Methods behind Harley Davidsons success and its history

Harley-Davidson is an American motorcycle manufacturer which is one of the leading automotive companies in the world. It produces heavyweight motorcycles, motorcycle parts, accessories, apparel and general merchandise (Datamonitor 2010: 4).

In this report, you will find a short summary of the history of Harley-Davidson of what is mentioned in the video. Furthermore, there will be explained some critical methods which changes the strategy of Harley-Davidson to become more successful. At the end of this report, a conclusion will be given.

Company: Harley-Davidson

History

Harley-Davidson was founded in 1903 in Milwaukee, where its first motorcycle was made but it was not until 1913 when the export sales began. In 1953, Harley was the last remaining major motorcycle manufacturer in the United States since Indian, the first motorcycle manufacturers, could not compete anymore after the two world wars and had to close (Carroll 2001: 80).

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In 1969, Harley merged with American Machine and Foundry (AMF) who produces leisure products. The early ’70s were boom years for Harley thanks to the merging. They owned the market in heavy weight cycles, so they increased the production (Carroll 2001: 9). Unfortunately, due to over expending and poor quality levels in the late ’70s, a sharp reduction in sales occurred (AME 1990). When they understood that Harley had a quality problem, they knew that a new start had to be made. Some of Harley’s employees purchased the company back from AMF in 1981, but due to the recession in the early 80’s, an overall reduction in the motorcycle market cut down the production (Datamonitor 2010: 7).

The top management traveled to Japan, their competitors, to find out how the Japanese factories were run. They saw that it was not the high-tech systems, but the efficient organization of the employees and productions systems that made the difference (Nahmias 2009: 401).

Harley reduced the set up time and changed to a just-in-time manufacturing and supply chain management. They moved from a push system to a pull system and their suppliers also required to have statistical operator controls and employee involvement programs. After the recession, Harley-Davidson was back on trail (AME 1990).

Implementation of JIT

Pull-system

In 1981, Harley had changed from a push system to a pull system, like mentioned in paragraph 2.1. Their problem was an overproduction and thereby a huge amount of stock. In this section, the different systems will be explained briefly.

A push system is a system where the production planning is already done for all levels in advance. For example, when the production in workstation A is completed, the items are pushed to workstation B as soon as it is finished in workstation A. A pull system on the other hand, is a system where the items only move to the next level when it is requested (Nahmias 2009: 364).

Unlike the push system, a pull system allows inventory levels to be reduced at all stages in the production chain. There will be three constraints observed (Southey 2010: 60):

consistently and predictability of the periodic demand profile of the customer for the finished goods;

reduction of batch sizes;

reliability of suppliers, i.e. delivery performance.

A pull system goes almost always hand in hand with just-it-time, what will be discussed in the next paragraph.

Just- in-time

As mentioned in paragraph 1.1, Harley-Davidson reorganized completely thanks to the visits to Japan. Their traditional management structure was replaced by a system where employees have ownership of their area of the line. One of the important changes was the way in which material was moved through the area of the company. They implemented just-in time, although Harley likes to describe its system as MAN, which means “material as needed” (Nahmias 2009: 401).

According to Jacobs, just-in-time means producing what is needed when needed and no more. The goal is to shorten lead times and to minimize inventory investment, because when inventory levels are low, quality problems become more visible (Jacobs, p.282-283). Briefly, JIT is cutting out waste.

JIT uses three principles (Southey 2010: 62-63):

elimination of waste to improve the effectiveness of processes;

total quality control to improve the efficiency of processes;

people involvement, because the employees are the most valuable resource.

Layout

Another change that occurs in Harley-Davidson was restructuring the layout of the plant into manufacturing cells (Nahmias, p.401). These cells are designed to work on products with similar parts or components and same processing requirements (Jacobs 2010: 76). In most circumstances, these manufacturing cells have a U-shaped structure to facilitate operator and material movements (Wisner 2008: 268).

One of the advantages of this type of layout is, that the work-in-process inventories will reduce. According to Wisner, excess inventories are considered a waste, because they tend to hide quality problems within the organization (2008: 268). The manufacturing cells are located close to the line, through which finished components can go directly to the next line, instead of delivering the components to a stock area.

This is one of the most important benefits to reduce queues of parts in the production line (Nahmias 2009: 561). By way of moving machine tools closer to the machines, setup times can also be reduced considerably. Using machinery that requires less setup time, practicing, preparation, etc. are other ways of reducing the setup times (Wisner 2008: 269). According to Nahmias, when a company has large volumes, process centers would have to be separated by large distances, hence considerable materials handling costs are required (2009: 562). Isolation of the parts facilitates to focus on the production flow within each cell. Reducing cycle times and work-in-process queues results in better schedules (Nahmias 2009: 562).

One of the disadvantages is that it, according to Nahmias, can be difficult to determine appropriate part families. Companies with a large number of parts would use a different layout for its plant. Another disadvantage is that the company may require duplication of some machines, when its uses this layout. This can become expensive and can result in greater overall idle time (2009: 562).

Employee involvement and continuous improvement

To have a successful implementation, commitment and participation from all levels of the organization is required. Harley-Davidson developed group solving problem programs for its employees to achieve impressive improvements in product quality (Nahmias 2009: 401).

Employees continuously have to find out how to reduce supplier delivery and quality problems. They are expected to control the quality of processed items which are coming into the manufacturing cell. During their day, the employees also get to work on reducing setup times and solving problems that occurs during the production. This is continuous improvement, which is also known as kaizen (Slack 2007: 595; Wisner 2008: 272).

Suppliers

According to Gary Kirkham, purchasing manager of Harley Davidson, suppliers who wants to be a JIT supplier to Harley Davidson cannot produce in large badges, warehouse its material and then transport it to Harley (AME 1990).

Wisner defined that supplier development is any activity that a buyer (i.e. Harley-Davidson) undertakes to improve a supplier’s performance and/or capabilities to meet the buyer’s supply needs (Wisner 2008: 91). One of the activities that require supplier development is training programs, which is exactly what Harley-Davidson has done and still is doing. Harley-Davidson is offering full day seminars to its suppliers to educate them about the principles of JIT, changes in the cost accounting area and changes in its supplier relationships. Harley give not only training programs to its suppliers, but also to suppliers from suppliers or firms who are not even clients of Harley (AME 1990; Nahmias 2009: 401).

Good scheduling information from Harley is hereby very important, because suppliers, such as KSG industries or Ultratool, have to maintain inventory (AME 1990).

Next to having a JIT program, suppliers are also required to have employee involvement programs (see paragraph 2.2.4) and statistical operator controls. Harley-Davidson changes the term from statistical process control (SPC) to statistical operator control (SOC), because they want that the person who had direct contact with the materials, i.e. the operators, also have the responsibility for the quality. He can make his process better, because he is the one who is able to use the information that he has measured (AME 1990).

Statistical process control is a method that uses statistical techniques and control charts to observe the variation in a work process (Nahmias 2009: 629). The control charts represent the process performance over time, shows the desired measurement with the upper and lower control limits. These charts facilitate the work for operators to plot data and compare the process performance over time (Wisner 2008: 290). To summarize, the control charts are used to see whether the process performs like it should be performing (Slack 2007: 553). A process is out of control when the points in the charts are lying outside the upper or lower control limit (Slack 2007: 557).

Harley-Davidson decided also to implement an enterprise resource planning system (ERP) (Färbinger 2006). According to Slack, ERP is ‘the integration of all significant recourse planning systems in an organization that, in an operations context, integrates planning and control with the other functions of the business’ (2007: 437). Their global business activities are supported with the ‘SAP for Automotive’ standard platform (Färbinger 2006). SAP is a company in Germany that is ‘a leader in supplying collaborative business solutions for all types of industries and for every major market’ (Monczka 2010:410). Harley is using this program to improve the relationship with its suppliers. Thanks to an IT system, suppliers can now log on to applications through the Web portal (Sullivan 2004).

Conclusion

Harley-Davidson is still an American icon who is committed to sell quality products while reducing costs. They not only want to create a purchasing engineer position, but also a closer relationship with their suppliers. They still focus on reducing costs, improving the quality of their products and reducing the time spent to develop new products. Its suppliers also are required to have specific quality levels (statistical operator controls) and employees involvement programs.