Supply Chain Management At Harley Davidson

1613 words (6 pages) Essay

15th May 2017 Management Reference this

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Harley-Davidson Motor Company is an American manufacturer of motorcycles. The company sells heavyweight motorcycles and is popularly known as ‘Harleys’. In 1903, William S. Harley and Arthur Davidson developed and made the first production Harley-Davidson motorcycle (Harley Davidson n. d.). Managing the supply chain was not the priority for Harleys. In mid-1970’s, Harleys was in the worst condition due to quality problems. Harleys began internal inspection which took a lot of time. They needed new start for improvement. In 1981, they took chances of implementing JIT and Supply Chain Management which ultimately succeeded (Association for manufacturing excellence n. d.). Harley-Davidson was facing numerous difficulties mainly due to the quality. Maintaining the supplier relationships was tough. Harleys had to overcome numerous problems for the growth and survival. In mid-1970’s, Harleys’ productivity was in worst condition. There was over expansion and a lot of quality issues. Additionally, recession in early 1980’s highly affected the business. Market shares were rapidly decreased to 23% since mid-1930’s (Southey 2009; Association for manufacturing excellence n. d.).

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WHAT IS SUPPLY CHAIN MANAGEMENT

The business world is constantly evolving. Businesses are seeking better, smarter and more efficiently ways of running their operations in a bid to be more competitive and give them that extra edge needed to stand out in the present world class business environment.

The need to continuously improve business operations cannot be met without a critical evaluation of the concept of Supplier Development within the framework of Supply Chain Management, particularly for manufacturing corporations such as the Harley Davidson Company which requires high design and quality standards. Michael (2003) explained supply chain management as the coordination of production, inventory, location and transportation in supply chain in achieving the best mix of responsiveness and efficiency for the required market demand.

Sako (1999) has described supplier development as being aimed at improving suppliers’ ability to sustain their competitiveness and not just to improve their performance for immediate tangible gains.

There are numerous reasons why businesses concentrate on supplier development as a means of strengthening their competitive positions and among these are; the need to increase coordination in complex processes or tasks, the provision of a buffer against technological uncertainty, protection against a shortage of skilled labour, profit stability, market advantage, cost efficiency as well as better customer service. Since the ICT came into business it has raised a possible effect on the state of spare parts. For more information about rapid manufacturing (RM) on spare parts is discussed on the following journals (Walter et al., 2004; Peres and Noyes, 2006).

Handfield et al (2000) found that an improved supply chain can come from improvements in supplier performance and have stated that viewing supplier development as a long term strategy is the best way to achieve an integrated supply chain. They have also suggested that companies must consider which of their suppliers to develop on the basis of the value and available volumes associated with their products as well as the potential of the supplier to develop.

This interwoven link between the supplier’s products and where to emphasis supplier development is called the Commodity Portfolio Matrix and is elucidated in Figure 1.

Figure: 1. Commodity Portfolio Matrix Source: Handfield, R.et al. (2000:39)

Harley-Davidson understood the benefits of partnership relations with its suppliers and consistently work towards that but have also come to an understanding that their relationships with their suppliers with regards to development must also be along the lines of their strategic value to the company as illustrated in Figure 1.

HARLEY DAVIDSON EXPERIENCE

When Harley Davidson had a large market managing it was a serious problem because of the quality, inventory management, good returns on investment and achieving process improvement having in mind that the competition was becoming more than what it was in the early 70’s. Dyer et al . (1998) explained that in order to meet the challenges of the increasingly globally competitive markets of today, companies must place adequate emphasis on supply management. They had to put in place a structure that could deliver the company aim and objectives in been the best manufacturer of such products. Meeting the new market challenges, Harley Davidson formed an operation management team that could move the company from its poor state to a world class level. Shim (1999) discuss that operation management deals with the management process and design of how the company will be run, Heizer ( 2008) also discuss operation management as a disciple that may possibly be applied in any organisation for a positive product in view. The team was able to come up with programs that they felt could change the company’s profile in terms of returns in investment.

Supplier development

Is the process whereby one of the partners (the buying organisation) in a relationship modifies or influences the behaviour of the other partner (supplier) with the intention of achieving a mutual benefit (Hines, 1994). Hahn et al(Larsson 2003:866) define supplier development as a “cross-disciplinary activity that could involve all functions in a firm and focus on different capabilities, such as technical, quality, delivery and cost capabilities and on product, process or operating systems related aspects of the business”

Harley Davidson had a difficult time to implement this because the suppliers were too much and some responded half-heartedly .To enable them achieve this, they had to reduce the supplier base from 320 to 120 and establish performance requirements. Robin and Slagmulder (1999) highlighted that one of the three ways to contract the number of suppliers is to reduce the number of suppliers of each part.

INVENTORY MANAGEMENT

Inventory management plays an important role in any manufacturing company; Harley Davidson had this problem in managing its inventory properly which affected it supply chain. Proper inventory can make a company maximize it profit if well managed, (J. Heizer 2008) also argue that inventory management is a crucial aspect in any company in striking a balance between the inventory investment and the customer needs. Harley Davidson became aware of this so the company had to introduce a program which they called material as Need (MAN), which made the company to move from push manufacturing system to pull manufacturing system, this was done to reduce stock in storage to having stock as at when needed which they also call just in time production. (R. Jacobs 2009) discuss inventory in manufacturing industry as stock from their raw state to the finished product. The company was able to make more profile in handling it inventory and equally met the customer requirement in the areas of quality and specification.

With major change in-house, they took their ideas towards the suppliers through a supplier development initiative

Return on Investment

The company needed to minimize it cost it had to cut down on inventory storage, which resulted on paying less for warehouse, increased market shares. (J. Jack 2003) explain return on investment as the quantity of performance used to evaluate the efficiency of the investment in an organisation. Harley Davidson has to reduce the fund been held down in area like fixed asset and inventory to get a measurable return of it investment.

formula:

Achieving Process Improvement

In maintaining its position in a competitive economic the personnel that were responsible for a particular jobs did in other to monitor the quality control of production, reasons were because there were operating a pull system so they needed to be right at first attempt help in saving a lot of time and money.

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Statistical Operation Control

Statistical operator control, in which the manufacturing operator is also responsible collection, measuring and recording data associated with the production process. This serves as an educational tool as he uses the information to make the process better.

Benefit

There was a drastic reduction in its warranty costs on materials.

It experienced a very high increase in the company productivity.

Lesson learnt

Information sharing is very important because it helps improve performance

Being price-driven alone without considering other criteria like quality, delivery and performance, will eventually lead to high total cost. Doing it right the first time (quality) helps save time and money.

Trust, leadership commitment and are critical success factors that are necessary for the appropriate implementation.

CONCLUSIONS

Harley-Davidson implemented Strategic changes staring from JIT approach to suppliers’ benchmarking to achieve overall improvement, growth and to overcome their difficulties. Harley-Davidson video case study identified that the main driver of supplier development is the pursuit of sustainable competitive advantage through continuous improvement at both customer and their suppliers (Southey 2009; Association for manufacturing excellence n. d.).

Harley-Davidson Motor Company is an American manufacturer of motorcycles. The company sells heavyweight motorcycles and is popularly known as ‘Harleys’. In 1903, William S. Harley and Arthur Davidson developed and made the first production Harley-Davidson motorcycle (Harley Davidson n. d.). Managing the supply chain was not the priority for Harleys. In mid-1970’s, Harleys was in the worst condition due to quality problems. Harleys began internal inspection which took a lot of time. They needed new start for improvement. In 1981, they took chances of implementing JIT and Supply Chain Management which ultimately succeeded (Association for manufacturing excellence n. d.). Harley-Davidson was facing numerous difficulties mainly due to the quality. Maintaining the supplier relationships was tough. Harleys had to overcome numerous problems for the growth and survival. In mid-1970’s, Harleys’ productivity was in worst condition. There was over expansion and a lot of quality issues. Additionally, recession in early 1980’s highly affected the business. Market shares were rapidly decreased to 23% since mid-1930’s (Southey 2009; Association for manufacturing excellence n. d.).

WHAT IS SUPPLY CHAIN MANAGEMENT

The business world is constantly evolving. Businesses are seeking better, smarter and more efficiently ways of running their operations in a bid to be more competitive and give them that extra edge needed to stand out in the present world class business environment.

The need to continuously improve business operations cannot be met without a critical evaluation of the concept of Supplier Development within the framework of Supply Chain Management, particularly for manufacturing corporations such as the Harley Davidson Company which requires high design and quality standards. Michael (2003) explained supply chain management as the coordination of production, inventory, location and transportation in supply chain in achieving the best mix of responsiveness and efficiency for the required market demand.

Sako (1999) has described supplier development as being aimed at improving suppliers’ ability to sustain their competitiveness and not just to improve their performance for immediate tangible gains.

There are numerous reasons why businesses concentrate on supplier development as a means of strengthening their competitive positions and among these are; the need to increase coordination in complex processes or tasks, the provision of a buffer against technological uncertainty, protection against a shortage of skilled labour, profit stability, market advantage, cost efficiency as well as better customer service. Since the ICT came into business it has raised a possible effect on the state of spare parts. For more information about rapid manufacturing (RM) on spare parts is discussed on the following journals (Walter et al., 2004; Peres and Noyes, 2006).

Handfield et al (2000) found that an improved supply chain can come from improvements in supplier performance and have stated that viewing supplier development as a long term strategy is the best way to achieve an integrated supply chain. They have also suggested that companies must consider which of their suppliers to develop on the basis of the value and available volumes associated with their products as well as the potential of the supplier to develop.

This interwoven link between the supplier’s products and where to emphasis supplier development is called the Commodity Portfolio Matrix and is elucidated in Figure 1.

Figure: 1. Commodity Portfolio Matrix Source: Handfield, R.et al. (2000:39)

Harley-Davidson understood the benefits of partnership relations with its suppliers and consistently work towards that but have also come to an understanding that their relationships with their suppliers with regards to development must also be along the lines of their strategic value to the company as illustrated in Figure 1.

HARLEY DAVIDSON EXPERIENCE

When Harley Davidson had a large market managing it was a serious problem because of the quality, inventory management, good returns on investment and achieving process improvement having in mind that the competition was becoming more than what it was in the early 70’s. Dyer et al . (1998) explained that in order to meet the challenges of the increasingly globally competitive markets of today, companies must place adequate emphasis on supply management. They had to put in place a structure that could deliver the company aim and objectives in been the best manufacturer of such products. Meeting the new market challenges, Harley Davidson formed an operation management team that could move the company from its poor state to a world class level. Shim (1999) discuss that operation management deals with the management process and design of how the company will be run, Heizer ( 2008) also discuss operation management as a disciple that may possibly be applied in any organisation for a positive product in view. The team was able to come up with programs that they felt could change the company’s profile in terms of returns in investment.

Supplier development

Is the process whereby one of the partners (the buying organisation) in a relationship modifies or influences the behaviour of the other partner (supplier) with the intention of achieving a mutual benefit (Hines, 1994). Hahn et al(Larsson 2003:866) define supplier development as a “cross-disciplinary activity that could involve all functions in a firm and focus on different capabilities, such as technical, quality, delivery and cost capabilities and on product, process or operating systems related aspects of the business”

Harley Davidson had a difficult time to implement this because the suppliers were too much and some responded half-heartedly .To enable them achieve this, they had to reduce the supplier base from 320 to 120 and establish performance requirements. Robin and Slagmulder (1999) highlighted that one of the three ways to contract the number of suppliers is to reduce the number of suppliers of each part.

INVENTORY MANAGEMENT

Inventory management plays an important role in any manufacturing company; Harley Davidson had this problem in managing its inventory properly which affected it supply chain. Proper inventory can make a company maximize it profit if well managed, (J. Heizer 2008) also argue that inventory management is a crucial aspect in any company in striking a balance between the inventory investment and the customer needs. Harley Davidson became aware of this so the company had to introduce a program which they called material as Need (MAN), which made the company to move from push manufacturing system to pull manufacturing system, this was done to reduce stock in storage to having stock as at when needed which they also call just in time production. (R. Jacobs 2009) discuss inventory in manufacturing industry as stock from their raw state to the finished product. The company was able to make more profile in handling it inventory and equally met the customer requirement in the areas of quality and specification.

With major change in-house, they took their ideas towards the suppliers through a supplier development initiative

Return on Investment

The company needed to minimize it cost it had to cut down on inventory storage, which resulted on paying less for warehouse, increased market shares. (J. Jack 2003) explain return on investment as the quantity of performance used to evaluate the efficiency of the investment in an organisation. Harley Davidson has to reduce the fund been held down in area like fixed asset and inventory to get a measurable return of it investment.

formula:

Achieving Process Improvement

In maintaining its position in a competitive economic the personnel that were responsible for a particular jobs did in other to monitor the quality control of production, reasons were because there were operating a pull system so they needed to be right at first attempt help in saving a lot of time and money.

Statistical Operation Control

Statistical operator control, in which the manufacturing operator is also responsible collection, measuring and recording data associated with the production process. This serves as an educational tool as he uses the information to make the process better.

Benefit

There was a drastic reduction in its warranty costs on materials.

It experienced a very high increase in the company productivity.

Lesson learnt

Information sharing is very important because it helps improve performance

Being price-driven alone without considering other criteria like quality, delivery and performance, will eventually lead to high total cost. Doing it right the first time (quality) helps save time and money.

Trust, leadership commitment and are critical success factors that are necessary for the appropriate implementation.

CONCLUSIONS

Harley-Davidson implemented Strategic changes staring from JIT approach to suppliers’ benchmarking to achieve overall improvement, growth and to overcome their difficulties. Harley-Davidson video case study identified that the main driver of supplier development is the pursuit of sustainable competitive advantage through continuous improvement at both customer and their suppliers (Southey 2009; Association for manufacturing excellence n. d.).

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