1

Operation Management

“Just-In-Time Production System”

In

HARLEY DAVIDSON®

Name: KRISHAN KUMAR SHARMA

Student Number: A4017252, MBAGroup5 A

Date: 04th January, 2011.

Academic Year: October 2010-2011.

2

Table of contents

Sr. No ContentsPage No

1. Executive summary 3

2.Brief about the Harley Davidson®.

4

3. Swot analysis for Harley Davidson®. 5

4. Evaluation of the use of JIT system in Harley Davidson®. 6

5.Discuss how waste can be managed along with the Harley Davidson® Supply chain system. 7-9

5.1

Recommendation that how waste can be managed in the Harley Davidson® supply chain.

6.Micro environmental analysis of Harley Davidson® from different resources.

9

7. Internal analysis for value chain system. 9

8. Porter value chain model. 10

9.A framework that will assist a newly appointed first - line manager in the Harley Davidson®. 10

10. Recommendations and Conclusions. 10

11.

References. 11

3

Executive Summary:-

The lean systems are an operations system that basically maximizes the value added by each of a company’s activities by pairing unnecessary resources and delay from them. Basically lean system includes the company’s operations strategy, process design, quality management, constraint management, layout design, supply chain design, technology and inventory management and can be used by the both service and manufacturing firms. Like a manufacturer, each of the service business firm first take the order from the customers, then deliver the services and at last collect the revenue from their customers. Every service company purchases services or items, receives and pays for them, and hires and pays employees. The same activity can be held in a manufacturing firm. They also contain a large amount of waste.

Lean systems affect a firm’s internal linkages between its core and supporting processes and its external linkages with its customers and supplier. The using of the lean system is very important for the various department and functional area across the organisation. The system is used in the all functional department of the organisation like, marketing, human resource, engineering, operations, and accounts as well. The top management must embrace the lean philosophy and make it a part of organisational culture and learning.

Harley Davidson used the just-in-time (JIT) in manufacturing production system to set their operations efficiently and to deduct the amount spending on transportation system. Just-in-time system is basically based on the strategy to deliver the product with in the minimum time. Harley Davidson used the UPS supply chain system to reduce the wastage and also increase the productivity of using the system.

The philosophy about the JIT, “the belief that the waste can be eliminated by cutting unnecessary capacity or inventory and removing non- value- added activities in operations”.

4

Brief Introduction to Harley-Davidson®:-

Harley Davidson® is the one of the best motorcycle manufacturing company in the world. The company is founded in 1903 by the William S. Harley and Arthur Davidson. In 1903 in Milwaukee is the beginning of history that they are available for the public first production Harley-Davidson® motorcycle. First the bike they built is used as a racer motorcycle, with a 3-1/8 inch bore and 3-1/2 inch stroke. The factory in which they worked was a 10 x 15-foot wooden shed with the words "Harley-Davidson Motor Company" crudely scrawled on the door. After that Arthur's brother Walter later joins their party. Arthur Walter Davidson and Bill Harley developed a one-cylinder motorcycle in Milwaukee. The motorbike they built is powered by a one-cylinder gasoline combustion engine which was used for racing. The small company grow very quickly and joint with some another member of the Davidson.

In 1909, bill Harley started to work on their first project 1000 cc V-Twin. The more recognizable images of the Harley Davidson® motorcycle are the 45-degree V-Twin. Actually, Harley-Davidson® did not invent the V-Twin, it is hard to believe. Harley-Davidson is more acknowledged when they winnings in races, power contest, and hill climbs. For a long, long time this V-Twin stayed with Harley Davidson motorcycle®.

The Harley-Davidson Company further started their growth in the year of 1912. In this time they become as a motorcycle exporter and they started their first sale with Japan. In the war there are about 20,000 motorcycles were used, and most of them from the Harley-Davidsons®. In 1918, Harley Davidson® was becomes one of the biggest motorcycle factory in the world and they have signed nearly 2,000 dealerships worldwide. After that a long period they come with some new changes such as the “eagle” design, which was painted on all Harley-Davidson gas tanks, changes were also made to the engine. The 1340 cc is the biggest Harley Davidson motorbike that ever appeared. Civilian production on the motorcycle was mostly suspended in 1941 because the company turned out motorcycles for the world war. Harley-Davidson® received the army-Navy “E” award because of their commitment and excellent work; this would not be the last time. In 1947 they purchased the old A.O Smith Propeller Plant and Hydraulic front brakes were introduces on the Hydra-Glide models in the year of 1949.

In the 1950’s the British hired their 40 % of the motorcycle market with their Triumph motorbike. This is becomes another bad effect on to the Harley-Davidson company, but because of that they still survived at the period. The Harley Davidson® Sportster was born in 1957. It is the fastest Harley Davidson® ever. In 1970’s is the beginning of revolution of Harley Davidson. They introduced FXS Low Rider and the FLHS Electra Glide Sport to the public in 1977.

The Harley-Davidson Company has introduced a place on the New York Stock Exchange for those who interested in taking a financial stake in the company. In 1991, the Dyna line of Harley Davidson’s was introduced with FXDB Dyna Glide Sturgis. In 1994, when Harley Davidson® introduced, than VR1000 is the jump of Harley-Davidson into the superbike racing.

Harley Davidson® mission statement:-

“We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders.”

vision

“We fulfil dreams inspired by the many roads of the world by providing extraordinary motorcycles and customer experiences. We fuel the passion for freedom in our customers to express their own individuality.”

5

Now at present time Harley Davidson® is the king of the road. In 1985, when respected firm was suffering from bankruptcy. Than some issues have been occurred that is management errors, Japanese competition and recession. It was about the last American manufacturer of motorcycles. The company was rescued by a sympathetic investor and a well-operated version of Lean Manufacturing system. In 1969 had an 80% market share but this dropped about 20% ten years later? In the period of recession in 1981 the sales reduced nation-wide as well as Harley Davidson market shares also reduced. Than the CEO Richard Teerlink convinced lenders to restructure their plan strategy. That is based on the “Japanese management principals” who affect mainly the Toyota production system or the lean manufacturing system. After reducing tariff the large number of imported motorcycles has done a dramatically changes in their share price. The plan was becomes successful. In between 1985 and 1987 the company had increased inventory turns from 5 to 20, reduced inventory by 75%, reduced scrap by 68%, and reduced manufacturing space requirements by 25%. In the same manner the improvements were made to the marketing and product development sides of the company.

Harley Davidson®, Inc. employs about 9000 people all around the world. In the improvement process it is very critical to process the employee involvement. It required an ultimate, unique and trusting relationship with the union.  The union always viewed management as a partner and it the management responsibility that they tried to "in-source" as much work as possible to help improve worker employment potential which is really proved them by the company management team. In Harley Davidson the workers always responded by embracing and owning quality and continuous improvement.

Harley Davidson® swot analysis:-

Harley Davidson® joins the New York stock exchange as a HOG (Harley Owners Group). Basically the company is represents the great American spirit and image in the global market. The strengths, Weaknesses, Opportunities and Threats of Harley Davidson are as follows:

Strengths:-

1. In relation to the heavyweight motorcycle market there are approximately 70% market shares.

2. Company is active in providing financial services and has its own operation in manufacturing motorcycles.

3. It is a strong brand and has well established in the consumers mind with the image of “strength and freedom”.

4. Excellent supplier relationship so that the integrity of work and performance without losing of quality.

5. Strong and long term relationship with the employees.6. The company admits breast cancer network of strength.7. Strong marketing and distribution channel in US.

Weaknesses:-

1. The price rates are very high from the customer’s point of view.2. Losing the market share especially in Europe.3. Unable to attract new customer internationally because of the poor marketing techniques.4. The production quantity not met with the requirements.

6

Opportunities:-

1. Highest demand in Europe in the international market.2. In the competitive market the company must market their product.3. The company must market their products in Indian market.4. Internationally market for bicycles is much larger than the US market.5. The company has to put their products in those regions where economy level is low

because bicycle is the cheapest mode of travel.

Threats:-

1. As per data a framework that will assist a newly appointed first - line manager in the Harley Davidson® received the average age of purchaser is 42 years and its growing.

2. The supply shortage and capacity constraints have expected lose in recent years.3. Environmental regulations increased.4. Competitors using more resources for marketing their product, It is a threats.

Material forecasting and replenishment:-

Harley-Davidson® used material replenishment and forecasting used to reorder regularly stocked their products. It contains evaluation of a need for material or components, communication of the requirements of the supplier, and fulfilment of the required by the supplier.

Evaluation of the just- in- time (JIT) Production system in Harley Davidson®:-

The term just- in- time (JIT) is used to refer to an operation system in which materials are moved through the system and services are delivered with precise timing so that they are delivered each step of the process just as they are needed. A highly coordinated, repetitive manufacturing or service system designed to produce a high volume of output very few resources than more traditional repetitive system, but with the ability to accommodate more variety than traditional system. The lean operations basically high quality processes in particular place. Quality is the internal part of the lean operations; without the quality lean operations can’t exist in any organisation. The JIT basic approaches to manufacturing planning, control and the material requirement planning (MRP). JIT operates on a “pull”, or demand basis whereby work is pulled from each step in process to the next step when next step has a demand for it, rather than pushed on to the next step when the work is completed at the present step.

The building blocks of the JIT system in Harley Davidson are as follows:-

1. Product design:-a) Standard parts.b) Modular design.c) Highly capable production system with quality built in.d) Concurrent engineering.

2. Process design:-a) Small lot sizes.b) Setup time reduction.

7

c) Manufacturing cells.d) Quality improvements.e) Production flexibility.f) A balanced system.

g) A little inventory system.h) Fail safe methods.

3. Personnel /organisational elements:-

a) Workers as assets.b) Cross trained workers.c) Continuous improvement.d) Cost accounting.e) Leadership/ project management.

4. Manufacturing planning and control:-

a) Level loading.

b) Pull system.

c) Visual system.

d) Limited work in progress.

e) Close vendor relationship.

f) Reduced transaction processing.

g) Preventing maintenance and housekeeping.

According to the JIT there are the six types of the wastes which are as follows:-

1. Waste from overproduction.2. Waste of waiting time.3. Transportation waste.4. Processing waste.5. Inventory waste.6. Waste of motion.

Harley Davidson operates a just-in-time which works to achieve the goals of eliminating the wastes and to solve the related problems through the supply chain system. Some people think that JIT is the system of reducing the inventory wastes. The main goal of the JIT in Harley Davidson® is to maintain a supply chain excellence.

The basic goals of the JIT system in Harley Davidson® includes:-

1. Flow of work smoothly.2. Elimination of wastes.3. Continuous improvement.4. Elimination of anything that does not add value.5. The simple and easy system which is easy to manage.

8

6. Use of the product layout that minimizes time spent moving materials and parts.7. Quality at the source: each worker is responsible for the quality of his or her output.8. Poka-yoke: fail- safe tools and methods to prevent mistakes.9. Preventive maintenance to deduct the risk of equipment breakdown.10. Good housekeeping: an orderly and clean workplace.11. Setup time reduction.12. Cross- trained workers.13. A pull system.

After operating the JIT system in Harley Davidson® it place a great impact on the supplier section process so that they are able to produce the right product, at right quantity and quality mainly when they needed , and in the same manner that Harley Davidson® requires them to be delivered. Harley Davidson® and their suppliers simplify and standardize their products as more as possible. And they become successful in the products and process utilized to manufacturing the products. The focus of the Harley Davidson® JIT environment provides a supply chain that is really useful to minimizing the wastes, increases flexibility, reduce inventory and also to minimizes the overall lead time for the material replacements. Harley Davidson® generates its material for Original Equipment’s parts which is using the Master Production Schedule (MPS) which is used to produce by the Operations Planning Department in connecting with information provided by Marketing, Manufacturing, Finance, and Purchasing. The Master Production Schedule also plan for the plants internal capacity with external sales demand while producing products that assist us in meeting Harley-Davidson financial goals.

Harley Davidson’s use of JIT is mostly characterized by its transformation in the late World War 2 era from an inefficient manufacturer that solved all of its problems with extra inventory to a nimble manufacturer able to meet demand and provide short lead times.

Results of Harley Davidson’s JIT implementation:

Inventory levels decreased 75%. Increased productivity.

According to the case study “UPS supply chain solutions”, the Harley Davidson chooses the UPS supply chain solution to grow business and to assured their standard worldwide through logistics processes. For the further growth in future after setting the company some challenges comes in front of them like; to add speed, to increase efficiency and visibility to the US complex processes, to enhance growth and increase service for the manufacturing process and dealership.

“UPS Supply Chain Solutions won our business due to its ability to offer comprehensive, fully-integrated services that not only serve our immediate needs, but pave the road for sustainable growth over the long haul,” said David Alamshah, Director of Transportation Logistics for Harley-Davidson.

UPS supply chain system helps Harley Davidson® to increase their inbound transportation process. Because before that they are using ships for the transportation but they are costing at very high price and frequency. After using UPS supply chain system the inbound process started growth at high rate. UPS has a very large network across worldwide of cross docking facilities. In order to fulfil the modern lean manufacturing system the shipment from suppliers to factory were occurred at low frequency. The system change the entire inbound transportation system of Harley Davidson® and the company started gaining efficiency by the manufacturing system, while on the other side it reduced their transportation costs.

9

“UPS Supply Chain Solutions has helped us reduce our transportation costs, improve our delivery speed, keep our inventory lean and improve service to our internal and external customers,” said Alamshah. “We will continue to leverage the strengths of UPS to help us effectively manage our national and global logistics challenges.”

Macro environmental analysis for the Harley Davidson®:-

The macro environment is basically given to the organisation their means of survival. The macro-environment is the power to affect people in organisation. These consist of wide environmental factors which is mostly put great impacts to a larger or smaller extent on organisations. The PESTEL factors can be used to identify the political, economic, social, technological, environmental and legal environments on organisations in future trends. The PESTEL analysis gives a large amount of data by which we can easily identify key drivers of changing environment. The PESTEL framework categorises environmental influences into six main types:

1. Political:-The Japanese and European competition with in the USA because of the low taxation from the USA government.

2. Economic:-Global recession is affected economies all over the world so that Harley Davidson® has to bear its position in the market.

3. Social:-Because of changing the environment and lifestyle of peoples Harley Davidson has to create many more Harley clubs and the academies all around the world like Rider’s Edge.

4. Technological:-New technology and materials always the potential the most innovative and customize environment.

5. Environmental:-Noise and some emissions standard of Harley Davidson® bike is not up to the levels of the some countries across the worldwide.

6. Legal:-There is different taxation methods are applied on the different countries especially in Southeast Asia so that Harley Davidson is facing the legal issues due to the high excise duty.

7. International:- The international market situation is volatile so that it is restricting the Harley Davidson® to capture the new market research.

8. Demographic:-Mostly the average purchaser who are mid-forties married man whose average household income is around $80000 while only 9% of the purchaser are woman’s.

Internal analysis value chain system:-

1. Infrastructure of the firm:-The firm has transformed the good senior management but it remains small as compared to Global competitors.

2. Human resource management:-The human resource management puts an excellent skills and ability but only in the USA.

10

3. Procurement:-Harley Davidson makes a very good relationship with the streamlined supplier base, and new Brazil operation can reduce the cost further more.

Porter value chain model:-

Inbound logistics Operations Outbound logistics

marketing Sale services

Good and advance JIT system

Excellent highest level operations

Very good because of the excellent shipment

Excellent relations and brand strength’s

Excellent sale services but only in USA but not good outside other places.

Frame work for a newly appointed manager:-

PrimaryKey activities Type of

wastesDanger signal

How to respond to danger signals

Inbound LogisticsOperations

SecondaryHR

IT/Infrastructure

Recommendation and Conclusions:-

The main goal of the JIT is to achieve a balanced, smooth flow of production. Supporting goals include eliminating disruptions to the systems, making the system flexible, and eliminating the waste. Lean system requires the elimination of sources of potential disruption to the even flow of work. High quality is essential because problems with the quality can be disrupting the process. Quick low cost setups, special layouts, allowing work to be pulled through the system rather than pushed through, a spirit of cooperation are important tools of the lean systems.

The benefits of the JIT/lean systems are reduced inventory levels, high quality, and flexibility, reduced lead times, increased productivity and equipment utilization, reduced amount of scrap and rework, and reduced space requirements.

Careful planning and much effort are needed to achieve smoothly functioning systems in which all resources needed for the production come together at precisely the right time throughout the process. Raw material and purchased parts must be arrived when needed. Teamwork and cooperation are always the important tools at all the levels, as are problem solving ability of workers and attitudes of continuous improvements.

11

References:-

1. Williams J. Stevenson, (2007) Operation Management, 9th edition, page no. 679-712.2. Cecil C. Bozarth, Robert B. Handfield, Introduction to Operation Management and

Supply Chain Management, 2nd edition, (2008), page no. 527.3. Operation Management, Andrew Greasley, 2nd edition, (2009). P no. 348-351, Wiley

publications.4. Operation and Process Management Principles and Practice for Strategic Impact, 2nd

edition, Nigel Slack, Stuart chambers, Robert Johnsons, Allen Betts. (2009). Prentice hall.

5. http://www.harley-davidson.com/en_US/Content/Pages/Student_Center/student-center.html?locale=en_US&bmLocale=en_US#vision (access on 29/12/2010).

6. http://www.articlesbase.com/motorcycles-articles/harley-davidson-history-1368467.html#ixzz19KkQqmYa (access on 27/12/2010).

7. http://www.brighthub.com/office/project-management/articles/71540.aspx#ixzz19W70lEM6(access on 29/12/2010).

8. http://www.evolvingexcellence.com/blog/2007/02/what_harleydavi.html#ixzz19Qgu4xVx access on 28/12/2010.

9. www.ups-scs.com/solutions/case_studies/cs_harley.pdf. Access on 31/12/2010.10. http://www.harley-davidson.com/en_GB/Content/Pages/home.html. Access on

27/12/2010.

12

13