I recently spoke with key members of Ford’s service parts supply chain and IT organization in North America to better understand how the company is using SAP’s end-to-end service parts supply chain solution (SAP is an ARC client). Ford and Caterpillar Logistics, as key customers and partners, have helped SAP to build out this solution, particularly in the area of service parts planning. Ford has implemented service parts planning in Europe and its first implementation of SAP’s Warehouse Management System (eWM) is currently ramping up to full production in France. The U.S. operation will soon begin implementing service parts planning and eWM. The other key part of the implementation will be SAP’s Supplier Network Collaborator, a supply chain event management (SCEM) solution, which will do event monitoring with alerting on upstream partner logistics activities. 

While Ford could be considered a partner almost as much as a customer, and while it can’t yet comment on the results it is getting because this project is still ongoing, the conversation was still informative. Here are some of the points they made that I found most interesting:

• Ford’s North American network has gone from a few, very large warehouses to a greater number (26) of smaller warehouses. Most warehouses are high velocity piece-pick operations, but the company also has warehouses for slow moving parts, medium-moving small parts, high cube, and exports. All warehouses in North America will eventually run off a single instance of eWM, so system stability and scalability are key considerations. Ford has spent about a year standardizing processes and preparing for the initial implementation. But subsequent implementations are planned to move very fast with the next 25 facilities occurring in about a year.
• Ford worried that moving to a network of smaller warehouses would hurt its labor efficiencies. The opposite has been the case. This is partly because the company has improved its economic order quantity (EOQ) logic and now instead of receiving 4 parts, for example, and putting 2 away in reserve and the other 2 in forward pick locations, it just orders the 2 parts it needs. This eliminates empty touches and moves, and it’s one of the reasons why synergies exist between service parts planning and WMS. Ford also anticipates that integrating with SAP’s SCM, particularly the demand history and forecast, will improve slotting. In Europe, there are synergies between the WMS and the financials, as transferring goods from a warehouse in one country to another also leads to a number of trade/financial transactions. 
• The financial turmoil across the automotive industry has made Ford’s job more difficult.  Historically, it has maintained a 98 percent fill rate, which the company believes is among the best in the industry, but supplier bankruptcies and financial difficulties have caused that percentage to fall by about a point.
• Ford believes that between itself and Caterpillar they have helped SAP build a service parts planning solution with the most advanced functionality available. While many companies have an ABC hierarchy around their inventory, they have 200 different planning segments with different min/max and EOQ planning horizons.
• The SAP service parts solution does a better job of marrying actual demand with packaging hierarchy logic. From an SKU perspective, if Ford wants to order individual boxes, layers of a pallet, or full pallets, the system will automatically round the actual quantity demanded up or down to match the pack dimensions, if that quantity is within a certain preset percentage. This used to be done manually in Ford’s legacy solution, but it will now be almost completely automated in SAP.
• The end-to end solution will have alerts at every significant step in the service parts process. Some of these alerts will reside in the planning engine, some in the SCEM solution, and some in the WMS. Forecasting alerts will show changing demand patterns, and other alerts will prioritize the movement of parts that are in short supply. Upstream partners will receive alerts to load and ship goods in short supply first, and when the trailers arrive, Ford will unload those pallets first. Alerting is designed to balance service with cost efficiency. So one set of alerts is based on shortage monitoring, another on comparing the plan to actual results and highlighting activities that were substantially more expensive than expected. Monitoring planned versus actual durations will help Ford keep its planning engine properly tuned.

It will probably be a couple of years before Ford has fully implemented these solutions and has used them long enough to fully understand the benefits. I plan to have another conversation with Ford in the future to get an update.