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November 30, 1998

Harley Shifts Into Higher Gear

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Information Sharing Boosts IT's Value

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Closer end-customer relationships may prove trickier for Harley-Davidson, which depends on 2,000 dealerships worldwide to sell and service its bikes. While customer loyalty to the brand name may be of the highest order imaginable, the dealerships are the standard-bearers for Harley-Davidson traditions--and the local presence to its customers. Currently, the company sells nothing directly to customers.

That gap between the company and its customers may be a competitive weak point. When James Weatherbe, a research fellow at IT consulting firm Concours Group, bought his 12th Harley-Davidson, he received a corporate thank-you letter as always. But it didn't acknowledge his long history with the company. "At the store level, they have good customer profiles, but their corporate memory on bike purchases isn't good," he says.

To help with that, Harley-Davidson has a data warehouse project on the drawing board. First up: a customer-relationship management system. Next, the company will test warranty and financial applications; it will begin testing the data warehouse system next year.

Because most of its customer data is embedded in dealership systems, and only about a quarter of all the dealerships use the proprietary Harley-Davidson Talon point-of-sale system or H-D.Net, Harley-Davidson has an extra challenge in collecting that data: coaxing competitive information from dealers. E-commerce presents a similar challenge: What could be a boon to Harley-Davidson risks alienating the company's relationship with its dealer channel. "We have to be careful about how we approach E-commerce," says Tschurwald, director of IS for customers. "We spent a long time thinking about whether we should have a Web site."

The relationship with dealers is important because Harley-Davidson faces pressure in the marketplace it hasn't felt in years. Japanese competitors are unleashing copycat cruiser bikes, and new competition is emerging from unexpected sources, such as Polaris Industries, a snowmobile maker. Two extinct American motorcycle brands, Victory and Excelsior-Henderson, also are being revitalized. Even the company's own component suppliers have gotten into the act, assembling their own motorcycles to compete against the original.

Update For Distribution
But Harley-Davidson has proved it can respond to a challenge. In 1994, for instance, the parts and accessories business was booming, and there was no way Harley-Davidson's antiquated distribution operation could keep up. In 1987, the company did $42 million in parts and accessories. By the time it brought Brian Smith in as director of logistics in 1994, revenue was more than $150 million. But Harley could have been doing much more.

Harley-Davidson's distribution warehouse was "dismal," says Smith. The building was 84 years old; the lift trucks, fork trucks, and other pieces of materials-handling equipment were 30+ years old; freight elevators were antiquated; and docking areas were cramped and congested.

The information systems were paper-intensive. All orders were printed out, then pencil-wielding employees would pick them up, walk to the parts area, select the parts, and check them off on the paper orders. "It was sort of like going to the grocery store with a grocery list," Smith says. The worst part: It took as long as 12 days to fulfill parts orders. Competitors could deliver in three days or less.

Smith, who had just spent 22 years at Whirlpool--which used state-of-the-art online systems--started from scratch. He built a 250,000-square-foot distribution center in Franklin, Wis., a suburb of Harley-Davidson's home base of Milwaukee. A warehouse-management system from Exeter and a shipping system, Pfastship, were implemented on the IBM AS/400 platform. Harley-Davidson installed Interlake's automated conveyors and other warehouse equipment. The $18 million construction and implementation effort was completed in 1996, and the last dealership region was phased in this spring.

Since January, says Smith, "we've gone on a rocket ride." Productivity has doubled, and order-fulfillment time has been cut to two days. Parts and accessories sales for this year are projected to exceed $250 million. "Today, when I come to work, it feels much more like what I was used to," says Smith. "It's modern, accessible, responsive.''

While the rest of the company doesn't move quite that fast, with the help of IT Harley-Davidson hopes to keep its loyal-but-aging customer base satisfied and growing. "This is a company that gets better every quarter at doing things," says Lee Wilder, an analyst at J.C. Bradford & Co., a brokerage in Milwaukee. "There's nothing wrong with being an intelligent tortoise as opposed to a hare."

Not as long as that tortoise is powered by a 1,450-cc Twin Cam 88 engine.