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Ford Motor Company's Investment Efficiency Initiative

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Case Study: Ford Motor Company's Investment Efficiency Initiative
James L. Nevins
Robert I. Winner
Danny L. Reed
70 pages

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This case study describes how the Ford Motor Company uses Investment Efficiency to minimize investment and, at the same time, optimize value for the customer. Implementation of the Investment Efficiency initiative is through a mechanism called the Product and Process Compatibility (PPC). This mechanism is discussed in detail, along with Ford's strategies for Investment Efficiency, PPC tools and metrics, the pilot program using the initiative, and organizational changes that resulted from implementation of the Investment Efficiency initiative. This document is intended for use by students of the DoD acquisition process and to provoke discussions of how DoD can better integrate cost trade-offs and cost targeting into its own acquisition processes and integrated process teams. The contents of the document are based on two visits made by the authors to Ford during 1995; updates and revisions from Ford management in 1996; and other studies and contacts going back several years by the authors and others.

Ford Motor Company operates in an intense competitive environment. Its traditional markets are now mature and show only marginal growth. Four incentives are driving Ford: emergence of new growth markets, smaller-volume niche markets, shareholder returns, and competitive drivers. Growth markets for the auto industry are centered in the Far East, Eastern Europe, and South America. To compete effectively in the next century, automotive companies must leverage their resources to grow their businesses profitably in these markets.

This is why Ford and the major automakers place such an importance on Investment Efficiency as a key operating strategy. Investment Efficiency is the ability to simultaneously minimize investment and optimize value for the customer—the goal being to provide the most product for the investment dollar. Ford has developed its own process of Investment Efficiency, centering on improving the compatibility between its product assumptions and its existing manufacturing processes. This process. Product and Process Compatibility, is facilitated by improved communication of product engineering and manufacturing very early in and throughout the product development process. Investment Efficiency through Product and Process Compatibility addresses the problem of getting development and production costs under control both on individual projects and across projects.

TOC

EXECUTIVE SUMMARY ES-1
1. INTRODUCTION
2. THE NEED FOR INVESTMENT EFFICIENCY AT FORD-
2.1 New Growth Markets.
2.2 Smaller-Volume Niche Markets.
2.3 Shareholders Returns.
2.4 Competitive Drivers.

3. THE INVESTMENT EFFICIENCY PROCESS--
3.1 Introduction.
3.2 The Ford Product development System (FPDS).
3.3 Investment Efficiency Goals.

4. BASIC TARGETS OF INVESTMENT EFFICIENCY AT FORD
4.1 Derivation of Cost Targets.
4.2 Investment Elements.
4.3 Key Areas of Investment.
5. STRATEGIES OF INVESTMENT EFFICIENCY-
5.1 Micro-Engineering.
5.2 Simultaneous Engineering.
5.3 Product and Process Compatibility.
5.4 Drivers of Investment.
5.4.1 Reusability .
5.4.2 Commonality .
5.4.3 Carryover Product .
5.4.4 Complexity Reduction .

6. PRODUCT AND PROCESS COMPATIBILITY TOOLS-
6.1 Investment Efficiency Metrics.
6.1.1 Ford's Metric Process .
6.1.2 Milestone Review Process .
6.2 Manufacturing Design Rules.
6.3 Generic Product/Process Concepts.
6.4 Life Cycle Cost Analysis.

7. FUTURE SMALL CAR PROGRAM PILOT.

8. ORGANIZATIONAL CHANGES AT FORD.
8.1 Implementing the Investment Efficiency Process
8.2 Involving the Suppliers in Investment Efficiency

9. LESSONS LEARNED.
9.1 Changing Mind-Sets.
9.2 Understanding the Need for Change.
9.3 Strengthening Management Support.
9.4 Creating Aligned Objectives.-

10. DISCUSSION ITEMS

BIBLIOGRAPHY.
BIBLIOGRAPHY
GLOSSARY GLOSSARY
ACRONYMS
ACRONYMS
APPENDIX A

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