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OM in the News: Ford Discovers a Damaged Supply Chain

May 11, 2018

Ford expects to lay off several thousand workers temporarily at a Michigan factory that assembles its top-selling F-150 pickup truck after a fire last week damaged the premises of a parts supplier,” reports The Wall Street Journal (May 9, 2018). The blaze, which occurred at a Michigan plant operated by Meridian Lightweight Technologies, has already disrupted production of Ford’s pickup trucks at a factory in Missouri. Meridian is an automotive-interiors supplier owned by China’s Wanfeng Auto Group, which makes components for Ford and other car makers. Ford’s F-150 factory in Dearborn, Mich., is expected to run out of Meridian-supplied parts and halt production as early as Wednesday.

Ford’s other main F-150 plant, in Kansas City, Mo., would be idled this week because certain parts are in short supply after the fire. The two plants, which together employ 7,600 people, could face several weeks of down time as the auto maker seeks ways to make up the parts shortfall.

The F-150 is Ford’s best-selling vehicle and generates the bulk of its global profit. A prolonged shutdown of the plants could dent revenue and profit. The two plants combined produce 10,000 to 15,000 F-150s a week. The company would face cost pressures from paying workers during idle time and while ramping back up to offset lost production. The fire also disrupted production at a Fiat-Chrysler Automobiles minivan plant in Windsor, Ontario, and a BMW sport-utility factory in South Carolina.

Classroom discussion questions:

  1. What are the advantages and disadvantages of a single-source supplier?
  2. What strategy (see Supplement 11) might Ford employ?
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