![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Auto-Supply-Chain-Update-2.png\")
<\/a><\/p>\nFigure 1: The automotive supply chain and effects of digitalization<\/em><\/p>\n Building Vehicles in a Digital World <\/strong><\/p>\n Vehicles are rapidly becoming smarter, more connected, and more complex, which is forcing companies like Ford to rethink their business model and value chain as new competitive threats and opportunities arise [3].<\/p>\n Digital as a Differentiator<\/em><\/p>\n As the major differentiating inputs shift from mechanical to digital components, Ford has been investing in integrating the supply chain to drive faster innovation.\u00a0 In February 2017, Ford announced it acquired a majority stake in start-up firm Argo AI [4], which is focused on developing artificial intelligence technology for autonomous vehicles, and plans to invest $1B in the company.\u00a0 Additionally, Ford recently purchased Princeton Lightwave, following up a $75M investment a year prior in Velodyne, both makers of lidar sensing devices, and made an investment in SAIPS, a visual detection software maker [5, 6].\u00a0 It seems Ford sees this as an opportunity to control the value chain and reduce risks of relying on suppliers to deliver on innovation, timing, and costs. This is an important strategy for Ford to keep any one supplier from having too much power while striving to deliver a smartphone-like experience for the customer.<\/p>\n Leveraging Connected Supply Chains<\/em><\/p>\n Ford has found that digital and connected supply chains give rise to benefits throughout the ecosystem, enabling better responsiveness to demand, increased productivity, and better quality.\u00a0 In one example, Ford has partnered with software firm Kinaxis to implement a rapid response supply chain system in order to efficiently manage their global network with minimum inventory levels [7]. Ford is also experimenting with 3D printing to see where it can add value in the supply chain, but in the near term it will likely be limited to prototype and aftermarket parts [8].<\/p>\n A New Way of Delivering Mobility to the Masses<\/strong><\/p>\n According to a report by RMI, \u201cpeak ownership in the United States will occur around 2020 and will drop quickly after that” [9]. As Ford is in the business of selling cars, this presents a clear threat to Ford\u2019s long-term viability without a strategic shift in how it supplies products and services to the end customer.\u00a0 In order to understand better where they can win in this space, Ford has been running mobility experiments around the world over the past few years, but it is yet to be seen which will come to fruition [10].<\/p>\n Chariot In September 2016, Ford purchased Chariot, a \u201ccrowd-sourced shuttle service\u201d that now uses Ford Transit vans along with smart routing algorithms to provide an Uber-like shuttle service [11]. In doing so, they found one way to get customers into Ford vehicles and introduce them to Ford as a mobility provider.<\/p>\n Fate of Dealerships<\/em><\/p>\n Another stakeholder in the supply chain facing disruption from the digital revolution is the dealership.\u00a0 Ford currently leverages its massive dealer network of over 11,000 dealerships worldwide through which the majority of Ford vehicles, parts, and accessories are sold [12].\u00a0 As the need for retail services fade, dealerships may become less relevant [13].\u00a0 Instead, Ford could study pivoting them to provide value in managing shared fleets and maintenance.<\/p>\n Time for Transformation<\/strong><\/p>\n Ford needs radical transformation – a change in mindset to drive digitalization throughout the value chain from connected supply networks to mobility solutions – in order to create a competitive advantage for the future. This should start by creating agile digital-focused teams to identify gaps in current processes and create system solutions. The challenge in the short term will be investing in these new technologies when the current profit machine is the core business of making incrementally better vehicles.\u00a0 How should Ford manage to blend the traditional and emerging business models? Transformational times create opportunity for great wealth, but will Ford be a winner or just produce a \u2018faster horse\u2019?<\/p>\n Word Count: 798.<\/em><\/p>\n Sources<\/strong><\/p>\n [1] Jefferies, \u201cFord Motor Co.: Falling into place at last,\u201d October 30, 2017, via Thomson ONE database, accessed November 2017.<\/p>\n [2] Fidelity, Ford Motor Company stock data, accessed November 2017.<\/p>\n [3] Porter, M. and J. Heppelmann, \u201cHow Smart, connected products are transforming competition,\u201d 性视界 Business Review, <\/em>November 2014.<\/p>\n [4] Tim Higgins, \u201cFord Acquires Majority Ownership of Self-Driving Car Startup Argo AI,\u201d The Wall Street Journal<\/em>, February 10, 2017, https:\/\/www.wsj.com\/articles\/ford-acquires-majority-ownership-of-self-driving-car-startup-argo-ai-1486756594<\/a>, accessed November 2017.<\/p>\n [5] Lienert, P., \u201cFord\u2019s Argo Self-driving Unit Buying Lidar Maker Princeton Lightware,\u201d Reuters<\/em>, https:\/\/www.reuters.com\/article\/us-princetonlightwave-m-a-ford\/fords-argo-self-driving-unit-buying-lidar-maker-princeton-lightwave-idUSKBN1CW273<\/a>, accessed November 2017.<\/p>\n [6] \u201cFord Targets Fully Autonomous Vehicle For Ride Sharing In 2021; Invests In New Tech Companies, Doubles Silicon Valley Team,\u201d Ford Motor Company press release, August 16, 2016, https:\/\/media.ford.com\/content\/fordmedia\/fna\/us\/en\/news\/2016\/08\/16\/ford-targets-fully-autonomous-vehicle-for-ride-sharing-in-2021.html<\/a>, accessed November 2017.<\/p>\n [7]\u00a0Clow, M., \u201cFord Motor Company: Creating global data standards with SCM software,\u201d Kinaxis, https:\/\/blog.kinaxis.com\/2017\/04\/video-ford-motor-company-creating-global-data-standards-scm-software\/<\/a>, accessed November 2017.<\/p>\n [8]\u00a0\u201cFord Tests Large-scale 3D Printing With Light-weighting And Personalization In Mind,\u201d Ford Motor Company press release, March 6, 2017, https:\/\/media.ford.com\/content\/fordmedia\/fna\/us\/en\/news\/2017\/03\/06\/ford-tests-large-scale-3d-printing.html<\/a>, accessed November 2017.<\/p>\n [9]\u00a0Johnson, C. and J. Walker, \u201cPeak Car Ownership: The Market Opportunity of Electric Automated Mobility Services,\u201d Rocky Mountain Institute 2016, https:\/\/www.rmi.org\/wp-content\/uploads\/2017\/03\/Mobility_PeakCarOwnership_Report2017.pdf<\/a>, via Thompson ONE database, accessed November 2017.<\/p>\n [10]\u00a0\u201cFord At CES Announces Smart Mobility Plan And 25 Global Experiments Designed To Change The Way The World Moves,\u201d Ford Motor Company press release, January 6, 2017, https:\/\/media.ford.com\/content\/fordmedia\/fna\/us\/en\/news\/2015\/01\/06\/ford-at-ces-announces-smart-mobility-plan.html<\/a>, accessed November 2017.<\/p>\n [11]\u00a0\u201cFord Partnering With Global Cities On New Transportation; Chariot Shuttle Service To Be Acquired, Ford GOBIKE To Launch In San Francisco,\u201d Ford Motor Company press release, September 9, 2016, https:\/\/media.ford.com\/content\/fordmedia\/fna\/us\/en\/news\/2016\/09\/09\/ford-partnering-with-global-cities-on-new-transportation–chario.html<\/a>, accessed November 2017.<\/p>\n [12]\u00a0Ford Motor Company. 2016 Annual Report. https:\/\/corporate.ford.com\/microsites\/sustainability-report-2016-17\/doc\/sr16-annual-report-2016.pdf<\/a>, accessed November 2017.<\/p>\n<\/a><\/em><\/p>\n