Harley-Davidson producing a leaner economic machine

September 27, 2012

As the global economy continues to dictate manufacturing strategy across the country, companies are looking to develop flexible and efficient production solutions.

According to The Wall Street Journal, even American icons such as Harley-Davidson are looking to revamp traditional methods of manufacturing and embrace the philosophy of lean enterprise. The company used to build some of its motorcycles over a sprawling series of buildings in Pennsylvania, employing approximately 2,000 highly skilled workers to keep the company moving forward.

With the nature of its product increasingly dependent on the financial security of its customers, Harley-Davidson was aware that supply could often exceed demand and decided to act accordingly. The company consolidated production into one predominantly automated facility and reduced the number of hourly workers by around 50 percent, while retaining a number of casual workers that can be deployed as and when they are needed. 

This has allowed the company to rethink its business strategy. The trimming of the workforce means that it can react quickly to either increase or cut production, depending on demand and sources at the Milwaukee-based firm believe that it was "a big bang transformation." Industry analysts believe that adopting a leaner workforce doesn't mean that capacity for production is diminished, rather it allows a manufacturing company to make effective choices.

"The efficiency gains mean Harley should be able to raise its operating profit margin for the motorcycle business, excluding financing operations, to nearly 16 percent this year from 12.5 percent in 2009," said Craig Kennison, an analyst at Robert W. Baird & Co. in Chicago. "Harley no longer needs peak production levels to achieve strong profits."

According to government figures, U.S. manufacturers have managed to come out of the global recession in good shape. Total profits at domestic manufacturing firms in the first quarter of this financial year were revealed to be at an annual rate of $363 billion as opposed to $290 billion in 2007.

Companies that rethought their business practices and slimmed down are focussing on performing better whatever the business environment. However, while Harley-Davidson has reluctantly bitten the bullet, there are those who think that it was a one-off solution.

"Harley-Davidson probably can do this just once," wrote Josh Patrick in the New York Times. "If it continues to use lean strategies to reduce headcount, it will see employee enthusiasm for the program wane. If the layoffs are an economic necessity, they can work. But you can only have so many economic emergencies before people say enough is enough."