Harley Davidson Supply Chain Improvements Free Essay Example

In the early 1980’s Wisconsin-based Harley-Davidson Motor Business, the country’s biggest producer of motorcycles, was having a hard time to survive. Faced with an attack of sever competitors from Japan and stopping working brand-new products, … Harley-Davidson was challenged to stay successful. Nevertheless, not just did Harley-Davidson make it through, it became a huge success story, with sales increasing from 36,735 bikes in 1986 to 291,417 in 2003 to over 350,000 bikes in 2006. It has actually likewise broadened internationally into Europe, China and India.

A significant consider its turnaround was the strategic changes it made in managing its supply chain throughout the next years.

… In the mid-1990’s Harley-Davidson started advanced supply chain methods to reduce stock and purchasing costs while improving item quality and shipment times from providers. Harley-Davidson now expects providers to focus tactically on cost, shipment, and quality enhancement and to hit recognized cost and quality targets.

Providers are anticipated to satisfy “two times the level of quality” and to develop a composed tactical plan to achieve objectives for quality enhancement.

Providers are graded according to faulty “parts-per-million” and it has a target goal of 48 malfunctioning parts-per-million that suppliers are anticipated to attain. Harley-Davison sends suppliers a regular monthly report showing their quality and delivery performance, and if the provider gets a bad report Harley-Davidson sends their individuals to the supplier to determine the issues and assist them solve them.

If the supplier does not improve its efficiency, it is replaced. In 1995 malfunctioning parts-per-million for providers were typically around 10,000; nevertheless, by 2001 approximately 75% of Harley-Davidson’s supplier base was performing at 48 malfunctioning parts-per-million or much better, and 36 suppliers were carrying out at zero malfunctioning parts-per-million.

… These objectives knowingly decreased Harley-Davidson’s supplier base that might not satisfy expectations for cost, quality, and shipment by 80%, from 4,000 providers to 800.

In some cases Harley-Davidson has moved toward single-source relationships with suppliers. In these instances, the company partners with one supplier for a part, system, or component – for example, lighting systems, instrumentation gauges, or ignition systems – and works closely with the supplier to develop technology that the company needs to remain competitive. Approximately 80 on-site (resident) suppliers take part in new product design, creating an interface between the company and its suppliers that helps Harley-Davidson improve quality and cut costs.

In return, Harley-Davidson remains loyal to the supplier and reduces supplier uncertainty, provided of course that the supplier continues to meet the company’s objectives for improvement. In order for Harley-Davidson suppliers to remain competitive they must enforce similar exacting goals and standards on their own suppliers, thus creating efficiency and cost effectiveness along the entire length of the supply chain from Harley-Davidson’s suppliers to its suppliers’ suppliers, and so on.

Harley –Davidson is using the Internet to further improve its supply chain performance. The company launched an interactive Internet-based supply chain management strategy that placed a large portion of the company’s supply chain management only to the Internet. It provided all suppliers with information they need to conduct online financial transactions and reduce the time spent chasing invoices. Suppliers are linked by a web portal to critical business transaction information, including data on delivery and quality performance and the status of financial transactions.

In-house software reports defect rates that provides quick feedback to suppliers about bad components. Suppliers can look at production schedules and delivery requirements and assess their ability to meet those schedules. Documents and information previously sent using an EDI format are now sent more cheaply through the Internet, which is also more universally available to supply companies, particularly smaller ones.

What has been the effect of these changes in supply chain management at Harley-Davidson? They reduced operating expenses by $161 million; the company now manages its inventory according to a JIT system, and it runs on 6. 5 to 10 days’ worth of inventory compared to 8 to 15 days of inventory before its supply chain initiatives; its logistics and distribution center costs as a percentage of sales decreased by 59%. By any measure Harley-Davidson’s supply chain management strategy has been a success.

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