Harley-Davidson Inc. – Productivity

I recently read in article in the Wall Street Journal, http://online.wsj.com/article/SB10000872396390443720204578004164199848452.html?mod=WSJ_business_LeadStoryCollection  talking about changes for the company Harley-Davidson.  Over the past few years the company has trimmed down their production making it more flexible in order to avoid the risks that come with a falling economy.  Production for the York plant in Pennsylvania has shifted from 41 buildings to one large factory that depends on machines to do more work, while at the same time cutting the number of hourly workers in half to improve production.  This transformation will help allow Harley-Davidson to increase or decrease levels of production based on demand.

Harley-Davidson now believes that it can increase its operating profit margin to 16% since it will no longer need peak levels of production to gain profits.  In many of Harley’s factories they are depending more on part time workers and contractors to cut costs.  In York where there used to be 62 job classifications now only has five, meaning the hourly workers have multiple skills and can be used in production anywhere making them a lot more flexible.  The company now receives supplies for the factory based on day to day sales instead of buying extra materials they will not need.

Like many other companies, Harley is just trying to cut costs and stay competitive in a slumping economy.  Companies keep looking for new ways to increase profits.  For example, the traditional approach, from our book, in operations management is the emphasis on specialized, often manual tasks.  However, Harley-Davidson appears to be getting rid of the specialization of their employees and would prefer them to be able to numerous tasks instead of one.  It is also the operation manager’s job to improve productivity, which is defined as the ratio of outputs divided by inputs (Heizer, Render 13).  This is exactly what Harley is doing. By reducing inputs like labor and other costs they are increasing their productivity efficiency.  Harley seems to be leaning on the labor variable more than others to improve its productivity by counting on the increased knowledge of their workers and the ability to use this knowledge to perform multiple tasks.

Some questions that I had about the changes going on for Harley-Davidson is that since facilities have started to stock supplies based on the everyday demand of its products, is it possible that if there were a sudden large increase in the demand for motorcycles the company would not be able to satisfy the needs of all its customers on time?  Also, with many companies like Harley downsizing to improve performance, does it hurt the overall economy because of the reduced number of jobs?

One thought on “Harley-Davidson Inc. – Productivity

  1. I really enjoyed reading this blog, it is so interesting that in order to reduce costs, Harley Davidson has shut down more than half of its production plants. I understand that Harley is trying to stay competitive in todays market, but I think that by shutting down so many plants and losing so many employees, there will be a huge loss of talent. I’m also wondering if the quality of the products will still be as good as they used to be, since so many of the specialized workers are gone.

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