Harley Davidson’s Supply Chain Improvement
Excerpted from Operations Management: Creating Value Along the Supply Chain by Roberta Russell and Bernard Taylor pp. 420-421
In the early 1980’s Wisconsin-based Harley-Davidson Motor Company, the country’s largest manufacturer of motorcycles, was struggling to survive. Faced with an onslaught of sever competition from Japan and failing new products, … Harley-Davidson was challenged to remain profitable. However, not only did Harley-Davidson survive, it became a huge success story, with sales increasing from 36,735 motorcycles in 1986 to 291,417 in 2003 to over 350,000 motorcycles in 2006. It has also expanded globally into Europe, China and India. A significant factor in its turnaround was the strategic changes it made in managing its supply chain during the next decade. … In the mid-1990’s Harley-Davidson initiated sophisticated supply chain strategies to reduce inventory and purchasing costs while improving product quality and delivery times from suppliers.
Harley-Davidson now expects suppliers to focus strategically on cost, delivery, and quality improvement and to hit established cost and quality targets. Suppliers are expected to meet “twice the level of quality” and to develop a written strategic plan to achieve goals for quality improvement. Suppliers are graded according to defective “parts-per-million” and it has a target goal of 48 defective parts-per-million that suppliers are expected to achieve. Harley-Davison sends suppliers a monthly report showing their quality and delivery performance, and if the supplier receives a bad report Harley-Davidson sends their people to the supplier to determine the problems and help them resolve them. If the supplier does not improve its performance, it is replaced. In 1995 defective parts-per-million for suppliers were generally around 10,000; however, by 2001 approximately 75% of Harley-Davidson’s supplier base was performing at 48 defective...
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