Ford Motor Company – an Outstanding Example of the Total Cost Minimization Being at Play


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In an economical point of view, it is essential to have and use the most effective methods as possible when doing business in order to have great benefits in return in one’s favor when the business is all dealt with. This means that in order to have a profitable outcome in an investment or asset, it is essential and fundamental to know beforehand the right moves to make in order to not be left unprofitable at the end. This method is used almost everywhere in life where people are doing business. An example of this method is when someone’s wants to make a brand new chair to sell in order to replace one that is already on the market. The person has to decide if he or she wants to build the chair themselves or if they are going to hire other people as workers to build the chair.

Furthermore, the person who wants to build the chair has to decide on the building where the chair will be assembled by the workers, whether if it would be assembled at a personal place or a rental. And lastly, the person have to calculate the amount of money that will need to spend on power, rental, materials, workers, and the advertisement for the newly built chair. By taking all these scenarios into a detailed account, the person who wants to build the chair will have a profitable outcome because the person had planned out everything before the building process of the chair, with everything planned out before the assembly process, there will be less money spent during the entire manufacturing processes.

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This method can also be seen in total practice in the Engineering field as well. In the engineering field, such as the automobiles plants and auto manufacturers, managers and officials look profoundly in details and breaks down all the costs to manufacture new vehicles in order to make the spending on the new vehicle less compared to the amount spent on the making of old vehicles from the past. In this way, the automobiles plants will have a great income as the outcome of the process, because more is earned then the amount spent on the making of the product. This method used in the business world is known as total cost minimization.

According to Reverso Dictionary, cost minimization is “the price paid or required for acquiring, producing, or maintaining something, usually measured in money, time, or energy; expense or expenditure; outlay “ (Reverso Dictionary). By knowing the definition of cost minimization, then total cost minimization can be defined as “ (…) as a basic rule used by producers to determine what mix of labor and capital produces output at lowest cost. In other words, what the most cost effective method of delivering goods and services would be while maintaining a desired level of quality” (Beggs, 2018).

This economical strategy is really essential and important to the producers because it serves as a guide for them since it is guiding the producers towards the most cost-efficient approach to achieve their goals with their products. An example of this financial and economical method being in practice is at the For Motor Company. Ever since its early establishment in June 16, 1903 by the American industrialist Henry Ford in the United States of America, Ford Motor Company has occupied the second largest auto manufacturer title in the United States following behind General Motors, and has been the fifth largest auto manufacturer in the world following behind the Chinese brand Toyota, german brand Volkswagen, South Korean brand Hyundai Motor Company and American brand General Motors.

Ever since it was founded, Ford Motor Company has greatly impacted the economic level of the American nation by providing a useful source of transportation to the citizens and also by exporting the built cars sell abroad to foreign nations. Also, the company have helped the nation’s economy to grow, by creating millions of job opportunities to the american citizen, and also by bringing billions of dollars from both nationally and abroad sold cars. The financial crisis between the years of 2007 and 2008, was seen as the “worst economic disaster since the Great Depression of 1929” in the United States”.

During the financial crisis, Ford Motor Company copped amazingly well on a financial level and it was the company along with other factors and assets that helped the American economy to make it out of the financial crisis without crashing down. The Ford Motor Company was successful because of its practices with the Total Cost Minimization method because by empowering this financial method in their board of discussions, they were able to minimize the cost to make each cars so that the price car was sold at would not be less than the price it cost the company to manufacture it. The Ford Motor Company is an automaker company founded by Henry Ford on June 16, 1903 in Dearborn, Michigan. During the early years of establishment of the Ford Motor Company in Dearborn, automobiles were in most cases getting assembled by hands of hired workers. In order for the company to have enough hands to utilize in the assembly process of the cars, the company has to hire a great population of people as workers to work in the auto plant in order to assembled hundreds of car each day. Hiring and recruiting a lot people posed a lot of problems for the Ford Motor Company because this created another area along with the cost of power, building management, and supplies where the company has to spend money on. This was also a problem because at the time the company needed a lot hands to manually assemble the cars and the more people that is hired, the more money the company have to spend to pay them for their hours worked during each day. In order to solve and soothes this problem, the Ford Motor Company implanted the idea of using a moving assembly line within their company 10 years later after its opening in order to increase drastically the amount of cars and the time it took to assembled them, “His [moving assembly line] reduced the time it took to build a car from more than 12 hours to two hours and 30 minutes”.

The moving assembly line that the company installed was essentially an arrangement that contained a mixture of technological operated machines, some of the workers, and the car parts. The assembly line was always in a constant flow of motion as the machines took the parts and place them on the cars to assemble them, at the same time the workers have to be fast and keep up with the machines during the assembly processes. With this technique used in the company, they were a able to find a way to maximize the cost of the production for each cars because the assemblies replaced some of the workers and this reduces the amount of money that the company have to spend on the workers by a significant margi . The moving assembly line that the Ford Motor Company made really benefited them in immense way.

Firstly, the assembly line was more faster and more efficient then the workers, therefore the assembly was able to produce more cars at a more efficient rate than the way the workers used to manually assembled them by hands. Secondly, the machines from the assembly line could do jobs that the workers could not have done, jobs that were deemed dangerous for the workers. With less workers doing less dangerous jobs at the company, there will be less injuries and incidents which in return will decrease the insurance plan of the company for the workers. Although the moving assembly line increases the productivity rate at the Ford Motor Company, it took many jobs away from workers that were there prior to its installation in the company. This can be seen as a negative side of the assembly line as it leaves hundred of thousands of men and women unemployed.In conclusion, it is essential to have the most effective methods as a producer when doing productions or landing some new on the market. In an economical standpoint, it is important to analyze the right actions and methods in order to come out as profitable as possible and not the other way around. In the case if a producer wants to produce a new product to sell to the customers on the market, the producer have to carefully plan out the required process to manufacture the product in order to maximize total cost which essential mean the producer have to find the most cost efficient method to produce the product where the cost to make is less than the price the product would be sold as. This method is referred to as the total cost minimization and essentially, it is a financial method used to find the cheapest and most efficient way of creating and producing goods in order to have a profitable income when the product is being advertised on the market.

Throughout times in history, Ford Motor Company is an outstanding example of the total cost minimization being at play. When the company first opened its doors, their cars were being for the most parts assembled manually by the hands of workers which was a huge crisis for them since they had to hire a lot of workers and pay them their wages. But with the introduction of the moving assembly line in the Ford Motor Company, the majority of the workers were sent home because the assembly line replaced them and were doing their tasks with a much efficient and quicker rate.

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