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Ready To Roll

Harley-Davidson's three-year effort to build closer ties to suppliers is paying off.
Harley has been bumping up production annually, including a 12% increase in 2003. This year, the company plans to make 318,000 motorcycles, an increase from 294,147 last year and 263,653 in 2002. An 8% annual growth rate would get it to 400,000 bikes by 2007. Banc of America Securities analysts are among those who consider that plan too aggressive given consumer demand. But from a production standpoint, Harley is determined to be ready.

THE UPSHOT

Harley-Davidson made itself easier to work with and cut supply-chain costs



It consolidated IT systems and business practices across factories, giving suppliers a portal to track transactions



Analysts predict Harley will improve profit margins in the next two years based on supply-chain gains



It's not perfect: Harley still overshot demand by 23,000 bikes in the fourth quarter


All of Harley's manufacturing happens in the United States, with no plans as yet to ship it overseas. One example of how the company expects to improve production and keep costs down without pursuing low-cost labor abroad can be found in the Kansas City factory.

That operation runs on an automatic-replenishment manufacturing process. Production cycles at the facility still depend on material-resource-planning data for estimating long-range demand, but daily operations rely on real-time inventory monitoring and management.

As motorcycles are built and parts quantities hit predetermined lows, parts suppliers such as MPC receive automatic electronic replenishment triggers via both the Harley-Davidson Supplier Network portal as well as EDI, which could eventually be phased out. In comparison, Harley's York factory runs on the more traditional forecast-driven supply chain, where if Harley plans to build 3,000 motorcycles per day, suppliers ship enough parts in advance to meet the requirements.

In Kansas City, the system adds parts and quantity to a material-replenishment list until 8 p.m. Eastern time. At the end of each day, the order is sent to the supplier. In MPC's case, Zimmerman has 48 hours to pull the parts and have them ready when one of Harley's trucks arrives.

Harley wants all its factories on this auto-replenishment model during the next few years. It's one of the many ways Harley is trying to make sure the nice ride it's been on for the past 18 years keeps on rolling.

Photographs by Bob Stefko

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Sara Peters, Editor-in-Chief, InformationWeek / Network Computing