford F-150, Super Duty and five other vehicles — Ford Expedition, Explorer, Flex and Lincoln Navigator and MKT,” the company said in a statement published in USA Today.

Often, hurricanes, floods, and other weather-related events take the most mindshare for those doing supply chain risk planning. However, factory fires and explosions are by far the most common type of supply chain disruptions, said Bindya Vakil, CEO and founder of Resilinc. “I try to tell our clients that supplier factory fires are the most common type of event,” she added. Often, they aren’t immediately affected by it if it’s a second-tier supplier. Often, too, suppliers don’t explain why there are delays.” In fact, fires/explosions accounted for 18% of disruptive events reported to Resilinc last year, according to Resilinc’s EventWatch 2017 Annual Report.   

Knowledge is power—so taking an organized approach to understanding which components have the potential to cause delays or stop production is critical. “If you take a structured approach you can expose locations or components that have the potential to cause disruption,” said Gibson.  

Early warning of fire-caused shortages is critical, so that OEMs can pull inventory from the channel or second source products, Vakil said. “Unfortunately, many companies are not mapping their suppliers or monitoring the supply chain in order to do proactive mitigation,” she said. Further, factory fires aren’t always newsworthy, and may happen in a country where reports might be made in a different language than the supplier uses.  

Creating close ties with important suppliers is another critical strategy, Vakil added. “Vetting and getting approval for a second source can take months or even years,” she said. “Unless a supplier is financially weak, it may be a better strategy to build a transparent and trustworthy partnership.  Give the supplier its due and work collaboratively. Ask them to share sub-tier supply information.”

— Hailey Lynne McKeefry, Editor in Chief, EBN Circle me on Google+ Follow me on Twitter Visit my LinkedIn page Friend me on Facebook

2 comments on “Ford Production Woes Teach Supply Chain Lessons

  1. John Benito
    May 22, 2018

    Regarding the problem at Ford. In most well run companies you will find that the Financial  group cover themselves, with all sort of protections andinsurances, from exchenage rate fluctuations to Bad Debts, etc. However, in the supply chain /operations area we have worked out many ways to reducce the amounts of inventories that the company should carry to support its business operation. We have done sucha good job, that for example a plant like GM in SH doesn't get the tires for the cars in the assmbly line until 1/2 hour before they are going into the car. Wonderful!We expect the sub-suppliers to carry the stocks, of course not in our books until basically the tires are screwed into the car. Great! However there are many issues with this kind of operations, such as Strikes, fires, Machines breakdowns, electricity support, etc. Few end users (Ford, GM, et all.) really do carry out consistent audits / checks of their suppliers capabilities and commitment to the agreed contractual obligations. These checks usually need people (Not Robots) and these cost money. So, we don't need them and we retrench them. We talk about, having a couple of tier one suppliers but rarely we split equally the requirements between these suppliers. Normally we give 80/90% of the requirements to one supplier for a variety of reasons some Logical and some not so! We do not carry out audits as mentioned earlier and seldom we do Physical checks of the Inventory holdings at the Tier One suppliers, even less if they are tier 2.  So if over 7000 people are not going to get pay who cares? Most certainly there will be enough stocks of FG's to cover a couple of weeks worth of inventory at the dealers or in transit. This is not Bad business is it!! And who's fault is it? Well ours!!Outsouring is great but there has to be strict rules and a commitment to work at arms length with suppliers no matter who they are. Unfortunately, the Operations area is a little more complicated than say: if the exchange rate goes up or down by more than 0.5% don't worry we have insurance.   For what is worth!!! JB  

  2. StephenGiderson
    September 17, 2018

    We cannot truly learn from an experience until a crucial one has hit us. The only way for us to really pick up on things is when a dire situation has come our way and we would have to handle it by all means possible. When we have to put our entire mind and soul into it, then only would the entire experience be memorable. This is always the case and usually it just becomes too late until we realize.

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