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The purpose of this paper is to explain about Harley Davidson and how it improved its internal processes and its suppliers to stay competitive. And also focuses on the future trends required for running an successful organisation and to develop it continually.
Harley Davidson was started in 1903 by three Davidson Brothers and William Harley. They want to replace the bicycles which were famous in 1901. Finally in 1903 they had an engine with a new look frame which was ready to go into production. Initially the production was slow, however, in 1905, they were able to produce 60 motorbikes. In 1907, Harley Davidson sold 150 motorbikes.
In 1909, a new 45 degree V20 engine was introduced, which had more power. This was introduced because speed was considered more important. In 1916, kick starting was introduced. In 1920, 30,000 motorcycles were produced. But business began to slide in 1920. By the time styling was emphasized. Then they introduced tear drop gas tank. They also started to sell Harley's accessories and clothing which took place in 1920. To compete with others Harley dedicated companies profit to engineering and product enhancements.
In 1929, businesses were closing everywhere. Harley have to struggle once again. In 1930, new Harley products were produced in the market. But there was a mechanical problem which was focussed by customer's before engineers could fix it. And again they started to give face lift by introducing colourful bikes and stylish changes. Side cars were emphasized to improve sales. But it was not that successful because, some found bikes with side cars can be little dangerous to operate.
In 1936 a new model was unleashed which produced double the horse power. This added advantage to Harley. The competition was high so Harley was in a situation to expand manufacturing capacity and production. To do this in 1960 Harley was in need of capital. In 1969 Harley merged with American Mission Foundry (AMF), which turned Harley into heroes'.
But in mid 1970's due to the over expansion they had quality problems because they loosed their control. The relationship between Harley and AMF was not successful. Harley took back the company and was back in control. Harley felt that to survive and to grow they have to make best bike parts. They started to give seminars for more than 500 companies. Their strategy and implementations made today Harley Davidson as a dream machine.
In essence all the products are measured in terms of quality. The quality depends on the manufacturer of the product, which in turn depends on its suppliers. Supplier development is a way of developing the capabilities of the supplier's which also focuses in achieving higher rate of performance.
Watts and Hans (1993) pointed out that companies in the US mostly use supplier development programs. According to them supplier development program are as follows: 'suppliers development program involves a long term cooperative effort between a buying firm and its supplies to upgrade the suppliers - technical, quality, delivery and cost capabilities and to foster ongoing improvement'. The ultimate goal of this program is to form a mutually beneficial relationship that will help both firms to compete effectively in the global market.
Monczka, R.M., Trent, R.J. and Handfield, R.B. (2004) pointed out that supplier development is any activity undertaken by a purchaser to improve a supplier's performance and capabilities to meet the purchaser's short and long term supply needs.
Harley considers one of its suppliers has a medal stamping company. ALTERDO is a dedicated manufacturer to sell parts for Harley. They always ask for supplier's specific measurable goals. Twice a year the Harley's team would sit with the supplier's team and go through their goals. And they find out whether they are in the right path. Also Harley's look for continuous improvement, if suppliers don't meet all the goals, Harley says that the suppliers should have a program to improve them. Also Harley suggests that any manufacturer should not overestimate the capabilities of their suppliers. Harley trained employees in quality circles and statistical operator control. Statistical operator control is a defect prevention system. Donald W. Dobler, David N. Burt says, the idea is to detect the operating problems that produce defective items before many defectives are produced.
William Roth (1998:17) mentioned that the number one goal of any quality effort must be to gain employee commitment.
According to Harvard Business Review, it is necessary because in a survey it is said that 'companies in developed countries buy more materials and components from suppliers. The 100 biggest US manufacturers spent 48 cents out of every dollar of sales in 2002 to buy materials compared with 43 cents in 1996. Business is increasingly relying on their suppliers to reduce costs, improve quality and develop new processes and products faster than their rivals vendors can'.
Supplier relationship management is an approach to manage interactions with the organisations that supply the goods and services it uses. The goal is to have effective process between organisation and its suppliers.
It is also a part of the information flow in Supply Chain Management. Harley suggests that not only having a closer relationship between customers and suppliers but also to share the information with the suppliers that was necessary to run the business successfully.
(Harvard Business Review), for e.g.: Toyota and Honda have built great supplier relationship, by following 6 steps:
Understand how their suppliers work
They turn supplier rivalry into opportunity
Monitor vendors closely
Develop those vendors' capabilities
Share information intensively but selectively
They help their vendor's continually to improve their processes
It's an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices (tutor2u n.d).
According to Porter's term there are only two sources of competitive advantage, the Cost and the Differentiation, Tony Hines (2004).
This shows that an organisation can be differentiated by cost advantage or from its competitors. Harley did this by re-engineering processes and continuous improvement of its quality. Hence they made the products more efficient. As a result Harley Davidson's motorcycles were said to be dream machines. Also they tried to be different by licensing its logo and held seminars which dealt with their experiences.
Derek, L. Waller (1999), for a competence to be core it must satisfy 3 criteria:
Must make a disproportionate contribution to customer perceived value
It must be competitively unique
Must be extendible meaning that the competence may be applied to the product areas or to new market developments and not just to existing product groups or existing markets
JUST IN TIME (JIT) MANUFACTURING
It is an inventory system in which the required raw materials are been delivered to the manufacturer on the day when they are required on the assembly line and finished goods are been manufactured just before they are shipped to customers (Investor Glossary n.d).
Harley, in the beginning stored a huge amount of raw materials which led to many problems such as increase in cost overhead, quality problems. When JIT manufacturing was introduced it reduced cost overhead, inspection of quality has been limited and also eliminated wastes of all kinds.
Harley called JIT as materials as needed. But when implementing, suppliers of Harley were not much comfortable. Suppliers felt their way of processing were different. Suppliers served different types of people, customers and companies. Suppliers thought Harley makes motorcycles and it is easy to implement JIT. But Harley tried and made their suppliers JIT.
If suppliers want to implement JIT then they have to be provided with the advanced scheduling information from manufacturers. Harley promised to provide suppliers with scheduling information; if the advanced scheduling is not known then the production might stop which leads to huge bottleneck problems.
Quality plays a major role in any organisation. This is an important aspect of any product which makes it different from its competitors. Good quality results in better reputation and loyalty among customers, reduces the costs which occur due to the rework, complaints, wastes, bad reputation when quality is not good.
During 1970's efforts were dedicated to increase production. But the product was worst in mid 70's because they were out of control due to over expansion. This resulted in quality problems. They checked the process before assembly line and also inspected all parts being delivered to assembly line. If it was not useful, then they started to look on supply line. This showed Harley Davidson needed a new start.
The sales were up again by the introduction of colourful bikes and stylish changes. Slide cars were emphasized to improve sales. Then they produced bikes with higher power, this attracted German market. Manufacturing process was improved. Then they recognised quality is the most important factor. They said 'they don't want to sacrifice quality'.
Arman Fiegenbaum (1983) defines quality as the total composite of product and service characteristics of marketing, engineering, manufacturing and maintenance through which the product or service in use will meet or exceed the expectations of the customer.
Also we have to manage supplier quality. If our supplier quality is bad, then quality would be tarnished even for the world's best brands. Any firm, that does not manage quality throughout its supply chain, risks customer's dissatisfaction.
As stated earlier, most of the companies in the developed countries depend on their suppliers. So 50% of failure in a product is the responsibility of suppliers.
Leadership is all about creating a quality culture.
Norman Gaither and Greg Frazier (2005) discuss, many US manufacturers have overhauled the structure of their organisations, changed their organisation climates and redirected the product quality programs toward becoming global quality leaders. Some efforts are often referred to as quality management. At Motorola it is called Six Sigma; at Xerox it is called leadership through quality. The aim of total quality management is to provide products which are considered best by the customers. And also it focuses to improve the quality of the product continually.
James H. Saylor (1996) Important elements of TQM:
Top management commitment and involvement
Design products for quality
Design production processes for quality
Control production processes for quality
Developing supplier partnership
Customer service, distribution and installation
Building teams of empowered employees
Benchmarking and continuous improvement
Harley, reckoned quality was important. And implemented JIT, supplier development, employee development and still continuous to improve its quality.
It helps in forecasting, scheduling information, costs taken for transportation and so on. Ravi Kalkota, Marcia Robinsons (2000), there was a tremendous growth over the last several years in the development of information technology which supports 2 primary applications: Supply chain execution, Supply chain planning.
In Harley, information passing is most important. Because it is JIT, so have to provide information scheduling, else will result in huge bottlenecks. It is necessary that throughout the supply chain to be effective the information has to be passed.
Programs implemented by Harley Davidson were successful. So they suggest organisations that benchmark them to apply these programs for continual improvement of their products and services in this competitive world.
It is clear from the above discussion that the supplier development, quality, continuous quality improvement is important and also they increase in the profit.