Supply Excellence — More on Harley and How to Rev Up Product Cost Management

More on Harley and How to Rev Up Product Cost Management

June 28th, 2006 · by Tim Minahan · No Comments · best practices, costing, design and development

Thanks again to Doug Smock for igniting the discussion around product costing and the convergence of design and supply.

I agree with Doug: Harley-Davidson was indeed a supply management innnovator before its time. As a senior editor at Purchasing magazine in the pre-Internet boom, I had the opportunity to do a cover story on Harley’s advanced sourcing and supplier management techniques. I visited several Harley plants as well as the Product Development Center (PDC) in which the company co-located its commodity experts (most of whom were degreed engineers), suppliers, and design engineers to help speed development cycles, reduce product costs, and capture innovation in the supply base.

These teams were grouped into centers of excellence (COEs) focused on a specific material, component, or system, such as powertrain, electrical, and castings and forgings. Design and commodity engineers were pulled from these teams to work on concurrent development teams with manufacturing and marketing personnel. Harley also incorporated its aftermarket parts engineers into the concurrent development teams to speed the development of lucrative aftermarket parts and accessories. (Another visionary approach that is just now being adopted as an industry best practice.)

But the real gem of Harley’s strategy was that the company realized the value hidden in its supply base and adopted organizational structures, processes, and systems to ensure that Harley captured and fostered this value. This spirit was best summed up during my interview with Leroy Zimdars, then-director of development purchasing:

“Suppliers are the experts. They have expertise not only in what they’re developing today, but also what’s going on in their industry. Instead of hiring this expertise in house, we’re relying on the competence that already exists in our supply base.” Indeed, for some complex components, such as brake systems, Harley tapped suppliers to lead development.

Although Harley Davidson has been employing these techniques for nearly a decade, the approach is to be emulated even today. Doug’s insights were spot on, Harley succeeded because it started by defining the right organizational structure to facilitate early supplier integration and collaborative design — before it invested in technology.

(Harley has sinced augmented this co-location approach with collaborative design and costing technologies to extend development coordination with a larger number of suppliers and locations.)

For more details on the Harley’s strategy, I turned up a spin off article I penned that on Harley’s product cost management strategy (Harley Davidson Revs Up Development Process). I also uncovered another article that delves into the convergence of design and supply, prophetically entitled, Is this the Future of Purchasing?

Check back here soon for more details on product costing and how enterprises are leveraging new technologies to foster the convergence of design and supply management and to capture the hidden innovation and value in the supply base.

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