The Distribution Center - Where It's At
This is a scenario the Harley-Davidson Motor Company says it must be prepared to handle. That's why the company sees its distribution center as being key to its operation. Motor parts and accessories represent $250 million of the company's sales.
If the thousands of worldwide Harley owners can't get the parts they need to keep their "hogs" running during what often is a short season, the bikes are of little use. So Harley has invested tremendous time, money and expertise into its Milwaukee-area distribution center, insuring parts are shipped almost immediately and delivered within days.
While the company now prides itself in the fact that it ships orders by 5 p.m. the same day and can promise delivery within two days, operations didn't always run this smoothly. Some of the employees remember the days – which were not that long ago – when it would take a week or two for Harley owners and dealers to receive their parts.
Just two years ago, a six-story, 84-year-old building with nine to 12-foot ceilings, served by just two freight elevators, housed Harley-Davidson's distribution center in downtown Milwaukee. Equipment in the facility was more than 35-years-old and the systems were 20-years-old and entirely paper-based. It was a nightmare, to say the least, for many employees. "Back then you felt like you were working in the early 1900s. You had roofs that leaked; everything was old" says Ken Freda, a Harley-Davidson employee of more than 25 years and now a Union steward.
While Harley's warehouse and distribution center may have been outdated, it wasn't the only company at the time that chose not to pump money into this area of its business. "Logistics and distribution were ignored in the 1980s. The emphasis was on manufacturing. We were pretty typical," notes Mike Mueller, general manager of the new distribution center.
Harley-Davidson officials did know something had to be done, but it would be a long road to the new $17 million distribution center, just south of Milwaukee, that the company would come to occupy.
A Hard Sell
When Harley-Davidson decided to go ahead and build a new distribution center, it decided it needed the full support of its Union. "We wanted to collaborate, not be adversaries. It was necessary in order to expand operations," explains Brian Smith, Director, Logistics, Harley-Davidson.
Management approached the Union to ask for its help during the building process, but many of the members were more than skeptical. "It took a lot of information, we had to do a lot of communicating. We asked management to help get the message out," explains one of Harley-Davidson's Bargaining Committee Representatives, Bob Smith.
Smith notes that employees gave their support to management when they realized that they would be left behind as the company moved into the next era of technology if they didn't pledge their support.
Trust – It Goes Both Ways
When Harley-Davidson reached out to the Union, its intent wasn't to just get the opinions of its employees, but to make them an important part of the decision-making process concerning the new distribution center. Management was looking to form a partnership with its employees where they'd take on responsibility for some very important decisions that would soon need to be made.
While many companies might choose to leave important decisions, like those of building site and equipment purchases, up to management and consultants, Brian Smith of Harley-Davidson says the company looked to its employees for guidance. "We recognized that those working with the equipment knew what needed to be changed," he explains.
And so employing the help and wisdom of its workers, more than a dozen focus groups involving 80% of the distribution center's employees were organized to make decisions on nearly every aspect of the building process. "We're married to this thing and we're going to collectively make it fly," comments Mike Mueller, describing the relationship between management and the Union at that time.
The first decision – and perhaps the most important – that had to be worked out was whether to build one centralized distribution center, five regional centers or let a third party handle distribution. The company commissioned an internal group to make the decision. Harley-Davidson's goal for the new facility centered on reducing order-to-fulfillment time. In fact, the company wanted a new facility where products could be shipped the day of order and received no more than two days later.
The bottom line was that a centralized facility would incur much higher transportation costs than the regional facilities. But the overhead of maintaining regional distribution centers would be greater than the other options because far more inventory would need to be kept on-hand in order to reach Harley's goal of two-day shipment.
In the end, Harley-Davidson determined that the centralized distribution center would provide much higher service at a significantly lower cost. And so the company began to plan for the new center that would be located in an industrial park, just south of the Milwaukee city limits and close to both an airport and the Interstate.
Since the new site would be located a good 30 to 45 minutes away from the old downtown site, distribution employees weren't forced to move with the new facility. Instead, they were given the option of transferring to one of the other downtown Harley-Davidson locations.
Management gave the employee groups full control of equipment buying. Workers were asked to employ their expertise to choose reliable equipment. For example, those working in receiving were given the responsibility of choosing dock equipment.
When the groups made a decision, the company went with it, even when the price was higher than the other options. This didn't bother management. For them, the bottom line included more than just the initial investment. "A higher price tag didn't mean the product would necessarily cost more. You have to think about productivity and employee happiness," explains Brian Smith.
The employees were no easy sell. They took their responsibility seriously. Equipment vendors had to be more than just persuasive. They had to provide all of the data to back up their claims. When trying to choose loading docks, the employees persuaded one of the vendors to install a dock into its old facility so it could be tested. (The effort wasn't in vain - the employees did end up choosing that dock for its new facility.) And when the issue of lift equipment came up, employees had the Raymond Corporation fly its corporate jet to Milwaukee to pick them up and take them to company headquarters on the East Coast where they could discuss their potential purchase in greater detail.
By the time Harley-Davidson was ready to move into its new distribution center, its old facility was nearly busting at the seams. "By the time we moved, we had more inventory stored off-site, than on-site," notes Mike Mueller.
The timing of the move to the new distribution center was less than ideal. The company had just months to move in, become settled, work out all of the glitches, and be running smoothly before the peak season began. Many doubted whether the division could make such a swift transition. "Everybody said you couldn't do it. We said we had to. But we couldn't do it without the employees," notes Mike Mueller who says that his staff proved the doubters wrong. Employees pitched in, many working nearly 60 hours each week during the transition period.
While Harley didn't take any of its equipment or systems with it to the new facility, the task of moving inventory proved to be much more than management had anticipated. "We underestimated the amount of inventory to move, the time it took to pack, and the fact that everything had to be relabeled before it was moved," explains Brian Smith. That only added headaches as the company faced a time crunch.
As for the surprises of the new facility, management tried to insure that there would be none. The company chartered buses, taking employees to the new distribution center so they could get a glimpse of the new facility and see the equipment.
It's been two years since Harley-Davidson moved into its new distribution center. And while the building may be finished and operations are running smoothly, management hasn't discarded any of the practices it implemented during the building process.
Focus groups continue to plan the facility's future, and because the building has reached between 95% and 98% of its capacity, groups are now considering an addition to the distribution center. Bi-weekly, employees meet in the break area for a brief meeting where they discuss production and personnel issues, any problems or questions, as well as give compliments and make announcements. Workers say they are happy to take such an active role in policy making at the facility where they influence such issues as scheduling.
In response, employees say the work environment has improved dramatically, along with it, productivity. It's an enjoyable atmosphere between union and management. Because of the knowledge employees gained during the building process and the information that is shared during the meetings, employees like Bob Smith say they can now see the company's bottom line. "It makes me smarter. I think better as I see the dollar figures. I know more about operations," Smith explains.
It's evident when you walk into the distribution center and talk with employees. They take pride in their jobs. And while that may be due in part to their new, state-of-the-art facility, it also has something to do with how highly management regards its staff.
While Harley-Davidson fights to dominate the market for parts and accessories, it hasn't lost sight of the big picture. The company puts a great emphasis on the well being of the individual employee. Prominently displayed in a number of locations around the distribution center, you'll find signs bearing corporate values the company encourages all its employees to incorporate into their daily lives. Those values include telling the truth, being fair, keeping promises, respecting individuals and encouraging intellectual curiosity.
A Win-Win Situation
The investment Harley-Davidson has taken in both its technology and employees seems to be paying off. "In the last five years, as a result of technological advances, we've handled all growth, and net costs to the company have been cut in half. Growth continues to rise, while costs decrease," Brian Smith proudly adds.
Today, the new distribution center employs 137 full time and 50 part-time employees who work three shifts, 24-hours each day to insure that customers get their parts and accessories as quickly as possible.
So, next time you find your Electra Glide idled, in need of genuine Harley-Davidson parts or accessories, don't worry. Thanks to a new distribution center and the high-performance partnership between management and employees, you'll have those parts on your local dealer's doorstep in no time at all!