Case Study 2 Harley Davidson
Question 1: Identify the Improvements that Harley Davidson Made? Harley Davidson decided to reduce high inventories and high operating costs that left the company vulnerable to market fluctuations. Harley Davidson set up a program where Employee Involvement (EI) would help the employees share the vision of the company based on 5 key principles – Tell the Truth, Be Fair, Keep your promises, Respect the individual, encourage intellectual curiosity. Harley developed the Harley Davidson Learning centre for employees which encourage employees to upskill and cross train and introduced a gain sharing program which give cash incentives for maintaining and improving quality, profitability and delivery. The company also decided to in-source work during difficult economic time to ensure employees felt confident in their job security and therefore would be more willing to show loyalty to the company. Extensive team building has taken place at all levels of the company and the new focus on open communication between all levels of employees greatly contributes to employee satisfaction. Top management have placed engineers on the factory floor in order to improve the speed and efficiency of fixing potential issues by giving the operators the opportunity of quick communication with the engineers. Harley Davidson also improved the way it handled its inventory. Harley changed from a complex computer based system which had on average a stock turn of just four times a year to a Just in time system which kept inventory levels low which helped free up cash which could be used elsewhere. The company also benefited from lower storage costs. The improvement in reduced inventory also helped to expose quality issues masked by high inventory levels and in turn issues were fix immediately. As a result of the improvement to inventory management, inventory levels were reduced by 75% and inventory turnovers steadily increased & turnover of inventory increased to 20 times per year from an average of 4. Harley Davidson also strives to improve its Process. Instead of buying new machinery, they focused on improving the use of its existing equipment by introducing Statistical Operator control which made the operators responsible for the quality of the product. Training was provided in relevant quality tools which saw a substantial improvement with 68% reduction in scrap and 50 % increase in productivity. Operators now understood if the process was in control and had the power to immediately stop the process and fix it. Harley had managed to improve the % of motorcycles coming off the line completed from 76% to 99% due to process improvements Harley Davidson also improved the layout of their operations, moving from batch process to U Shaped cells where one to four people worked together to produce a finished part. Each of the new U shaped Cells required 25% less space and lead times fell from 6 weeks to just a few hours as a result of inventory being delivered directly to where they were required by the suppliers instead of a central stockroom. As a result of the improvements work in progress and handling were reduced by 50% & space requirements were down by 25%. Harley Davidson has also embarked on a process of improving its image through marketing and incentives related to brand loyalty with an aim to increase sales. Harley also installed new demand forecasting software which helped the operations with its flexibility and efficiency
Question 2: Explain the impact these had on HD’s performance in terms of Sales, Profit, Cost and Inventory? Inventory
As a direct result of improvements made to Harley Davidson inventory handling system, Harley now increased their stock turn from on average 4 times per year to on average 20 times per year. This resulted in the company having low stock levels at the manufacturing site as a result of MAN system they introduced. The MAN system replaced the complex material requirements...
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