The key concepts that brought Harley Davidson back into business

The aim of this article is to identify the key concepts that brought Harley-Davidson back in to business. It mainly devotes the new management team that attempts to rebuild the production methods and working traditions in order to reduce costs and recover quality. The significant indicative contents are discussed relating to Harley-Davidson’s development on their new strategy concerned with their quality issues.

This piece of writing describes the transformation of Harley-Davidson’s supply chain management. The article concludes with a summary of results that have been accomplished by the organisation.

Introduction

“Harley-Davidson Motor Company” was formed in 1903 by William S. Harley & Arthur Davidson. Harley-Davison got the prominent identity for its quality & trustworthiness in the automotive industry and soon become one of the world’s leading manufacturers of motorcycles. It had a positive grasp over the sole competitor “Indian Motor cycle company”. After the World War-II, “Indian Motor Cycle Company” went out of business (1953). During this period Harley-Davidson dominated the motor cycle market. It was quiet obvious because it has got the complete competitive advantage.

Effects on Harley-Davidson due to Japanese automotive entrant

Things started changing when Japanese motor cycle companies entered the US market in 1960. Japanese products achieved enormous popularity and as expected Harley-Davidson were in serious difficulty. In this period Harley-Davidson goes public and it gets hold of American Machine and Foundry Inc. AMF wanted to take advantage on what they assumed to be a motorcycle trend in house market. And there strategy to survive was concerned on two major things ‘Increasing the production’ and ‘decreasing the labour cost’. They achieved their goals but it was an inappropriate step in their process of survival. Things went worse, class drop off to the low level and there was a huge decline in quality. Harley-Davidson gained nothing from their strategy hence conflicts grew between Harley-Davidson management and AMF. Due time top executives with a family member of Davidson brought back company from AMF. There was not only a task to turn around the company but also to regain lost market share. There was a situation of ‘alter or extinct’ for Harley-Davidson.

‘Vaughn Beals’ and a group of senior executives visited their Japanese competitor plant. They saw the difference in their strategy; their working environment and their aim towards producing quality goods. Beals decided to implement these systems to Harley Davidson. In other words Beals determined to improve Harley-Davidson Supply Chain.

Supply Chain Management

“Supply Chain Management is about linking the business processes between the related entities such as the buyer and the seller.” And the link is provided to all the connected areas such as managing logistics and the exchange of information, services and goods among supplier, consumer, warehouse, wholesale/retail distributors and the manufacturer of goods. (Pg. 185, 2009; ISACA)

“Supply Chain Management is the management of relations and integrated business processes across the supply chain that produces products, services and information that add value for the end customer”. (Pg. 12, 2005; Larsen)

Product triad

It was quiet obvious that this was not so easy to implement these strategies into working environment. Rapid changes in the company rules can’t take place unless top management let their old habits & attitudes concerning employees.

Hence Beal changed departmentalized environment to team based culture. And he found three ways to improve the supply chain and he called it as ‘Production triad’. Which includes Employee Involvement (EI), ‘Just In Time (JIT) inventory’ and Statistical Operator Control (SOC).

Employee Involvement (EI)

“Employee Involvement seeks to increase members input into decisions that affect organisation performance and employee well being”.(Pg. 351, 2009; Thomas) There are four key elements to obtain employee involvement they are Power, Information, Knowledge & skill and Rewards.

Process of implementation:

All efforts were made to get hold of employee’s involvement in the improvement of supply chain. They even dropped the concept of white collar thinking and blue collar working. The ultimate goal was to focus on quality and to get employee’s concerned about “thinking and doing” for the wellbeing of the company. This was not only concerned about their goals and profits but to make employee’s feel the sense of ownership of Harley-Davidson. To attain this they framed a group called EIG (Employment Involvement group) and Employee Solving Program (ESP) Groups. These groups are given rights to identify issues and research all the possible solution for those problems. Company on the other side deals with the possible solutions for those problems and finally union and company will arrive to a common database with minimum friction. This process was implemented by Rich Teerlink, York Plant. He named it as ‘Joint Process’. The main objective of this was to bring the possible best solution for the growth of the company irrespective of the managerial and non-managerial base.

“It is when people stop talking that I get worried. I want people to talk about the things that are bothering them” Says Bob Miller, York Plant; Harley-Davidson.

Harley-Davidson union contract 1983 provided in sourcing program designed into Harley-Davidson plants that had formerly done by outside suppliers. No other industry in US were in sourcing, Harley-Davidson was opposite to them and was success in creating manufacturing base as well as creating jobs. Harley-Davidson played an important role in helping to justify in sourcing in terms of quality.

EI was one of the predominant stages of the company, which turned into a good fortune and till today it’s in existence with some further added compulsions. (The Harley-Davidson Employee Involvement Manual was brought up in1983 involving of ‘nine’ must rules for Employee Involvement. Currently they have extended it to ‘twenty’ must rules for the welfare of the company.)

Just In Time (JIT) & Statistical Operator Control (SOC)

“JIT (Just In Time) means producing the right item at the right time in the right quantity”. (Pg. 67, 2007; Dennis) It follows few simple rules, they are as follows:

Don’t fabricate something unless the consumer has ordered it.

Connect all processes to consumer demand through simple visual tools.

Maximize the flexibility of people and machinery.

Level demand so that work may advance smoothly throughout the plant. (Pg. 69, 2007; Dennis)

Statistical Operator Control is used for analysing operator data. This could be a process of executing the whole thing required to turn an input into an output for a customer.

Process of implementation:

The main objective was to reduce Inventories, costs and improve quality control. “JIT” (Just In Time) system from Honda was applied in Harley-Davidson and they called it as “MAN” (Material As Needed). In Harley Davidson’s plant it was designed to free up much needed cash by reducing work-in-process inventory. According to the Production Triad, Employees had the freedom to order parts and materials as needed instead of working through hierarchy submission. Here they eliminated the course of scrutiny which was done by ‘checkers’ in untimely practice. Now they introduced a system called JCM (Job Characteristics Model), according to this system the team refined the product from begin to finish and they ran it through inspection themselves for completion. This ensured the employees to trace the problem and correct them in the production process. Thou it took time to train the employees about statistical methods; it was worth for Harley-Davidson to include it in production triad.

This MAN program was so effective that; Work in progress inventory reduced sheer 75%, reworks and scrap were reduced to 68% and productivity went up over 50%. And the most significant thing for a company, its market shares nurtured to 97%.

MAN was the dynamic strength for Harley-Davidson’s quality improvement program. During this process Harley-Davidson’s trained it’s suppliers to follow the same method for production, so as to meet the Harley-Davidsons production triad. The training was so professional and effective that it managed to implement this MAN system for their supplier’s supplier and so on in a very less span of time. This would have not been possible without the support of Employee Involvement (EI) in implementing MAN.

Conclusion

We can noticeably see the changes in the management can transform the outcome of a company’s destiny. By structure of a learning association (Senior Management with Vaughn Beals) Harley-Davidson effectively put together an organisation that became the world’s leading manufacturer of ‘heavy weight motor cycles’ (In terms of market share). The managerial structure of the company was compressed, getting relieve of positions that did not attach worth to the product. These factors along with Employee Involvement and Harley-Davidson’s MAN system have contributed a statement that Harley-Davidson is known for its products of quality and products that many customers accept as an element of their standard of living today.

In this corporate grey world of business, Concepts of Harley-Davidson’s production triad has achieved a brand image of ‘quality and design’ by managing its supply chain. In the battle of survival Harley-Davidson learnt from its mistake and responded in the way they should react. Now in the year 2010 it is successful although it should keep on shifting according to the change of environment.