Harley Davidson: Supply Chain Management

Introduction:

In the business market there are many different organizations, but those who have good quality, design, and manufacturing process with low cost and meet market requirement they wins like Harley-Davidson.

The main objective of Harley- Davidson was to focus on Just In Time manufacturing, Supply Chain Management and Total Quality Management in order to compete with other organizations. In this case study the emphasis is on how they developed the Supply Chain Management, Supplier Relationship, timed delivery and Quality. How sharing of information help them to implement just in time at supplier end ,its brief history ,problems it had faced in mid 70’s, the remedies, the steps followed to overcome the downfall, with emphasis on Supply Chain Management, and lastly it concludes with the findings and learning’s from the overall case study

Brief History

Harley Davidson is an American manufacturing motor cycle company which was built in 1903 by William Harley and author Davidson. In year 1970 the decision taking power was in the hand of cooperate parent company American machine and foundry at that time Harley Davidson was sole surviving company who were making heavy weight motor cycle in united states.AMF wanted to take the advantage of the market so decide to increase the production neglecting the importance of supply chain which made the quality go out of control. In 1981 new management was appointed by Harley Davidson to get out of this issue .Better operations towards better Bikes was their goal.

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Problems faced by Harley Davidson

In the mid 1970’s H-D had tough times, the market share was decreasing due to the poor quality of the product. After a detailed analysing it became evident that overproduction has resulted in a defocus from the Supply Chain Management. The quality of the H-D product which was the basis for their success did no longer exist. The low number of the Inventory Turns led to a high level of Stocks. With the demand decreasing and the high stocks the company was cash ridden. The recession also had its impact on low returns of the company. Another problem was they had no control over the suppliers and supplier quality was unpredictable which added to customer dissatisfaction.

Remedial Measures Taken

In 1980 Harley Davidson really had bad time so the management decided to take action by organizing there company with new start, management launched production schedule which increased inventory turns.Inventory Turns is define as the ratio of cost of goods and average inventory.

The inventory dropped to 4 million Dollars, with high level of productions. Inventory turns increased from 16 to 28 million per year.

Supplier base was reduced from 320 to 120 it leads to focus on supplier and better relationship with supplier.

Set up times were reduced drastically, it made smaller lifesize feasible which increased the production.

Harley Davidson introduced SUPPLY CHAIN MANAGEMET and JUST IN TIME MANAGEMENT which help to achieve continuous improvement in quality and delivery services,so there was drop in warranty cost also helped to eliminate inventory.

Shift of production focus from PUSH (anticipating demand) to PULL (responding to orders).

Supplier involvement program was evolved to improve the product development efficiencies and effectiveness which lead to development cost and reduction of developed time and reduce the cost and increase product value. Suppliers must install JIT, Statistical Operator Control, and should work for continuous improvements. Supplier development must increase the performance and capability to meet the long term supply need.

Rewards and Outcome

The main achievement of Harley Davidson is Quality and Delivery, it had established its base in the market.Introduction of just in time management helped them to work according to customer needs which led to customer satisfaction. Continuous improvement and bench marking the supplier helped them to improve the quality of the product.

Analysis

Supply chain management:-It is an activity which is defined as planning of operations, implementing the operations and controlling the operation of the supply chain to satisfy customer requirement as efficiently as possible. It includes production scheduling; Order processing, inventory management and customer services.

Just in Time or Man: Just in time helped Harley Davidson by eliminating waste by using quality of raw material, producing right quality of product in right place at right time. It also improves the product quality, increase the productivity and decrease the cost. Harley Davidson called just in time as man (material as needed).just in time help Harley Davidson to develop trust between suppliers, it also helped to increase inventory turns which generate the cash flow.

Principles and Technique of just in time used by Harley Davidson

Total quality control:- The purpose of total quality management is to focus on customer satisfaction by improving process, high quality of product and services. Total quality can be achieved by Employee involvement program and stastical operator control.

Reducing batch size production:- small batch size production helps to reduce inventory, reduce handling cost, smooth production flow and improves quality of the product.

Reduce set up time:- Reduction of set up time helps to make smaller and larger size doable. It also increases the productivity and quality. Reduces inventory, space and time.

Pull system (kanban):- pull system is a method in which we can control the flow production based on customer demand. In this system production is done in small batches in case if there is any problem at any point of operation the whole production line will quickly come to stop. Implementation of pull system can help you to eliminate waste in handling, optimize the shop floor space usage and improves on time delivery to customer.

Supplier development:- supplier development is long term relationship between customer and supplier that intent to benefit both. Supplier should not be treated as external source but part of supply chain management. Supplier development is actually developing supplier in same way the employer are developed, providing scheduling information about product and involving supplier in design stage can improve the quality of product. Darren docemsolo lean supply chain mgnt

Total employee involvement:- Each and every employee should be committed and dedicated to their work.employeer should be involved in quality circle with in the organization in order to discuss and develop management issue. Quality circle to encourage employee to take responsibility of their work which helps to improve quality and elimination of waste.

Supplier selection: The best decision taken by the management of a Harley Davidson was proper selection of supplier .In the past there were lot of suppliers so quality of the product was unpredictable single sourcing helped them to check the defect .selection was done by better interviewing the supplier and understanding supplier capability.

Supplier relationship: Another important step taken by Harley Davidson was improvement of supplier relationship .Their past relationship with suppliers was not that good which lead to quality and delivery problem ,weak relation with supplier can affect the organization and entire supply chain. Sharing information and conducting problem solving programs like statically operation control and employee involvement program helped Harley Davidson to improve the long term relationship. Working together with the supplier in various forms improves effectiveness and efficiency of operations in a company. Good use of relationship with the supplier can enhance the resource and capability of the company and hence it can improve market effectiveness. Harley Davidson would conduct meeting twice a year and looked for continuous improvement process.

Continuous improvement

continuous improvement is a management policy that sees quality improvement as an on-going process, and increasing improvement rather than once and for all improvement efforts. It helps to improve the supply chain as a whole.

Future Trends

Harley Davidson has diversified futuristic plans. Apart from being a leader in the Motorcycle manufacturing, they are into Branding of their logos. Supplier trainings, which includes a detailed study of their past strategies, problems and the way they have approached the solutions. The innovative Supply Chain Management systems which they inculcated in the organization. Also their aims are:

• Being world class customer
• Make worlds profitable motor cycle
• To have best supplier in the world
• To be recognised by customer for quality, value of product, services

Key point

Key points that we could learn from this layout are

• Quality
• cost
• Delivery and demand
• Development
• Management

Quality is the main objective of each and every organization but is should also be cost effective. The efficient logistics must ensure that the delivery is on time, which in turn increases the demand. Continual improvement of the product is achieved by development of research, training and supplier relationship. Management must be actively involved in strategically controlling the operations of Supply chain.

Conclusion

From the above study we can conclude that how Harley Davidson regained their reputation in the market by applying Supply Chain Management, just in time program and also good relation with the supplier helped them to improve their quality and standard of the product. Supplier quality was unpredictable in past, sharing information, good scheduling and teaching their supplier to adapt just in time program improved Harley Davidson’s quality, delivery and sevices.Thus applying supply chain management organization can improve their product range and make a better way for their future.