Executive Summary

Size Up Analysis
Harley Davidson is a leader in the motorcycle manufacturing industry that mainly competes in the heavyweight class motorcycles. They compete mainly against Japanese manufacturers in the market. During the 1980s, the company came close to bankruptcy due to quality issues that accompanied its rapid production expansion. However, that incident compelled Harley Davidson to renew its focus on quality. Since then, Harley Davidson’s successful differentiation strategy focusing on quality, luxury and branding has been reflected on Harley Davidson’s financial highlights. Net income has more than doubled in a span of 5 years; net income increased to $213 million in 1998 from $104 million in 1994. Net working capital has also increased to $376 million in 1998 from $179 million in 1994. Harley Davidson’s share price has more than tripled during the same period as well, suggesting improved investor confidence. However, we should note that Harley Davidson has increased its financial leverage as displayed by the change in their debt to assets ratio. It was noted that Harley Davidson’s customers are willing to wait 2 years for its motorcycles. There seems to be unmet demand and that may have caused a focus on production to be ingrained into their culture. This is evident in their vision to dramatically increase production capacity demonstrated in their plan 2003. Harley Davidson’s products also have very long life cycles. The evolution of the product line may have influenced the culture at Harley Davidson to gravitate towards continuous improvement as opposed to transformation. In terms of IT, Harley Davidson’s organization is neither fully centralized nor fully decentralized. We believe that the interlocking circles structure, including the leader and strategy council and ITC, is a great fit for Harley Davidson. However, there seems to be some problems with its execution. Procurement, in particular, has separate systems that do not communicate with each other efficiently. This has led us to assume that the ITC at different sites do not communicate enough with each other. Each site’s ITC may be making the best choice for their own site but that may not be the best choice for Harley-Davidson as a whole. Although Harley-Davidson is not facing any sort of crisis at the moment, Harley-Davidson should consider a more centralized IT strategy as site independence seems to be working against them.
SWOT Analysis
Strength
-Strong brand
Customers are willing to wait 2 years for Harley-Davidson’s motorcycles. There seems to be unmet demand.
-Defined Project Scope
The scope of the project is well defined and the SiL’K team members know exactly what Harley-Davidson is trying to achieve with SMS.
-Decision is made by end users and IT professionals.
The SiL’K team is fully empowered to make the final decision. The team is handpicked by management for being opinion leaders that understand the existing processes and its relevant support personnel. The decision is made by the people that is most connected to the process.
Weakness
-There is a short-term transaction mentality in terms of procurement at Harley-Davidson.
This weakness is most likely due to site independence being encouraged. As each independent site handles procurement individually, they did not see the potential of long-term supplier relationships due to being smaller buyers.
-There is high degree of dissatisfaction with the existing systems. Existing systems are also mismatched for SMS.
The stakeholder survey revealed that 85% of personnel’s time is spent on non-strategic activities due to duplicated work caused by systems that do not communicate with each other. This again seems to be due to IT decisions being made by ITCs at each site without communicating with other sites’ ITC. Again, site independence seems to be working against Harley-Davidson.
Opportunities
-Growth in Harley-Davidson’s target market fueled by riders in their 40s.
Harley-Davidson can take advantage of this opportunity to increase products to meet demand generated by this new market segment.
-Supply Management Strategy
Harley-Davidson did not manage its supplier relationship to its full potential. However, of a motorcycle’s value is comprised of purchased parts, Garry Berryman, VP of Materials Management sees a supply management strategy as an opportunity to speed time to market, reduce costs, and improve product quality. The SiL’K team estimated that with SMS enabled, there will be up to $34 million in purchasing cost reductions over 5 years and a number of other intangible benefits.
Threats
-Strong Japanese competition
Harley Davidson’s competitors also manufacture cars and are more diversified in the automobile industry. These competitors may increase output to seize the opportunity of the increased demand.
-Rising fuel costs
Harley Davidson competed primarily on the heavyweight class motorcycles. Although this is not evident in 2008, this is definitely a threat for Harley Davidson as its product depends on fuel.

http://verdisgroup.com/blog/2012/08/if-youre-waiting-for-2-00gal-gasoline-its-gonna-be-a-while/us-gasoline-price-graph-3/
Summary:

There is an opportunity for growth for Harley-Davidson since its target market expanded. Harley-Davidson also faces the threat of its Japanese competition. To take advantage of the opportunity presented and to compete with its competition, Harley-Davidson must first overcome its weaknesses of their short-term transaction mentality approach to supplier relationships and the lack of communication between the different sites’ IT systems. Supplier management strategy is the key to achieving their goal of increasing production. By re-aligning their IT strategy and organization strategy with its new business strategy (SMS), they can overcome their current weaknesses. They have done much research in their needs and they now need to select a partner in this endeavor. Although rising fuel prices is a threat, we will not be discussing it as it is out the scope of the core purchasing and supplier management strategy discussion.

Evaluative Criteria
Functionality seems to the issue of most pertinence to the SiL’K group. The group is also concerned about implementation and change management (they feel the individualistic Harley Davidson employees would be resistant to change). SiL’K also seeks to have an ongoing relationship (we consider platform portability an aspect of this relationship) with the provider through the supply management strategy that would be beneficial to Harley Davidson. The SiL’K group is also considering cost. We will be using the work already done by the SiL’K team to evaluate the alternatives. We will be using the score for functional fit to evaluate functionality. We believe that a 50% weight is appropriate. For implementation, we will be using the qualitative criteria and the SiL’K team’s ratings related to implementation to evaluate the implementation piece. We believe a 30% weight is appropriate. In terms of the potential of an ongoing beneficial relationship, we will be using the information from qualitative criteria developed by the SiL’K team that is related to this criterion. We believe that a 15% weight is appropriate. And lastly, cost will be weighted 5% with information from the qualitative criteria list. With the exception of functionality, we will be converting the ratings in the qualitative criteria to a score out of 5. (High being 5 and Low being 1). For implementation, the criteria Training Approach, Implementation / Education / Change Management Methodology, Understanding Harley’s Requirements, Enabling the SMS, Technical Support Offerings, Number of Partner Providers included in Solution Proposal, Architecture Compatibility, Web Functionality “to go” and Manufacturing Experience will be used in equal weights to calculate a score. The criterion Long Term Relationship Potential, Research and Development and Financial Viability will be used in equal weights to calculate a score. For cost, the qualitative criteria Cost will be used will be used to calculate a score.

Alternatives
Alternative #1 - Maintain Status Quo:

To keep a decentralised IT system for procurement that allows each Harley Davidson site to maintain its own individuality. However, this will maintain the status quo in terms of production capacity. In order to reach the goals of Plan 2003 (to increase production capacity), the relationships with the suppliers must improve. With this alternative, Harley Davidson personnel will continue to do work that is redundant in some areas leaving them with little time to develop long-term relationships with suppliers. This means purchasing costs will remain constant (and not decrease) as will delivery time for supplies. This will also limit innovation (lack of long-term relationships with suppliers).
Alternative #1 – Provider 1:

Alternative #3 - Provider 2:
Pros:
- Major ERP supplier and admired widely across industry
- Highest score on functionality checklist
- Superior functionality and seamless web enablement

Cons:
- Products tended to be more expensive than competitors
- Did not assess change management
- Consultant like attitude (different culture)

Analysis - Provider 2 had the highest score for our functional fit evaluation. This is important as it allows for HD to work towards Plan 2003 to increase production capacity to meet unmet demand. Provider 2’s system will free up HD personnel by eliminating redundancies. Provider 2 also scored well on our Implementation Evaluation. Provider 2 seemed to excel in technical facets such as “technical support” while performing middle of the pack in the more organizational cultural/values focused facets “training”, “implementation” and “understanding Harley’s requirement”. Unfortunately, performance in those organizational cultural focused facets is important to change management which in turn is important to HD as it has an organizational culture that is potentially resistant to change.

Provider 2 also tied for the highest score for Long-Term Relationship evaluation. Provider 2 excelled in the facets of financial stability as well as research and development. However, unfortunately Provider 2 had the lowest score on our Cost evaluation. Provider 2 is the most expensive of all the providers.
Alternative #4 - Provider 3:
Pros:
- Major ERP player and Harley Davidson engaged them to do systems in another functionality area before. There is some organizational familiarity.
- Provider scored high (96.8%) for functional fit.
Cons:
- Lacked knowledge of social dimensions.
- Did not demonstrate functionality.
- Late, unorganized and did not leave good impression.

Analysis - Provider 3 scored high as a functional fit, but did not well score on our implementation evaluation. They scored poorly on the training approach component that is integral for assisting Harley Davidson’s “resistant to change” employees to understand how to use the new IT system. Provider 3 also scored poorly on “Understanding Harley Requirements” (meaning they do not understand HD’s culture), which is problematic for an organization that wants to align its organizational culture and strategy with business and IS strategy. Provider 3 does have good architectural compatibility and functionality; however, this might not matter if Harley Davidson personnel do not embrace their offerings. Their lack of social dimensions is problematic for Harley Davidson.

Provider 3 also scored the worst out of 3 providers in our Long-Term Relationships evaluation. They did not make a good impression and seemed unorganized. This resulted in them scoring poorly on the Long-Term Relationship Potential component. They also scored poorly on the research and development component of the same evaluation. This suggested to us that it was possible that Provider 3’s software had a higher risk of obsolescence.

| | Provider 1 | Provider 2 | Provider 3 | Criteria | Weight | Score | Weighted Score | Score | Weighted Score | Score | Weighted Score | Functionality | 50% | 93.44% | 46.72% | 98.89% | 49.45% | 96.83% | 48.42% | Implementation | 30% | 90% | 27.00% | 90% | 27.00% | 66% | 19.80% | Long Term Relationship Potential | 15% | 90% | 13.50% | 90% | 13.50% | 87% | 13.05% | Cost | 5% | 100% | 5.00% | 20% | 1.00% | 60% | 3.00% | | | Total Weighted Score | 92.22% | Total Weighted Score | 90.95% | Total Weighted Score | 84.27% |

Recommendations

Implementation plan