Harley-Davidson, Inc. Contents Introduction Problem Statement Supply Management Strategy Project Scope Project Execution Software Vendor Finalists Recommendations 2004 update References Harley-Davidson is an American motorcycle manufacturer with a rich history and cultural tradition. Founded in 1903 in Milwaukee, WI, Harley Just celebrated its 100th anniversary with a series of events around the world that culminated in hundreds of thousands of motorcyclists rallying last summer on the shores of Lake Michigan. In 1929, there were 241 motorcycle manufacturers in the US.
After the Depression, only two remained: Harley and Indian. By 1953, Indian went out of business, leaving Harley-Davidson as the only American motorcycle manufacturer. Financial difficulties in the 1970’s led to the parent company, AMF putting the motorcycle division up for sale. Without a buyer, a group of Harley managers bought out the company and rescued it with a business turnaround that included brand extensions into licensed goods, such as apparel and related accessories. Now a publicly owned company, Harley has scored double digit growth for eighteen consecutive years.
Harley ransformed itself into a strong marketing company with a focus on lifestyle image and product quality. The case took place in retrospect from 1997-1999. The purpose of the case was to management for this large manufacturing company. Recognizing that the purchasing process for obtaining materials and parts was out of control, management coordinated a project to understand its purchasing process and activities, solicit feedback from the 800 people who would be affected by the new system, and create a complete transformation in thinking and action regarding the procurement and management of incoming supplies.
In addition, management wanted to move the company from a short-term transaction purchasing basis to a long-term relationship with suppliers. In addition to selecting an ERP system, Harley Davidson was interested in developing supplier relationships with key vendors. They wanted the new system to facilitate this development. In the case, the managers went as far as making the distinction between vendor and a supplier indicating that a vendor is someone selling on the street corner and a supplier was an extension of the primary business. The company had highly fragmented purchasing functions.
Even though all product development and manufacturing remained in the US, materials represented nearly 75% of product cost. They used different invoices, schedules and procedures in every facility. Suppliers complained that they were dealing with three different companies, sometimes receiving orders from various facilities in the same day. Harley had hundreds of suppliers and no system of coordination or relationship management. Because the company was steeped in cultural traditions of gradual improvement and quality ideology, dramatic change was an unlikely outcome.
As n any major software project, the company faced three types of risk with this endeavor; size, experience, and structure. The size of the project determined how much risk was involved in terms of cost, time, and supplier relationships. Switching over to a centralized purchasing system may have resulted disruptions in supplies and production flow, costing the company in lost sales and dealer/customer relationships. Failure of the system to meet the expectations of users would cost the management credibility with employees and suppliers. We do not know the selection process cost.
Because this project consisted of only two ERP modules in collaboration and delivery management, it was not as large in size and posed only moderate organizational risk. Harley employees had experience with many different software systems to support various activities. They did not have an ERP system, so there was some risk involved in the coordination of all purchasing activities among facilities under one program. Because the managers understood the strong culture and history of the company, they structured the project carefully to create a change in thinking before creating a change in software.
The methods they used to survey purchasing people, involve representatives from all areas of the company, understand the process, work with suppliers, and select an ERP provider to grow with company and its future needs. All of these components helped to reduce the risk of the project. To get a better understanding of the scope of their problem and to plan the project, managers decided to survey those who were responsible for purchasing. They intended to discover what activities purchasing people carried out and how much time and effort went into procuring materials.
Everyone was surprised to learn hat 85% of purchasing time was being spent in non-strategic activities, such as counting inventory, data entry and expediting. While the company had 200 purchasing staff, the survey revealed that over 2,000 people were issuing purchase orders. Quantitative estimates provided a potential savings of an ERP implementation for purchasing at $34 million. Data like these helped to get people committed to making the project a success. The project scope had to identify the purchasing activities, the stakeholder groups (owner, driver, or participant), and the target audience (800 people).
In addition, the scope had to fine tune the details needed to create a software quote request and a list of supplier selection criteria. This helped to answer the following questions: Who will use the system? What will the system have to do? How can we make the implementation a success? Which vendor can best provide the functionality, support, and scalable potential? Even though the process took over two years, Harley managers did a comprehensive Job of selecting the ERP solution. It appears that the Silk team did a good Job preparing for the project evidenced by the careful mapping of the “as is” rocess and of the “to be” process.
This helped to reduce and manage project scope creep. Typical of lower risk, low technology projects, the details in planning generally pay dividends in the form of reduced implementation time at a cut over to a new system. Poor planning can lead to huge cost over runs and delays in system implementation. More serious problems can occur if the system can not deliver on promises made in initial project Justification. These are the kinds of problems over which project managers can lose their Jobs. We think that external consultants could have helped with the initial ssessments.
This may have helped Harley Davidson get a broader picture of the purchasing organization and allowed for the use of best practices from other industries. They may have done this”we do not know from the case. Great planning that is myopic does not necessarily lead to the best solutions. The time Harley Davidson spent on the initial phase of the project is much longer compared to either Tektronix or Cisco. In the case of Tektronix, they were happy throwing more money at implementation problems to stay on schedule. Tektronix also suffered from their lack f planning with previous implementation failures.
Cisco succeeded in meeting the short, implementation schedule through the use of a very standard, off-the-shelf system. Less customization of any ERP system leads to lower costs and quicker implementation schedules. A standard system is easier to upgrade also. Customizations are often required to ensure systems can meet a companies reengineering and ERP customization when implementing an ERP system. The successful ERP selection at Harley Davidson was not a result of planning alone. The case paints the picture of the culture of HD well.
This culture is brought ut in the style of management and the approach to the project and the selection process. Their use of their internal business integration (81) of process, people and technology was consistent. It would send a good message to the organization. Their definition of full time members as a Tuesday through Thursday was interesting. This is contrary to our experience of Monday through Friday being full time. The reason they gave does have merit. Full time members can lose track of the day-to-day business and not realize the impact of pending changes.
Seemingly small obstacles can turn out to be the biggest problems of system acceptance. There are some people that think a new ERP system can fix all of an organization’s ailments. This is simply not true, as bad processes are often the root cause of many ERP installation failures. The last paragraph of the case mentions the question of linking the Supply Management Strategy (SMS) and procurement system. Without the link, this process could have failed. The risks of not linking were higher than with linking because the procurement system should be looked at as an enabler of the SMS process.
Harley Davidson also developed additional standards before embarking on the ERP selection process. One was that of platform standardization. The case did not mention the standard but made note of the disqualification of one vendor’s product due to “architectural incompatibility. ” IT does need to lead and develop standards as part of the ERP and other operational strategies. Scalability of the purchasing system must also be considered. They had a basis to work from for future growth and development. An example here would be to standardize on Oracle for the database and Java script language for the web-enabled application development.
The group selected three finalists based on a number of variables. By allowing the software vendors to rate themselves quantitatively on functional variables, the team had some “hard data,” biased as it was. Each vendor wanted the opportunity and the business”of course they would rate their functionality as high as possible! There may have been no statistical differences among any of them. Clearly the motivation for the vendor was to win the contract, not be accurate in their capability assessment and potential fit for that organization.
Software vendors are notorious for assuring any potential large customer that their system will be great for them! The qualitative cale of fuzzier attributes (low, medium, high) was perhaps useful to the selection team, but again, held rater bias. Finally, three software vendors made it to the final round. The case was written such that there appeared to be a close tie between two, with a confounding variable for number three. The reference to provider three’s existing project was interesting. There is reference to the political and economic advantages.
It appears that having an existing project was a consideration. This may explain the poor first-run performance by the group as they may have thought they would get the work. The team tried to be objective. Ultimately, the company largest client bases of Supply Chain Management in the world. Harley is using their Collaborate and Delivery Management modules. The modules provide Harley with a web-based private trading network that provides visibility and transaction execution through a portal. In retrospect, we would have recommended that Harley do a few things differently.
First, they could have researched the literature on what types of problems mechanistic manufacturing organizations face when they try to implement an ERP system in a highly inflexible environment. There was enough research and case analysis available to do this. While they were clearly aware of potential change resistance and the need to get all stakeholders involved, the amount of time their search and selection process required was ridiculous in todays business environment. We speculate that the sheer demand and high prices of their product allowed them to wallow in their inefficiencies a few more years before they had to bite the bullet.
Second, obtaining the advice of experienced software and supply chain consultants earlier in the process probably could have saved some time and created a defined focus. Often, managers use the discipline and recommendations of onsultants to reinforce the need for organizational change. With the purchasing process out of control, they could have brought in some purchasing expertise to clean up some of the mess before selecting a software system to help organize the Third, we questioned the research methods and bias of the data. process.
However, if Harley eventually got what they wanted and it turned out to be a success for them, then perhaps their methods were valid. We do not know final cost fgures and messier details of implementation (schedule, support, etc. ). There are many technical details that we also know nothing about. Three out of five comments in the making the decision section suggest the people side was more important that the functional side. In reality, the functionality of any finalist should not be questioned. To get to the final round, the product has to work.
It is analogous to having to have a certain quality level to sell products. The team was looking at the project from the implementation and buy-in standpoint of the end users, which was appropriate. They tried to remain close to the end users from the start. Harley was successful in transforming its scattered purchasing functions into a supplier relationship management program. The supplier portal now serves 300 of its 695 suppliers. In 2004, the company will be extending portal access to its accessories and merchandise suppliers. This year, Harley will have about 300 IT employees.