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Behind the solution
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Teradata Warehouse powered by: Teradata Database V2R4.1, 32 nodes (production), 16 nodes (test/disaster recovery)
Storage: 40TB of disk space, RAID 1 with 20TB of usable space
Operating System: UNIX MP-RAS
Teradata Utilities: FastLoad, MultiLoad, FastExport
Tools/Apps: Teradata Supply Chain Intelligence (SCI) and products from Business Objects, Ascential Software Corp., Cognos, Hyperion
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CASE STUDY
"Have you driven a Ford lately?" Teradata has!
Tech upgrades put savings into high gear
by Jackie Zack
One hundred years ago, Henry Ford made his dream a reality. With just $28,000 in capital he, along with 11 investors, incorporated Ford Motor Company. It took a little more than a month for the company
to sell its first car, and over the next 19 years, it sold 15 million Model Ts. The rest, as they say, is history.
Today, Dearborn, Mich.-based Ford is a Fortune 500 company that ranks as the second-largest automotive producer in the world. In the 2002 fiscal year, Ford sold 6,793,000 vehicles globally and
generated revenues of $1.63 billion.
The company has two primary businesses: automotive and financial services. On the automotive end, Ford manufactures cars, trucks, vans and sport utility vehicles under such well-known brand names as Ford, Lincoln, Jaguar, Aston Martin, Mercury and Volvo, and it markets the products through retail dealers. The financial services end of the business includes The Hertz Corporation, a car and equipment rental business, and Ford Motor Credit Corporation. Ford Credit is the world's largest automotive financing company, providing dealer and vehicle financing to more than 11 million
consumers and more than 12,500 dealers in 36 countries.
When Ford first approached Teradata in 1993, its primary objective was to save money. Jim Aldrich, the Teradata sales
director who heads up the account team that works with Ford, says the company was looking for a cost-effective alternative to
a mainframe upgrade and chose Teradata. "By off-loading mainframe applications to Teradata, Ford realized cost savings."
Since then, Teradata has become the basis for an evolving
analytical solutions environment used in both the financial and the automotive arms of the company.
Take a look under the hood
In 1995, Ford Credit began actively using Teradata to better market and structure the business, particularly in the areas of car lease and loan profitability, rate establishment and branch profitability. One of the major pain points was time.
"The response time and the amount of data couldn't get through the mainframe systems Ford needed for their decision support and branch profitability analysis system," says Aldrich. With the help of Teradata, Ford Credit branches were soon receiving vital information in two or three days, a process that once took up to 10 days. Faster access time enabled Ford Credit to better manage its branches and act on business trends.
"In 1997, Ford's Customer Services division chose Teradata for its enterprise warehouse, so we started bringing on Ford's parts warehouse (along with) a number of different customer services' data and applications," says Aldrich.
In 1999, Ford once again turned to Teradata, this time for a Customer Knowledge System project, which has since expanded its marketing campaigns from around 40 in 1999 to more than 750 in 2003. Teradata is also the basis for a variety of other applications, including order fulfillment metrics for tracking new vehicle shipments and warranty claims analysis to detect duplications or inaccuracies, all of which help Ford accomplish its original goal of saving money. One of the most impressive gains has been realized in the area of inventory optimization for Ford PS&L (Parts, Service and Logistics), the group that supplies after-market parts to North American car dealers.
These auto parts are used as general replacement parts and for warranty repairs, and they include everything from bumpers and spark plugs to gaskets and oil filters, essentially any component that goes into a car.
Ford had several problems that needed to be resolved, all stemming from the fact that its previous supply chain system did not include predictive identification of shortages, complete visibility of material within the supply chain or alerts when issues occurred. The sheer size of the company and the number of parts being shipped on a daily basis compounded these problems even further. Ford supports 35 model years of vehicles and has 2,000 parts suppliers, which translates into about 220,000-250,000 possible part numbers. Couple that with almost 7,000 dealers and it becomes clear that what Ford really needed was a solution that provided visibility, monitoring and proactive alerting across the entire
supply and distribution chain.
It's all about the parts
During a typical day, filling any number of waiting back orders is a challenge. When a back-ordered part is not available at the dealer, it has to be ordered internally. "(Before implementing Teradata), it took a longer time than average to process a backorder through the system," explains Jerry Hill, who is in charge of Teradata's Center of Excellence for Supply Chain Intelligence. "Back orders are costly to Ford not only in customer satisfaction, but also from the expense standpoint."
To get the back order processed, Ford will not only pay a premium to expedite shipments, but it also pays overtime wages. Often, Ford must pay a referral fee if they send the order to a second local warehouse because the facing warehouse cannot meet a part order. This results in special (usually manual) handling and incremental transportation costs, and it can create a ripple effect by depleting a second warehouse's inventory.
But monetary costs were only part of the problem. "Any time a customer had to leave their car longer than they thought, that was a real black eye for Ford," explains Hill.
In the morning, PS&L faced the problem of "too many back orders," but by afternoon another problem would surface:
"way too much inventory." While Ford needed to improve fill rates, it also needed to reduce stock levels; buying and holding excess inventory was costing the company money and creating bottlenecks throughout the supply chain.
To a certain degree, Ford has the ability to forecast customer parts requirements based on factors such as historical sales data and number of active vehicles on the road. While this provides a general idea of what needs to be in stock at any given time, it doesn't reveal the entire picture. "What they can't predict is how many accidents and fender benders and weather-related problems will occur," says Hill. "So in spite of the fact that for 100 years Ford's been trying to forecast (parts needs), the forecast can inherently never be accurate."
At the beginning of the Teradata project, Ford saw hundreds of supply trucks at the main distribution center in Detroit each day; some were being loaded, some were being unloaded and some were just waiting for attention from operations. The system was simple: The first truck in was the first truck unloaded. Ford allowed a set amount of time to unload trucks, stock the inventory and react to an order. "If everybody did their job right, it would allow the system to buy enough inventory to satisfy the needs of customers, and all the customers would get their orders on time. That was the philosophy," says Hill.
However, problems arose when unpredictable variables surfaced, whether it was a snowstorm in Denver or more parts inventory was required than originally anticipated.
Because of these unpredictable issues, the "first truck in, first truck unloaded" concept had a flaw: The company couldn't actually see into the truck to determine how important the inventory was.
It takes two to build a hot rod
Teradata had a tall order to fill with Ford, says Hill. "What Ford needed was an application, a tool that would allow personnel to manage customer service as well as inventory levels and not put one at the expense of the other."
Ford had already been using Teradata in other areas of the company with great success. Aldrich says that Ford next
needed a single view of some four or five different operational systems in the after-market parts area. "Ford recognized the possibilities with Teradata's Supply Chain Integration solution," he explains.
Teradata's SCI solution, known as Inventory Monitoring Alert System (IMAS) inside Ford, went into full production in January 2001 and immediately began showing positive results. "By being able to see into the truck—to see and understand the importance of the inventory—the sequence in which the trucks are unloaded could be reordered to unload the most important inventory first. That is what the Teradata system does," explains Hill. "It looks at the inventory; it looks at the criticality to the customer based upon the order rate and the supply chain position—‘how much inventory do I have and how long does it take to get new inventory if I don't have enough?'"
The Teradata Warehouse allows Ford to do business more efficiently every step of the way, beginning at the part number and location level, and following through the entire supply chain. By being able
to determine which truck should be unloaded due to the criticality of the inventory, Ford's service levels started improving immediately.
The bottom line? In just 12 months, back orders dropped 20%, safety stock inventory levels were reduced 20% and there was a 30% reduction in cycle time.
Hill adds that one of the biggest benefits of Ford's IMAS is that variables in the supply chain no longer pose the same problems they once did. "The byproduct of all of these transactions and calculations is analytics that tell Ford where the
variability is in their process," he states.
In fact, Ford found a rather unexpected variable: "There are 4,500 trucks at each point in time moving inventory around
the different sites," explains Hill. "Through analysis, 10% of those trucks were found to be habitually late, and some trucks were driving off the Ford property, parking and waiting for confirmation or return orders because they didn't want to 'deadhead' the delivery."
As a result, Ford was paying for carriers that were "waiting" for full loads. "This was found out very quickly using the data warehouse, allowing us to nail the specific problem carriers. Ford eliminated that variability in the process," Hill says. "You do that enough times and you take 30% of your cycle time out."
IMAS runs every day, pulling data from several source systems inside of Ford, calculating inventory and sending out alerts and reports to nearly 450 users inside and outside of the company. "Ford tried to utilize other technologies to do what we're doing with the IMAS and the SCI application," says Aldrich. "The problem was it was taking 12 to 14 hours to regenerate their whole supply chain with ad hoc reporting, whereas now they can
do it in 45 minutes."
Mapping the future
Teradata's SCI was developed to lower costs and improve the efficiency of businesses with complex workings such as Ford, and Ford has been able to build upon that foundation.
"We've worked very closely with Ford in putting together an analytical pattern that their users can easily access," says Aldrich. "We've grown the warehouse substantially every year. More and more applications come onto this warehouse because it's in an area where Ford can cost-justify the expansion." In addition
to its after-market parts business, Ford
is now also using IMAS in its packaging and coating (parts painting) centers.
As Ford celebrates its 100th anniversary, it is enjoying ongoing success in the automotive industry by continuing to
set and meet high-performance
standards. By streamlining both the financial and manufacturing divisions
of the company, Ford has been able to improve its financial operations and monitor every aspect of the supply chain, which not only improves the way the business runs but results in total customer satisfaction. With that kind of forward thinking in mind, Ford is eager to build upon its exceptional product line and strong business foundation during the
next 100 years.
Jackie Zack's business and technical articles have appeared in various trade journals.
© Teradata Magazine-June 2004
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