Consumer-driven Six Sigma at Ford

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Case Review

CASE ANALYSIS

Imagine that you are visiting a nearby dealer showroom to buy a new car. The dealer shows you a new model car (say Model-X). This new model car meets all your requirements in terms of color, number of doors, automatic gear type, etc. You like the car and buy it! You drive home happily, with your new car. But, after a couple of weeks, you are informed that the manufacturer of your car is `recalling’ all the cars of Model-X due to serious quality problems in one of its components. How would you feel?

It is precisely the situation that many Ford customers faced four years ago. Ford Motor Corporation, one of the largest automakers, was plagued by quality problems that lead to humiliating round of product recalls (Explorer Model, Taurus Model), stalled product launches (Saturn Model) and Firestone-Ford controversy. Ford’s reputation for quality was tarnished. The end result was poor customer satisfaction, increased warranty costs (more than $2 bn) and poor financial performance.

Not that all cars produced by Ford contain defects. It does produce cars with zero defects. That means Ford knows how to build a perfect car. But, it is not able to build cars the same way often enough, due to variability in the business processes. “Process variation is a killer and variability reduction is mandatory for achieving zero defects.” It is precisely the message quality gurus have been sending to business communities since 1950. Several companies have responded to this message by implementing company-wide quality initiatives such as TQM. Ford implemented

TQM two decades ago and became the most profitable American motor company in the 1980s.

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Case Review

Having said that, how do we explain all the recent quality problems at Ford? Indeed! Ford might have avoided the recent quality problems, had it kept the momentum on its TQM initiatives. Unfortunately, it lost the momentum on its TQM initiatives when its champions retired and were replaced by executives with other priorities. This has led to recent quality slide.

While the success of Six Sigma at Ford is very evident, it also experienced some obstacles during the implementation. The major obstacle was employees’ initial skepticism (“Six Sigma is a flavor of the month”). Ford overcame this obstacle by demonstrating success and benefits in the initial Six Sigma projects. This was a critical step that made more employees jump on the Six Sigma bandwagon. Another issue was that of resource requirements. The top management showed their commitment by allocating necessary resources (time and money) for different activities such as employee training and Six Sigma project execution. Besides all these, Ford’s well-founded lean production methods helped to a great extent by creating a synergy.

Today, Ford is dedicated to company-wide Six Sigma (meaning implementing Six Sigma across various business units). Should Ford move beyond that? Absolutely! The reason is 76% of Ford’s quality problems are caused by its largest suppliers. This is a clear signal that it should move beyond company-wide Six Sigma. Six Sigma should become a natural part of “how Ford does business across its supply chain.” Ford is on its way towards achieving this goal!

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