1. MGT 702: Total Quality Management
International Case Study: Harley – Davidson
Case Study:
Introduction:
Harley – Davidson Motorcycle Company was established in the year 1903. It soon became a
leading manufacturer of motorbikes in the US and neighboring countries. After World War
II, Harley – Davidson had a monopoly in the motorbikes market due to the closure of its
main rivals. It was easy, therefore, for the company to increase its market share and
production, but the quality of the product became a secondary consideration.
Problems faced by Harley - Davidson
The problems for Harley – Davidson started only when Honda entered the US market and
started to cut into its market share. Using the TQM principles of Edward Deming, Honda’s
products were increasingly in better terms of quality at a time when Harley – Davidson’s
products were low on the quality front. By 1981, Honda almost pushed Harley – Davidson
on the verge of closure. The management of Harley – Davidson was wondering how Honda
was able to manufacture motorbikes much better in quality and at a much lesser cost
compared to its products.
Initially it attributed this to the cheap Japanese labor, huge advertising budgets, and
dumping practices on part of Honda. Over the period of time, Harley officials found that the
3 reasons for Hondas success: - kaizen (improvement), just – in – time (JIT), and extensive
use of statistical methods to measure quality.
Kaizen: (improvement) – 1000ventures.com/businessguide
Management has two major components:
1.maintenance, and
2.improvement.
2. The objective of the maintenance function is to maintain current technological,
managerial, and operating standards. The improvement function is aimed at improving
current standards.
Under the maintenance function, the management must first establish policies, rules,
directives and standard operating procedures (SOPs) and then work towards ensuring
that everybody follows SOP. The latter is achieved through a combination of discipline
and human resource development measures.
Under the improvement function, management works continuously towards revising
the current standards, once they have been mastered, and establishing higher ones.
Improvement can be broken down between innovation and Kaizen. Innovation involves a
drastic improvement in the existing process and requires large investments. Kaizen
signifies small improvements as a result of coordinated continuous efforts by all
employees.
Methods to measure quality:
Some of the methods used to measure quality are:
- pareto charts: ranks related measures in decreasing order of occurrence.The
purpose of a Pareto diagram is to separate the significant aspects of a problem from
the trivial ones. By graphically separating the aspects of a problem, a team will know
where to direct its improvement efforts. Reducing the largest bars identified in the
diagram will do more for overall improvement than reducing the smaller ones.
- cause and effects diagram : Cause and effect analysis is a technique for identifying
the possible causes affecting a project/problem. A cause and effect diagram is a
visually effective way of recording the possible causes as they are suggested. It helps
define a problem, identify possible data requirements and possible causes, develop
objectives for solutions and narrowing down the causes.
- Flowcharts: is an illustrative and useful technique to allow a person or team to visualize a
process. They are a simple and effective tool and are made even more powerful during
a Kaizen activity in a group setting, whereby the teams are either designing a new, or
‘ walking’ an existing process. In quality movements, they are a good tool to
3. understand possible escape points; that is identifying the points in the process where
easy mistakes can be made or indeed pass through without being detected.
- check sheets:
- histogram: is merely a way of showing that frequency on a bar chart format.
- scatter diagrams
Just – in –time: Tutorialpoints website
Just-in-time manufacturing goes hand in hand with concepts such as Kanban, continuous
improvement and total quality management (TQM).
Just-in-time production requires intricate planning, in terms of procurement policies and
the manufacturing process, if its implementation is to be a success.
Highly advanced technological support systems provide the necessary back-up that Just-in-
time manufacturing demands, with production scheduling software and electronic data
interchange being the most sought after.
Using JIT, Honda was turning its inventory 20 – 30 times per year compared to Harley –
Davidson and other American Companies at that time, who were turning their inventory
only 4 times per year. Harley had by now understood how less inventory turns ef+fect the
product cost and quality. Earlier in 1978, it had tried to implement the quality circles
concepts in its organization, but could not sustain it for a long time, in complete contrast to
kaizen’s continuous improvement concept evolved and successfully implemented by the
Japanese companies.
The top management of Harley – Davidson was very conscious of employee involvement
programmes having had a bad experience with quality circles. They did not want to thrust
upon their workers various types of programmmes for inventory reduction, quality
improvement, work methods improvement, cost reduction, etc. simultaneously leading to
confusion.
4. Solution to the problems faced by Harley - Davidson
Instead, they focused on a single most important agenda – quality. They felt that this
umbrella term contained in an implicit way all other improvement programmes. This
simple goal of achieving quality in all the spheres of activity was something every worker
could relate to easily. Improving the quality in everything you do gives a sense of pride and
commitment. Harley – Davidson’s managers were so focused on their goal of quality that
they were not opposed to making investments in order to improve their product. If new
equipment can provide increase in productivity and quality in addition to fostering a
climate of continuous improvement, the company would go for it even without financial
justification.
Another important decision on part of Harley – Davidson officials was to avoid sending
rigid rules and regulations to their multiple facilities with diverse manufacturing
environments. It was felt that doing so will kill employee participation in the quality
initiative. The management gave only the direction to the plant managers in which the
company was willing to go and told them the principles and concepts to be applied, but
gave them the freedom to do it on their own way. This was the drastic shift from the white
collar and blue collar discrimination existing in the American companies at that time.
A typical example of this radical change in the thinking of the top management can be
demonstrated with an example of the company’s plant at York. The company wanted to
have the paint facility at the plant enclosed to keep it cleaner and have proper lighting. The
employees made the designs of the enclosures themselves and asked the management if
they could choose the color of its walls. The usual response would have been that they have
to follow the standard color scheme, but the management responded with consent to the
worker’s request. This resulted in a clear demonstration of the management’s commitment
to change and the worker’s reciprocated in the same way.
Harley – Davidson started employee involvement groups (EIG) in order to solve the quality
problems. It was the same quality circles programme which was a disaster earlier. This
time the company gave liberty to the workers to choose a suitable name for the concept.
5. The employees at Milwaukee engine plant opted for ‘quality circles’, while York assembly
plant workers decided to call this ‘employee involvement groups’.
Conclusion
Now, the company has a full-fledged employee involvement programme, in which the
company gives formal training to the employees in problem – solving, through
participation is voluntary. Harley – Davidson does not quantify the cost benefits as a result
of these employee involvement groups as it does not want to shift the company’s focus
form quality to cost reduction.
Harley’s turn around has been highlighted in a big way in terms of its financial recovery
and manufacturing improvements, through what is unreported is the vision of Harley –
Davidson in promoting employee involvement.
Source:
Bed, K. (2006). Quality Management. New Delhi: Oxford University Press.
