The choice of auto industry outsider Alan Mulally as the new CEO of the Ford Motor Co. could usher in a new and improved era in purchasing and supply chain management at Ford - an area that will have to be the cornerstone of a long term Ford turnaround, writes Edmund Chew of SupplierBusiness.com.
And the former Boeing executive vice president - and head of the 777-project and several other successful jetliner development programs -- also brings a superb understanding of modern product development techniques. Some Detroit analysts wonder if that skill-set is immediately applicable at Ford, where the widespread view among analysts is that the main requirement today is deep cost-cutting.
But according to SupplierBusiness's surveys of Ford suppliers earlier this year most suppliers believe that Ford already purchases low cost parts. Suppliers are more concerned about the longer term - Ford needs to give its suppliers long term hope to ensure that they remain on board for its key programs later in the decade, and confidence that Ford's tentative move to a more collaborative approach to working with suppliers will be sustained. Better relations with suppliers and more efficient product development won't pay dividends for years. Senior management commitment to that is nothing less than essential.
Mulally certainly talks a good game - and shows a keen understanding of the principles of good supplier relations. In his first round of interviews, Mulally, 61, said, his basic approach to Boeing's thousands of parts makers has been one of partnership based on tough performance targets. He insists that collaboration involves a close interface between the OEM's own designers and engineers and its procurement department based on a simple understanding -- that the OEM's requirements and specs are what drive supplier cost. He calls himself a disciple of the Toyota product system, and at Boeing, Mulally sent executives to Japan to visit Toyota and other carmakers, then brought Japanese consultants to Boeing for help in transforming airplane factories into moving assembly lines.
He even hired executives from NUMMI to help revolutionize the way things are done at Boeing. It's too early to get overly excited about one executive. The auto industry in general and Ford in particular have a history of rejecting talented outsiders. But Mulally comes to Ford with a compelling reputation as a turnaround guy - but not the kind of one-dimensional Mr. Fix-it who merely cuts costs (though he certainly did that at Boeing). Rather he is reputed to be a leader of turnarounds based on the efficiency with which he builds the teams that develop successful products.