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Harley Davidson Case Study

Harley Davidson Case Study

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Published by Muayad Faraj

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Published by: Muayad Faraj on Dec 14, 2010
Copyright:Attribution Non-commercial


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Executive Summary
Harley-Davidson's management understood that there was much that the companycould do to enhance internal operating efficiency; one of those areas was in supplymanagement across all of the company's production sites. After defining its needs through itsSupplier Information Link (SiL'K) team and extending requests for proposals (RFPs), thecompany received eight responses and seriously considered three providers. None of the providers was absolutely a perfect fit, but one came close. In assigningweights to identified factors, it is clear that Provider1 is the best choice for Harley-Davidson's needs.
Harley-Davidson motorcycles are as much legend as product. The company enjoysintensely loyal customers, and nearly as loyal employees. The company celebrated itscentennial year in 2001, which in itself was nothing short of a miracle given all of theopportunities that the company had to go out of business. The company fell on hard times inthe early 1980s and even flirted with bankruptcy. Management did a turnaround in the mid-1980s, however, resulting in a financially sound public company today. One of the areas of turnaround was in relying on employees to help keep the company afloat - not in financialmatters directly, but rather in ensuring that Harley return to its standard and reputation for quality. Quality had suffered so in the 1960s and 1970s that the common saying aboutHarley-Davidson motorcycles was that a five-mile trip consisted of riding for one and pushing for four.Harley-Davidson has now returned to its former days of quality, adding productionefficiency along the way. It is the only surviving domestic motorcycle producer since Indian,its primary competition, closed in the early 1950s. It controls 54 percent of the domestic
market in heavy motorcycles, and devoted owners across the country sustain active ownersclubs and hold weekend rallies.In the mid- to late 1990s, Harley-Davidson's management turned its attention tointernal efficiency. Though it had made great gains in that area, individual sites still operatedmore than only independently from the company as a whole. Site independence was an issuethat had been encouraged for years, providing motivation for the employees and management personnel of each site to behave entrepreneurially rather than faceless entities of the larger organization. The downside of that approach by the 1990s was that each site had developed"different methods for handling procurement, including the acquisition and/or developmentof different information systems for Purchasing" (Sole, Cotteleer and Austin, 2003; p. 3).Harley-Davidson was a late entry into Just-In-Time (JIT) manufacturing, whichrequires that the organization hold little inventory either in finished products or in component parts. This late entry allowed Harley-Davidson to avoid many of the mistakes that other companies made in earlier years (Kelley, 1999), but did not preclude the possibility of making new mistakes of its own.Through much of the 1990s, Harley-Davidson used standard software packages easilycustomizable while still retaining ability to import and export directly with other packages(Hunter, 1996). This allowed it to interface easily with all suppliers without much regard for the systems used by diverse suppliers. In 1998, one author reported that Harley-Davidson,then a $1.8 billion company, was making its biggest technology commitment to date. Thatyear's IT budget and capital spending was "$50 million - slightly more than 2 percent of revenue and above average in the manufacturing sector. More than half of that budget isdedicated to new development, funding an IP-based corporate network, a data warehouse project, and standardizing on Microsoft desktop and server software" (Caldwell, 1998; p. 63).Harley made design drawings available to suppliers, effectively offering them partnership in the business. "These steps open Harley-Davidson's suppliers to collaborativerelationships that it hopes will cut product development time and manufacturing costs by $40
million" (Caldwell, 1998; p. 63). This action, however, was wholly inconsistent with thewoefully separate procurement systems existing at individual manufacturing sites.
Problem Statement
The problem with all of this is that Harley-Davidson was unable to gain benefits of quantity pricing as a company overall. Not only were the individual sites treated as separateentities, but their insistence on behaving that way prevented Harley-Davidson from gainingany benefit of quantity pricing or preplanning based on total sales forecasts. The companyneeds a means of operating with greater internal efficiency.
Alternatives and Score Matrix
The SiL'K team already had determined that Harley-Davidson was in need of amodified ERP; it also was adamant in the beginning that it was "not seeking a full ERPsolution, that the scope was well defined and those suppliers shouldn't waste time pitchingadditional functionality" (Sole, Cotteleer and Austin, 2003; p. 9). Harley's ArchitectureIntegration group reviewed all possibilities to ensure compatibility with existing systems. Of the eight potential suppliers responding to Harley-Davidson's RFP, the company narroweddown its choices to three.
Provider1's "representatives asked appropriate questions, they clearly acknowledgedHarley-Davidson's values, and seemed comfortable with the casual but competent Harley-Davidson style" (Sole, Cotteleer and Austin, 2003; p. 11). Provider1 addressed every issueraised in Harley-Davidson's RFQ, and tailored its solutions perfectly to the requirements setout by Harley-Davidson.Provider1 did not offer the highest form of functionality, and did not offer "'web-enablement' directly but its team proposed integrating a partner solution" (Sole, Cotteleer andAustin, 2003; p. 11). On the other hand, Provider1 was comfortable with the changemanagement issues that would arise in making the changes that the company sought.

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