April 23, 2004
Supply Management Strategy
Software Vendor Finalists
Harley-Davidson is an Americanmotorcycle 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, suchas apparel and related accessories. Now a publicly owned company, Harley has scored double digit growth for eighteen consecutive years. Harley transformed 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 critique the process of selecting a modularERP system to support supply chain 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 actionregarding 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 thecase, 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.
Supply Management Strategy
The company had highly fragmented purchasing functions. Even though all product development and manufacturing remained in the US, materials representednearly 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 gradualimprovement and quality ideology, dramatic change was an unlikely outcome.
As in 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 disruptionsin 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...