Harley Davidson's Top and Bottom Line — Might More Creative Spend Management Be the Answer

I'll admit, I've never quite understood the appeal of Harleys. Why would anyone spend the kind of money they charge for a motorcycle that accelerates more slowly than Lance Armstrong, sounds like someone had too much Indian food and stuck their derrière up to a bullhorn and has a historic reputation for (un)reliability that makes Peugeot look like a Honda in comparison (I know they've solved that last part). But seriously, what's the appeal, especially when Honda and BMW deliver vastly superior touring bikes? As an aside, I write this as a non-bike owning neutral party (but as someone who was a few days away from having one grandfathered into a marriage).

Alas, while I don’t "ride", I do know a thing or two about Harley's procurement practices from hearing things over the years and living ninety minutes South of HQ. And one thing is clear: it's cost cutting needs are not keeping up with falling revenue. According to Harley's most recent quarterly results, the company is "lowering shipments" and "cutting its workforce" as a response to declining volumes. Which is not surprising if you consider that "In the United States, the company's biggest market, retail sales of the company's bikes tumbled 35.1 percent from the year-ago period."

But might Harley be missing out on other opportunities to cut costs and even further improve quality on the sourcing side? Perhaps. In the past, Harley Davidson was knocked by loyalists for buying "cheap Asian parts" as someone once put it to me. They've gotten the quality control, for the most part, under wraps. But from what I've heard, their decisions in certain direct material categories of spend (e.g., make/buy, global source vs. local source, supplier development, design for cost, etc.) leave open what are probably a good many opportunities for savings. Granted, they've done a lot on the indirect side over the years, so not to knock them there. But while their market is a cult thing, there's nothing cultish about significant opportunities to reduce costs and helping to bring Harley pricing more inline with the competition while also preserving margin -- and keeping that trademark sound that I'll never quite understand.

Jason Busch

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