I usually let Van Mieghem take the motorcycle-themed stories but thought I should take a crack at this one. The one in question is a Wall Street Journal article about steps Harley-Davidson has taken to improve its operations and prepare itself for the future (Harley Goes Lean to Build Hogs, Sep 21). As the Journal tells it, Harley has greatly revamped its York, PA plant to both cut costs and preserve flexibility.
Until recently, the company’s sprawling factory here had a lack of automation that made it an industrial museum. Now, production that once was scattered among 41 buildings is consolidated into one brightly lighted facility where robots do more heavy lifting. The number of hourly workers, about 1,000, is half the level of three years ago and more than 100 of those workers are “casual” employees who come and go as needed.
This revamping has allowed Harley to quickly increase or cut production in response to shifting demand. …
Harley got more serious about cutting costs when Keith Wandell became chief executive in 2009 amid a severe slump in motorcycle sales. On his first visit to the York plant, Mr. Magee recalled, Mr. Wandell declared the layout and working methods unsustainable. Harley began scouting sites for new plant to replace York and settled on Shelbyville, Ky. The company notified the International Association of Machinists and Aerospace Workers, or IAM, which represents York workers, that the plant would close and move to Kentucky unless they approved a new contract giving Harley more control over costs. Union members voted overwhelmingly to make concessions, and Harley stayed in York.
Instead of 62 job classifications, the plant now has five, meaning workers have a wider variety of skills and can go where needed. A 136-page labor contract has been replaced by a 58-page document..
At some level, Harley’s actions here are merely a reflection of what it takes to be a successful manufacturer in the States. One needs to compensate for relatively high labor costs by substituting machines for people. One aims for flexibility — essentially making sure to make the most of one’s geographic proximity; if it’s going to take months to complete any order, one might as well produce in Asia. Here is what the article says about Harley is making use of its new flexibility.
Production fluctuates depending on day-to-day sales, so the company doesn’t have to stock up well ahead of the spring peak-selling period and guess which models and colors will be popular.
For all that, I’ve got to think that their ability to cheaply scale their workforce up and down is worth as much as the ability chase hot colors. As long the global economy is weak, Harley will face a higher level of uncertainty in the total volume of demand than its mix of sales. Of course, in the process they have shifted risk from shareholders and managers to hourly workers.