Analysis of risk management in the automotive supply chain a case of ford motor

1

FOREIGN TRADE UNIVERSITY

SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS



INSURANCE AND RISK MANAGEMENT REPORT

Group

TOPIC: analysis of risk management in the automotive supply

chain: a case of ford motor

Instructor: Dr. Hoang Thi Doan Trang

Class code: TMAE308(GD1-HK1-2223).1

Hanoi, 09/2022

2

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION ABOUT THE AUTOMOTIVE SECTOR

AND THE RISKS IN ITS SUPPLY CHAIN...........................................................3

1.1. Overview automotive industry..........................................................................................3

1.2. Risks in the supply chain.................................................................................................4

1.3. Risks in the automotive industry......................................................................................6

CHAPTER 2: THE CASE OF FORD MOTOR.....................................................9

2.1. Brief about Ford motor....................................................................................................9

2.2. Supply chain management of Ford before 2018...........................................................10

2.2.1. How Ford manage the automobile supply chain before 2018..............................10

2.2.2. How Ford motor managed risk after applying new supply chain management. .12

2.3. The Case of Ford Motor: May 2nd 2018 fire accident.................................................14

CHAPTER 3: PREVIEW OF FORD'S CASE......................................................21

3.1. Risk management assessment........................................................................................21

3.2. Proposals for Ford Motor..............................................................................................24

CONCLUSION........................................................................................................26

REFERENCES.........................................................................................................27

3

CHAPTER 1: INTRODUCTION ABOUT THE AUTOMOTIVE SECTOR

AND THE RISKS IN ITS SUPPLY CHAIN

1.1. Overview automotive industry

It all started with the development of the first car by German inventor Carl Benz in 1886. Nearly

136 years later cars are the main way of transportation and the automotive industry has grown

into one of the most important industry sectors of the world. The global, total revenue of the

industry accumulated to about $2,86 trillion in 2021. It’s also the sector with the highest R&D

spending per company and is known for its highly automated production. I think we have all seen

the robot arms assembling car pieces on a conveyor belt. Because the supply chain is a big

complex system of suppliers many technological clusters arise around the big factories. To the

point where whole cities evolve around a company and a car plant like for example Wolfsburg,

Germany, the HQ of Volkswagen.

Germany has been famous for its cars for many years. However China has been the biggest car

producer since 2009, with an output of about 26 Million cars in 2021. Global motor vehicle

production in 2021 was around 80 Million units, an increase by 3% from 2020’s output but still

12 Million lower than pre-pandemic numbers. Passenger cars made up the largest portion with 57

million units. The biggest industry players are Toyota Motor Corp. with $255.817 bn annual

revenue in 2021, Volkswagen AG with an annual revenue of 250,2 bn € in 2021 and Daimler AG

with 167,9 bn € revenue in the same year. Other big automotive companies are Ford Motor,

Honda Motor, BMW, General Motors and Hyundai Motor.

In recent years the industry has been prone to many internal and external changes and challenges.

The increasing concern about human made climate has led the European Commission to issue the

european green deal. Which only allows the registration of zero emission cars from 2035 and

onwards. With Tesla, BYD and Nio the industry has seen an increasing shift towards electric

powered engines instead of conventional combustion engines. In 2021 Tesla became only the 5th

company, and the first automaker, to reach a company market value of 1 trillion USD. Nearly

10% of global car sales were electric in 2021 which is four times the market share of 2019. This

has brought the total number of EVs (electric vehicles) to about 16,5 million. Partly due to

government tax reductions and subsidies for EVs. But the complex automotive supply chain is

increasingly dependent on China for rare metals and battery production. China dominated the

production of all lithium-ion batteries with a 79% share of worldwide output in 2021. This is an