| July 22
July 22 U.S. motorcycle maker Harley Davidson
Inc came late to the offshoring game.
But now that the company has moved some production overseas
and built up a roster of foreign suppliers, it is discovering
why so many pioneers of the strategy are scrambling to relocate
Far-flung supply chains required by overseas sourcing can
create all kinds of unforeseen inventory expenses, quality
control problems and unanticipated delays, as the Boston
Consulting Group and other analysts have pointed out.
For Harley-Davidson, they turned a happy debut into a
near-debacle, as its second-quarter earnings released on Tuesday
Until this year, all Harley-badged motorcycles were built in
the United States using parts that were almost exclusively
That changed earlier this year with the introduction of the
Street, the Milwaukee-based company's first new motorcycle
platform in more than a decade and its first Harley-badged
lightweight bike since the 1970s.
Street motorbikes destined for the North American market
would be built at the company's Kansas City, Missouri plant. But
to keep prices low, Harley-Davidson said the U.S.-built bikes
would feature more foreign-made content and components than any
motorcycle in the company's history.
Streets bound for the rest of the world, meanwhile, would be
built in India.
Harley-Davidson hoped to begin shipping Streets to its U.S.
dealers this spring. But on Tuesday, it admitted the launch had
not gone as planned. Instead of showing up in showrooms in large
numbers in May, the Streets only began to trickle in at the end
The company blamed foreign component makers whose parts
failed to get to the Kansas City plant on time.
Bob Klein, a spokesman for Harley-Davidson, said the
problems forced the company to "slow-walk" the startup of Street
production. He said the issues have been addressed, that the
company is "catching up on parts deliveries to the U.S." and
that Harley-Davidson's "ability to supply the U.S. dealer
network will improve" later in the year.
Ironically, Harley-Davidson's decision to move production
overseas comes as many other U.S. manufacturers are doing the
Analysts at BCG, which first flagged the reshoring trend in
2011, say a number of factors, including rising overseas wages,
are driving the return of manufacturing to the United States.
But BCG says a key factor is concern about "supply chain
risks" and "headaches associated with operating a supply chain
extending halfway around the world."
It is a lesson Harley-Davidson is learning.
"This is the first time we're manufacturing product
internationally, and with that, a majority of the supply chain
is international," Chief Financial Officer John Olin told
investors during a conference call.
"And not only is it a much longer supply chain, but it's
with a lot of new suppliers .... We're going through a learning
(Reporting by James B. Kelleher in Chicago; Editing by Richard