Ford Motor’s has decided to build lighter-weight trucks that incorporate aluminum body panels, a decision which helps them meet the global trends in the marketplace and establish themselves as a supplier for critical raw materials (Greenhalgh, n.d.). The increasing demand for aluminum in the auto-making industry is having an upstream effect on the supply chain management practices. Ford has changed their practices to meet the increased demand. This has brought with it financial and environmental ramifications. As of now, only 60% to 65% of a roll is actually used to make F-150 body panels. Since its creation, the vehicle was built out of steel sheets. But steel is much less valuable in terms of recycling; only $100 worth of steel can be re-cooped from each truck. Comparatively, switching to the aluminum based design has increased costs for Ford by $1000 per truck, but now they can recycle up to 90% of the unused aluminum, and offset nearly 20% of their production costs. With the changeover to aluminum, every scrap of aluminum is being recycled, making Ford the proud owner of a closed loop system and the proud business of an environmentally friendly solution.
Manufacturing companies have an ethical responsibility to find alternative ways to recycle waste products and scrap. Today the key to winning consumers is to implement social responsibility. This refers to business practices which participate in initiatives that improve the environmental. Implementing recycling programs places Ford as a forward-thinking company in the eyes of the consumers and it created shared value between consumers and the company. Sustainability is not just important for the environment but for business success (Agrawal, n.d.). Communities across the United States are struggling with multifaceted problems and businesses need to engage in ethical and social responsibility in order to counter that. Consumer awareness of global social and environmental issues places a higher level of importance on businesses adhering to environmentally sustainable plans than ever before. Technology has brought together global connectivity which has allows for awareness of social and environmental situations and enabled increased advocacy among consumers (Ducassy, n.d.). Consumers are re-defining what it means to give something back. People want to have a good feeling about what their money is doing, and investing in recycling programs or sustainable programs is one of the main ways this can take place. Corporate revenue is now stronger than it has been since the recession. That being said, companies are being encouraged to return that profit into programs that give something back (Aslaksen & Synnestvedt, n.d.). In Ford’s case they are giving back through environmentally friendly recycling programs. These programs meet with an ethical responsibility to take better care of the environment, reduce the company’s carbon footprint, and counter all of the detrimental effects that such gas guzzling vehicles have on the environment.
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Ford now enjoys value-added benefits and risks thanks to launching this recycling manufacturing strategy. Their overall costs for the changeover to aluminum has brought with it substantially higher costs per truck. But the ability to save all of the unused aluminum and recycle it has compensated for the increase in fees and also provided the company with a closed loop system and the ability to maintain control over raw materials in a business environment where this is challenging, at best (Harris, n.d.). Rapid growth taking place within emerging markets has created a dramatic increase in the demand of raw materials. This has caused commodity prices to rise (Ross, n.d.). Manufacturers can face these challenges head on by unlocking value in operational stability through the closed loop system and recycling program that Ford is implementing. This initiative offers lean manufacturing, addressing resource costs and energy constrains. This systematic approach focuses attention on the available resources in the value chain. Upstream manufacturing transforms materials into inputs that other companies can use (Cassivi, n.d.). This optimizes production as a resource productivity measure. Ford has the most to gain by reducing the total amount of materials used in product. By implementing a program that prioritizes upstream focus within operations, Ford can prioritize waste recovery, which will allow them to secure access to the otherwise limited materials that they need. This is done through their recycling program. This brings with it financial benefits. Right now Ford is spending $600 million annually for the F-150 series. But the use of aluminum allows them to save 20% of production costs and recoup $300 per truck. Pay recycling the old aluminum and giving it to an aluminum company, Ford is able to recoup up to 90% of the original cost of the metal.
In the automotive industry, or any industry, the best practices for using scrap to create new supply materials or products requires a flexible process and efficient manufacturing operations. Inflexible processes and inefficient manufacturing operations make it challenging for a company to adjust to changes within production and customer demand. This creates non-value-adding operations, low output, a lack of transparency, and high work in process, all of which have corresponding costs (Finch, n.d.).
If operations for a company are not integrated then the lines of business will produce slow growth and revenue. Best practices need to be shared with manufacturing locations or with supply chain partners. Inefficient execution process will bring with them product variations, increased scrap, defects, and poor reaction to any unforeseen turn of events. This leads to the inability of a company to maintain optimal rates of production. Having an inefficient supply chain execution also leads to a lack of integration and redundant data. But lean processes throughout the supply chain enable the automotive companies to produce the exact products their customers want, when they want them and maintain consistent and predictable results (Chanaron, n.d.).
- Agrawal, A. (n.d.). Sourcing Hub. Retrieved March 12, 2015, from http://www.emeraldgrouppublishing.com/learning/ami/issue_01/AMI-Issue01-article10.pdf
- Aslaksen, I., & Synnestvedt, T. (n.d.). Ethical investment and the incentives for corporate environmental protection and social responsibility. Corporate Social Responsibility and Environmental Management, 212-223.
- Cassivi, L. (n.d.). Collaboration Planning In a Supply Chain.Supply Chain Management: An International Journal, 249-258.
- Chanaron, J. (n.d.). Implementing technological and organisational innovations and management of core competencies: Lessons from the automotive industry. International Journal of Automotive Technology and Management, 128-128.
- Ducassy, I. (n.d.). Does Corporate Social Responsibility Pay Off in Times of Crisis? An Alternate Perspective on the Relationship between Financial and Corporate Social Performance. Corporate Social Responsibility and Environmental Management, N/a-N/a.
- Finch, P. (n.d.). Supply Chain Risk Management. Supply Chain Management: An International Journal, 183-196.
- Greenhalgh, L. (n.d.). Ford Motor Company’s CEO Jac Nasser on transformational change, e-business, and environmental responsibility. Academy of Management Executive, 46-51.
- Harris, A. (n.d.). Lessons in lean [lean manufacturing].Manufacturing Engineer, 16-16.
- Powell, S. (n.d.). The nexus between ethical corporate marketing, ethical corporate identity and corporate social responsibility: An internal organisational perspective. European Journal of Marketing, 1365-1379.
- Ross, A. (n.d.). Lean is not enough [lean manufacturing].Manufacturing Engineer, 14-14.
