Ford Motor Company’s group vice president of global purchasing, Hau Thai-Tang has announced a long-term plan to cut its supplier list to 750 firms, compared to the 1,260 suppliers it did business with in 2012.
Thai-Tang made the announcement in Dearborn on Monday, stating, “We still think that there’s plenty of opportunities for us to get down to the 750 number and still have plenty of competition and allow us to get the best ideas from the most innovative suppliers.”
Cutting the amount of suppliers Ford does business with by roughly 40% will allow the automaker to decrease production costs and complexity by doing business with fewer companies. The announcement, however, will undoubtedly stress Ford’s current suppliers who have served The Blue Oval and count on its business.
For Ford, the push to reduce complexity is key to an ongoing drive to increase profitability. Driven by CEO Alan Mulally, the strategy began by cutting the amount of vehicle architectures the automaker utilizes, with Ford’s global platform count dropping to 14 today from 27 in 2007. Ford will continue reducing its platform portfolio well into future, with plans to use nine global architectures by 2017. The platform cuts have allowed Ford to boost its profit margin and earn $35.2 billion from 2009 through 2012. Those figures are in stark contrast to the $30.1 billion loss from the previous three years, a period that proved to be extremely tumultuous during the recession-laden years of 2008 and 2009.
The Motrolix Take
Witness the One Ford strategy in action: decrease complexity via fewer platforms and fewer suppliers to bring about best-in-class global vehicles and higher profitability. After having more or less tackled the reduction of vehicle platforms, it’s time for The Blue Oval to focus on suppliers — which is precisely what Ford is doing here.