LEAN OPERATIONS MANAGEMENT

(MBA343L)

CIA-1

Study on Lean Manufacturing System and its importance for better

productivity and profitability at HARLEY DAVIDSON

Submitted by

KARTHICCK M

2228324

Under the guidance of

Prof. SREERENGAN V R

SCHOOL OF BUSINESS AND MANAGEMENT

CHRIST (DEEMED TO BE UNIVERSITY)

BENGALURU

MARCH 2023
INTRODUCTION

About the company:

In 1903, the American motorcycle manufacturer was founded. To become one of the largest
motorcycle manufacturers in the world, the firm has gone through many ownership changes,
subsidiary alliances, periods of poor economic performance, product consistency, and strong
competition on a global scale. The world, and a long-lasting brand with a devoted fanbase.
There are owner's clubs and there are owners’ associations, events across the world, as well
as a brand-focused museum supported by the firm. In the nick of time Harley Davidson
adopted development, often known as lean manufacturing, in the year 2000.

In 1981, Harley-Davidson used just-in-time production to reduce inventory levels by 75%.

As a result, efficiency improved. Toyota was the first company to implement just-in-time
manufacturing. The goal of the just-in-time strategy is to reduce waste. Increasing the quality
of procedures rather than capacity-based manufacturing, output is dependent on demand.
Harley Davidson discovered the benefits of just-in-time manufacturing about 40 years ago.

BODY

APPLICATION OF LEAN PRINCIPLES:

The five fundamental tenets of lean are value, value stream, flow, pull, and perfection,
according to Womack and Jones.

Value:
The value of a product is always determined by the needs of the customer. What is, for
example, the manufacturing and delivery schedule? What is the starting point for the price?
What are the other critical needs or expectations that must be fulfilled? This data is critical
for determining value. In automobile production, it is essential to identify the possible
customers and their requirements. It aligns with specifying the value of the automobile to be
assembled. According to lean thinking, it is only a small fraction of the company’s time and
effort that adds value to the end products (Khalil, 2016). Quality comes first, according to
Harley-guiding Davidson's principles. Continuous improvement is crucial to the company's
success since customers are at the centre of all they do. The company seeks to improve
people's transportation as one of the major participants in the global market. The main value
of Harley Davidson is “balance stakeholders' interests through the empowerment of all
employees to focus on value-added activities”.

Value stream:

It includes every step of the production process, from the procurement of raw materials to the
delivery of the finished product to the client. Value-stream mapping is an easy-to-do but
enlightening exercise that identifies every step a product or service takes to move through an
organisation. Examples of processes include design, production, procurement, human
resources, administration, delivery, and customer service. The objective is to present a "map"
of the product or material flow through the process on a single sheet. Finding every step that
adds no value is the goal, followed by figuring out how to do away with it, is the idea. Value-
stream mapping is often referred to as process re-engineering. This exercise will help the
organisation better understand how the entire business operates as a whole. VSM is a method
that works well in complicated industrial systems like Harley Davidson, because it not only
aids in identifying wastes that impede production but it also aids in finding the best lean tools
to utilise in the current situation. (Nirali Pandya, 2017).

Flow:

As soon as the trash has been taken out of the value stream, make sure that the subsequent
processes go off without a hitch. The process of getting the product or service to the customer
will go smoothly if the value-creating steps are completed in the right order. One of the
biggest hurdles for lean projects to overcome is being cross-functional across all departments,
which can require aiming to do. The process at Harley Davidson starts with raw materials and
ends with a customer driving away in a brand-new vehicle. When separate components,
human labour, and moving conveyance were merged, lean concepts were first applied.
Pull:

Time to market (or time to customer) can be greatly reduced with improved flow. "Just-in-
time" manufacturing and distribution are made easier as a result. This implies that the buyer
has the ability to "extract" the goods whenever they choose. As a result, resources don't have
to be hoarded or products don't have to be constructed in advance, saving both the
manufacturer/provider and the client money by preventing the need for expensive inventory
that needs to be maintained.

Harley Davidson switched from a push to a pull method in 1981. Their issue was an
excessive number of stock caused by overproduction. A push system is one where all levels
of production planning are completed in advance. For instance, the products are immediately
pushed to workstation B after manufacture in workstation A is complete. Contrarily, with a
pull system, objects are only promoted to the next level when a specific request is made.

A pull system, instead of a push system, enables inventory levels to be decreased during the
production process. There will be three constraints observed:
1. consistently and predictability of the periodic demand profile of the customer for the
finished goods;
2. reduction of batch sizes;
3. reliability of suppliers, i.e. delivery performance.

Perfection:

The incorporation of lean thinking and process improvement into the corporate culture is the
fifth and, arguably, most crucial stage. The lean is a dynamic system that calls for ongoing
work and focus to master as the gains mount. Every employee should take part in the lean
implementation process. Before a process has undergone the value-stream mapping process at
least six times, it is not considered to be genuinely lean.
LEAN TOOLS AND TECHNIQUES USED IN HARLEY DAVIDSON:

Lean tools are made to lower Muda in workplaces and enhance quality assurance. In other
words, Lean tools aim to reduce unnecessary processes. They are utilised to accomplish the
objectives of lean manufacturing, which include eliminating waste, cutting costs, improving
quality, and reducing lead times, inventory, and downtime for equipment.

Just in Time (JIT)

JIT, a business strategy created by Japanese firms, encourages producing only what is required,
when required, and no more. Following the Second World War, Japanese automakers that were
able to create better quality motorcycles at substantially lower costs presented Harley-Davidson
with stiff competition. The business effectively embraced JIT techniques and realised their
rewards (Harley-Davidson's Just-in-time (JIT) Journey, 2011). Because quality issues are more
apparent when inventory levels are low, the objective is to reduce lead times and inventory
investment. JIT follows these three rules:

1. Reducing waste to increase the efficiency of processes;

2. Complete quality control to increase process effectiveness;
3. Involvement of the workforce, as the workforce is the most significant resource.

The aftermath of JIT implementation:

The cost of goods ratio and average inventory is used to calculate inventory turns. Inventory
declined to $4 million due to strong manufacturing volumes. Inventory turnover increased from
16 million to 28 million annually. The number of suppliers has decreased from 320 to 120,
resulting in a stronger focus on the provider and a better relationship with them.

Layout

Reorganising the plant's architecture into manufacturing cells was another development at
Harley-Davidson (Nahmias, p.401). These cells are made to operate on goods with comparable
parts or components and the same processing demands (Jacobs 2010: 76). These manufacturing
cells often have a U-shaped design to ease operator and material movements (Wisner 2008:
268).

This layout's ability to reduce work-in-process inventory is one of its benefits. In Wisner’s
opinion, excess inventories are wasteful because they frequently mask organisational quality
issues (2008: 268). Because the manufacturing cells are near to the line, finished components
can be delivered to the next line without first going to a stock area.

One of the most crucial advantages to reducing part delays on the assembly line is this one.
Setup times can also be greatly decreased by bringing machine tools closer to the machines.
Focusing on the manufacturing flow within each cell is made more accessible by the separation
of the parts. Improved schedules are the result of decreasing cycle times and work-in-process
queues.

Employee involvement and continuous improvement

All organisational levels must be committed to and involved in the implementation to succeed.
To make notable improvements in product quality, Harley-Davidson created programmes for
its employees to work in groups to solve problems.

Workers are constantly challenged to figure out how to lessen delivery and quality issues with
suppliers. They are expected to monitor the calibre of processed goods entering the production
cell. The employees' workdays also include time spent decreasing setup times and resolving
production-related issues. This is kaizen, which is another name for continuous improvement.

Total Productive Maintenance (TPM)

TPM is an all-encompassing maintenance plan that places a strong emphasis on proactive and
preventative maintenance to increase the equipment's lifespan. TPM By highlighting the value
of enabling operators to participate in the maintenance of their equipment, Harley Davidson
blurs the distinction between production and maintenance in the book.

TPM highlights maintenance as a critical and necessary part of the enterprise. It isn't regarded
as a non-profit endeavour anymore. Scheduled maintenance downtime is part of the
manufacturing day, and in some cases, maintenance downtime is a crucial step in the production
process. It is not any longer merely packed in at material pauses. Limiting the number of
unexpected and urgent maintenance is the goal.

5S at Harley Davidson

5S stands for “sort”, “stabilize”, “shine, “standardize”, and “sustain” and essentially focuses on
maintaining efficiency and order in the workplace. Effective 5S process implementation
includes clearing the workspace, reorganising, developing procedures, and improving
discipline. Harley Davidson had concentrated much on 5S on the path towards implementing
lean.

The benefits they reaped out of it were:

1. Optimised organisation
2. Bigger storage density
3. Increased efficiency
4. Increased safety
5. Increased workspace morale

IMPORTANCE OF LEAN MANUFACTURING SYSTEM FOR PRODUCTIVITY

AND PROFITABILITY:

Implementing Lean Manufacturing System can lead to several benefits for organisations,
including improved productivity and profitability. Some of the benefits are:

a) Improved Quality: Lean Manufacturing System focuses on identifying and eliminating

defects in the production process, leading to improved final product quality.

b) Reduced Lead Time: Lean Manufacturing System aims to reduce the time taken from
initiating the production process to delivering the final product to the customer, thereby
reducing lead time.

c) Reduced Inventory: The implementation of Lean Manufacturing System leads to reduced

inventory levels, which reduces the storage and carrying costs.
d) Improved Efficiency: Lean Manufacturing System eliminates non-value-added activities
and improves the flow of materials and information through production, leading to improved
efficiency.

e) Improved Customer Satisfaction: The improved quality and reduced lead time lead to
improved customer satisfaction, which can lead to increased sales and profits.

Evaluation and Analysis:

There was a time when Harley-Davidson was on the verge of going out of business, and
demand for motorcycles was at an all-time low. That's when the company restructured its
management and hired a new CEO, with the result being a higher profit margin. The
organisation made several modifications and launched contemporary trends by using lean
methods from poor to good times.

After the implementation of the lean concepts, they have made tremendous improvements in
various criterias, they include a reduction in inventory levels which is by 75%, a reduction in
scrap and rework which is an improvement in internal failure by 68%, productivity up by 50%,
a reduction in space requirement by 25%.

Real and remarkable results are being produced via lean manufacturing. Their top goal is
always safety, and over a five-year period, we lowered injury rates at Pilgrim Road by 91%.
They use the OSHA recordable rate algorithm to compute the injury rate, and their present
performance is below 1.0.
They can produce motorcycles more quickly thanks to lean manufacturing. They have the
flexibility to quickly change the product mix and timing of the product to market to reflect
retail trends. It all comes down to making the right motorcycle at the right moment for the right
consumer.

They are expanding the effectiveness of their stock administration, which has brought about an
expansion in their stock turnover proportion from 5 to 20.

CONCLUSION

The main advantage is that the company could improvise its productivity and profitability.
The most critical factors in Harley Davidson's success are quality and execution. It has
established a commercial presence. They could function according to consumer demands by
implementing just-in-time management, which increased customer loyalty. The supplier's
constant improvement and benchmarking helped them improve the consistency of the
product.

Thus Harley Davidson, by implementing the Lean principles and tools, had reaped
tremendous improvements which gives them a competitive edge.
REFERENCES

Harley-Davidson's Just-in-time (JIT) Journey, Reference no. 611-007-1 (2011).

UKEssays. (November 2018). Methods behind Harley Davidsons success and its history.
Retrieved from https://www.ukessays.com/essays/management/methods-behind-harley-
davidsons-success-and-its-history-management-essay.php?vref=1

Harley- Davidson sharpens focus and reignites culture; delivers best third quarter net
income since 2015. (2020, October 27). Harley-Davidson, Investor Relations.
https://investor.harley-davidson.com/news-releases/news-release
details/harleydavidson-sharpens-focus-and-reignites-culture-delivers

Matthew D. (2019, May 3). Harley-Davidson has been around for 116 years - but the
iconic American company is facing new challenges. Business Insider.
https://www.businessinsider.in/transportation/harley-davidson-has-been-around-for-
116-yearsbut-the-iconic-american-company-is-facing-newchallenges/
articleshow/69168085.cms

Khalil, R. (2016). Lean Operational Excellence – Ford Best. International Journal of

Scientific & Engineering Research.