{"id":22714,"date":"2017-11-15T21:36:22","date_gmt":"2017-11-16T02:36:22","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/automotive-industry-the-usual-suspect\/"},"modified":"2017-11-15T21:45:41","modified_gmt":"2017-11-16T02:45:41","slug":"the-automotive-industry-the-usual-suspect","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-automotive-industry-the-usual-suspect\/","title":{"rendered":"The automotive industry \u2013 the usual suspect!"},"content":{"rendered":"

Our personal vehicles are a major cause of global warming. The transportation sector accounts for 28% of U.S. greenhouse gas (GHG) emissions (14% worldwide) [1,2], with light-duty vehicles responsible for about 60% of US emissions [3]. Ford, as a market leader, needs to address climate change risk as a strategic priority.<\/p>\n

Exhibit 1:<\/strong> U.S. Transportation Emissions by Source [4]<\/p>\n

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Exhibit 2:<\/strong> Global Greenhouse Gas Emissions by Economic Sector [5]<\/p>\n

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Primarily, carmakers will need to reevaluate both their supply chain and vehicle models to comply with U.S. emission-reduction targets for 2030, 2040, and 2050, which aim to limit global temperature rise to 2\u00b0 C above pre-industrial levels. Ford models are very far from achieving these targets, such as the Ford F-Series, which currently accounts for 30% of the U.S. pickup market [6]. Besides regulatory pressure, climate change has resulted in changing customer preferences, with an increased demand for “green” vehicles and alternative transportation [7]. Moreover, investors are showing greater concern for climate change and the associated financial risk [8]. \u00a0As an industry leader, how can Ford ensure its future survival?<\/p>\n

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Exhibit 3:<\/strong> Light duty vehicles in the U.S: Lifecycle emissions and related costs [9]<\/p>\n

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Ford is trying to mitigate climate change risk through a series of short and medium-term measures. These include:<\/p>\n

Short term measures:<\/u><\/em><\/strong><\/p>\n

Supplier management: <\/u><\/strong>Ford audits its suppliers to verify compliance with its code of conduct [10] to address areas such as manufacturing impact and responsible sourcing. Beyond auditing, Ford aims to reduce its collective supply chain footprint through its Partnership for a Cleaner Environment (PACE) [11]\u00a0by building suppliers\u2019 capability to minimize their environmental impact, sharing best practices for reducing energy consumption and emissions. To extend its impact, Ford encourages its suppliers to cascade the information down to their own suppliers.<\/p>\n

Exhibit 4:<\/strong> The Five-Step PACE Process [12]<\/p>\n

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Government and industry partnerships:<\/u><\/strong> Ford is actively engaged in several industry forums, including the AIAG\u2019s Environmental Sustainability Advisory Group [13], which educates suppliers and manufacturers about environmental sustainability and develops common metrics and benchmarks to improve sustainability performance. Ford is also involved in regulatory and legislative processes used to set standards, providing information to authorities and sharing its expertise [14].<\/p>\n

Manufacturing and logistics efficiency<\/u><\/strong>: Ford plans to further reduce emissions by maximizing the use of alternative transportation (e.g. rail, river) and improving freight efficiency (increasing load density to reduce the number of trips and fuel consumption, using regional distribution centers to coordinate deliveries, etc.) [15]. Through its “Plant Energy Team”, Ford is also aiming to maximize manufacturing plant efficiency [16].<\/p>\n

Exhibit 5:<\/strong> Ford Plant Energy Team [17]<\/p>\n

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Medium-term measures:<\/u><\/em><\/strong><\/p>\n

Investing in sustainable technologies<\/u><\/strong>: Fords aims to cut emissions across its portfolio by developing smaller fuel-efficient models, investing in Autonomous Vehicles and alternative fuel technologies, as well as expanding electrification through more efficient electric cars (13 new EVs by 2020) [18, 19].<\/p>\n

Increased use of sustainable materials<\/u><\/strong>:<\/strong> Ford plans to prioritize locally sourced materials and increase the use of recycled materials. Ford is also exploring how 3D printing could help produce lighter-weight models to improve fuel consumption efficiency. [20]<\/p>\n

Exhibit 6:<\/strong> Materials used in a typical vehicle [21]<\/p>\n

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Although Ford has several initiatives to mitigate climate change risk, there is an opportunity to leverage advanced data analytics, Artificial Intelligence (AI) and Internet of Things (IoT) to further its effort.<\/p>\n

The adoption of a set of centralized analytical tools would provide a more visible and connected operations along the supply chain, enabling to assess and diagnose overall efficiency. AI could quickly analyze data to make accurate recommendations about how to adjust plants\u00b4 operations to reduce GHG emissions, avoid waste and operate at peak efficiency. Furthermore, AI in Autonomous Vehicles could result in more fuel-efficient driving as machine-driven cars can have smaller engines and use less gasoline than human-driven cars.<\/p>\n

Ford could also use IoT as a lever. By 2020, industry analysts estimate that 250 million cars will be connected to the Internet [22]. With new vehicles equipped with smart sensors, embedded connectivity applications and big-data enhanced geo-analytical capabilities, IoT could facilitate increased supply chain efficiency and reduced carbon footprint:<\/p>\n