Ford & Penske

Ford Motor Company, one of the world's largest automotive manufacturers, has worked with Penske on several Six Sigma initiatives. As its lead logistics provider (LLP), Penske's quality team of associates are trained in Six Sigma practices and work closely with Ford to streamline operations and create and maintain a more centralized logistics network. Together, they uncovered several areas for real cost savings as a result of reducing inbound carrier discrepancies, eliminating unnecessary premium costs and reducing shipment overages. Plus, Penske implemented accountability procedures and advanced logistics management technologies to gain more visibility of its overall supply network.

Challenges Solutions / Results

?To develop, implement and operate a centralized logistics network for Ford

?To streamline supplier and carrier operations for improved performance and accountability

?To provide Ford with real-time supply chain and financial visibility

?Penske established 10 Origin Distribution Centers (ODCs) and consolidated shipments to plants. Approximately 1,200 trailers now ship to and from Ford's ODCs per day, with most trucks at 95 percent capacity. Penske has reduced plant inventory by 15 percent.

?Penske trained more than 1,500 suppliers on a uniform set of procedures and logistics technologies. Stringent carrier requirements and a Carrier Rating System were implemented to measure carrier performance.

?Penske implemented strict accountability procedures and advanced logistics management technologies to gain real-time visibility of delivery status, routing schedules and productivity. A new freight billing system was designed to immediately capture logistics costs.

Getting Started

Today, Ford owns and produces automobiles under several major brands: Ford, Lincoln, Mercury, Mazda, Land Rover, Aston Martin and Volvo. They maintain one of the automotive industry's most complex manufacturing, transportation and distribution networks.

Penske Logistics began its relationship with Ford as lead logistics provider (LLP) for Ford's assembly plant in Norfolk, Va. At the time, each of Ford's 20 North American assembly plants managed its own logistics operations. A decentralized approach provided total control of logistics at the plant level, but presented costly redundancies in materials handling and transportation.

Ford conducted studies to determine the benefits of transitioning the company's decentralized logistic operations to a centralized approach. The decision was quickly apparent—centralization of the company's logistics operations would increase both velocity and visibility throughout the network, as well as reduce supply chain costs.

Shortly thereafter, Ford selected Penske as its North American LLP. Under the contract, Penske would centralize and manage all inbound materials handling for 19 assembly plants and seven stamping plants.

Consolidating Logistics Operations

Penske immediately developed an aggressive logistics transition program with Ford. Penske would provide Ford with a single point of contact for all logistics operations.

By working with individual plants and corporate management, Penske established a baseline of current operations and outlined the proposed solutions. The new logistics program would establish a Penske Logistics Center that included the following core functions:

?Network Design Optimization—implement a more efficient inbound materials strategy through Origin Distribution Centers (ODCs)

?Carrier and Premium Freight Management—manage all carriers and logistics companies, while reducing premium freight costs

?Information Technology System Integration—achieve real-time visibility of supply chain shipments, schedules and orders

?Finance Management—improve freight bill payment, claim processing and resolution throughout the supply chain

Upon development of this new plan, the Penske/Ford team began evaluating Ford's existing network design. Under the plant-centric approach, suppliers would make multiple deliveries of the same parts to different plants. A supplier would pick up a small load, deliver it to one plant, pick up another small load of the same parts and deliver it to another plant. Carriers with half-empty trucks would often cross routes with each other en route to the same plant. Aside from being highly