Executive Summary

Harley-Davidson's management understood that there was much that the company
could do to enhance internal operating efficiency; one of those areas was in supply
management across all of the company's production sites. After defining its needs through its
Supplier Information Link (SiL'K) team and extending requests for proposals (RFPs), the
company received eight responses and seriously considered three providers.

None of the providers was absolutely a perfect fit, but one came close. In assigning
weights to identified factors, it is clear that Provider1 is the best choice for Harley-
Davidson's needs.

Background
Harley-Davidson motorcycles are as much legend as product. The company enjoys
intensely loyal customers, and nearly as loyal employees. The company celebrated its
centennial year in 2001, which in itself was nothing short of a miracle given all of the
opportunities that the company had to go out of business. The company fell on hard times in
the early 1980s and even flirted with bankruptcy. Management did a turnaround in the mid-
1980s, however, resulting in a financially sound public company today. One of the areas of
turnaround was in relying on employees to help keep the company afloat - not in financial
matters directly, but rather in ensuring that Harley return to its standard and reputation for
quality. Quality had suffered so in the 1960s and 1970s that the common saying about
Harley-Davidson motorcycles was that a five-mile trip consisted of riding for one and
pushing for four.

Harley-Davidson has now returned to its former days of quality, adding production
efficiency along the way. It is the only surviving domestic motorcycle producer since Indian,
its primary competition, closed in the early 1950s. It controls 54 percent of the domestic
market in heavy motorcycles, and devoted owners across the country sustain active owners
clubs and hold weekend rallies.

In the mid- to late 1990s, Harley-Davidson's management turned its attention to

internal efficiency. Though it had made great gains in that area, individual sites still operated
more than only independently from the company as a whole. Site independence was an issue
that had been encouraged for years, providing motivation for the employees and management
personnel of each site to behave entrepreneurially rather than faceless entities of the larger
organization. The downside of that approach by the 1990s was that each site had developed
"different methods for handling procurement, including the acquisition and/or development
of different information systems for Purchasing" (Sole, Cotteleer and Austin, 2003; p. 3).

Harley-Davidson was a late entry into Just-In-Time (JIT) manufacturing, which

requires that the organization hold little inventory either in finished products or in component
parts. This late entry allowed Harley-Davidson to avoid many of the mistakes that other
companies made in earlier years (Kelley, 1999), but did not preclude the possibility of
making new mistakes of its own.

Through much of the 1990s, Harley-Davidson used standard software packages easily
customizable while still retaining ability to import and export directly with other packages
(Hunter, 1996). This allowed it to interface easily with all suppliers without much regard for
the systems used by diverse suppliers. In 1998, one author reported that Harley-Davidson,
then a $1.8 billion company, was making its biggest technology commitment to date. That
year's IT budget and capital spending was "$50 million - slightly more than 2 percent of
revenue and above average in the manufacturing sector. More than half of that budget is
dedicated to new development, funding an IP-based corporate network, a data warehouse
project, and standardizing on Microsoft desktop and server software" (Caldwell, 1998; p. 63).

Harley made design drawings available to suppliers, effectively offering them

partnership in the business. "These steps open Harley-Davidson's suppliers to collaborative
relationships that it hopes will cut product development time and manufacturing costs by $40
million" (Caldwell, 1998; p. 63). This action, however, was wholly inconsistent with the
woefully separate procurement systems existing at individual manufacturing sites.

Problem Statement
The problem with all of this is that Harley-Davidson was unable to gain benefits of
quantity pricing as a company overall. Not only were the individual sites treated as separate
entities, but their insistence on behaving that way prevented Harley-Davidson from gaining
any benefit of quantity pricing or preplanning based on total sales forecasts. The company
needs a means of operating with greater internal efficiency.

Alternatives and Score Matrix

The SiL'K team already had determined that Harley-Davidson was in need of a
modified ERP; it also was adamant in the beginning that it was "not seeking a full ERP
solution, that the scope was well defined and those suppliers shouldn't waste time pitching
additional functionality" (Sole, Cotteleer and Austin, 2003; p. 9). Harley's Architecture
Integration group reviewed all possibilities to ensure compatibility with existing systems. Of
the eight potential suppliers responding to Harley-Davidson's RFP, the company narrowed
down its choices to three.

Provider1

Provider1's "representatives asked appropriate questions, they clearly acknowledged

Harley-Davidson's values, and seemed comfortable with the casual but competent Harley-
Davidson style" (Sole, Cotteleer and Austin, 2003; p. 11). Provider1 addressed every issue
raised in Harley-Davidson's RFQ, and tailored its solutions perfectly to the requirements set
out by Harley-Davidson.

Provider1 did not offer the highest form of functionality, and did not offer "'web-
enablement' directly but its team proposed integrating a partner solution" (Sole, Cotteleer and
Austin, 2003; p. 11). On the other hand, Provider1 was comfortable with the change
management issues that would arise in making the changes that the company sought.
Provider2

Provider2 was a major ERP supplier in the industry and also was an early leader in
the selection process. Provider2 offered a higher functionality score. Its team also was quite
formal and in that sense did not "fit" with Harley-Davidson, and it also maintained a heavy
"consultant" attitude. Further, Provider2 did not "emphasize methods or processes for
assessing organizational needs and preparing people for change" (Sole, Cotteleer and Austin,
2003; p. 11).

Provider3

Provider3 also was a major ERP supplier and recently had worked with Harley-
Davidson in another area. Provider3's team was unprofessional to the point of being
disrespectful, but it did score high on functionality. Even so, the Sil'K team believed that
Provider3 could offer "potential political and economic advantages" (Sole, Cotteleer and
Austin, 2003; p. 11).

Score Matrix

Provider 1 Provider 2 Provider 3

Item Weight
Rating Score Rating Score Rating Score
Functionality 0.25 3.00 0.75 5.00 1.25 4.00 1.00
Capability 0.15 5.00 0.75 3.00 0.45 1.00 0.15
Culture fit 0.15 5.00 0.75 2.00 0.30 1.00 0.15
Response completeness 0.20 5.00 1.00 5.00 1.00 1.00 0.20
Change management 0.25 5.00 1.25 1.00 0.25 1.00 0.25
Totals 1.00 4.50 3.25 1.75
Implementation and Conclusion
The most important aspect in evaluating the providers is the functionality and the
related training. However, from the beginning, Harley-Davidson's management had stressed
that proposals should not strive for greater functionality than the company asked for, but then
it graded the finalists on functionality. This was a mixed signal point of confusion, but other
points were not.

Even so, assigning weights to selection points and ratings to each provider returns
Provider1 as the most appropriate choice for Harley-Davidson.
References

Caldwell, Bruce (1998, December 7). Harley-Davidson Revs Up IT Horsepower. (Company

Operations). InternetWeek, p. 63.

Hunter, Tim (1996, January 11). Software suite yields ear-friendly motorcycle. Machine
Design, 68, p. 90.

Kelley, Katherine A. (1999, September). Handling chips in hog heaven. (Harley-Davidson's

Plan 2003). Modern Machine Shop, 72, p. 146.

Sole, Deborah, Mark J. Cotteleer and Robert D. Austin (2003, January 22). Case 9-600-006:
Harley Davidson Motor Company: Enterprise Software Selection. (Boston, MA:
Harvard Business School Publishing).