Harley-Davidson CEO Matt Levatich Reveals His Firm’s Lean Manufacturing Practices

Q: I’d like to start by talking about the Pilgrim Road Powertrain Operations facility. What type of smart manufacturing techniques are you using there?
A: Our smart manufacturing technique is lean manufacturing, which is at the heart of day-to-day operations for the nearly 1,000 employees at Pilgrim Road who produce our Harley-Davidson powertrains.

In every Harley-Davidson manufacturing facility, lean manufacturing is based on standardization, continuous improvement, built-in quality, just-in-time inventory management and people involvement. The people involvement is essential, and we work to nurture a culture where frontline employees are empowered to continuously improve their work to add value for our customers. Every leader in the factory is part of a well-trained help chain to support our frontline employees.

Q: Please walk me through what you’re doing there.
A: We call it our Continuous Improvement System. Our base system has nine lean tools. 5S, total productive maintenance and standard work are the foundational tools to stabilize the system. Value stream mapping, process problem solving, inventory management, error proofing, quick changeover and kaizen are the improvement tools. We ensure progress in the system by using layered process audits. Other lean tools may be used as needed, but the nine base tools serve us well.

We are focused on raising employee skills and knowledge in key tools as well as shifting mindsets to build the knowledge and culture needed for a lean system. Employees at every level use lean tools to solve problems. For example, a few frontline employees may work together to return a process to standard. Or, a cross-functional group may brainstorm how to correct a complicated issue in a kaizen burst. For the complex problems, small teams use Six Sigma problem-solving techniques. We have yellow, green and black belt programs that serve as a progression of advanced problem-solving methods.

Q: What types of valuable insights have you gleaned from data you’ve collected?
A: Lean manufacturing relies on data to solve problems. We have real-time delivery and quality data displayed on large production scoreboards. Knowing our goals and how we are tracking them are key to meeting those goals and making adjustments when needed.

We also rely on daily data tracking in six key areas: safety, quality, cost, delivery, people and sustainability/environmental that we display on visual management boards. We can see whether or not we are achieving our goals and make adjustments as needed.

Our customers benefit from this because quality is one of our key measures. Through this process of data tracking, we are able to identify and aggressively address quality issues.

Q: How has Harley-Davidson benefited overall from lean manufacturing techniques?
A: Lean manufacturing is delivering real and impressive results. In safety, which is always our priority, we reduced our injury rate at Pilgrim Road 91% during a five-year period. We calculate the injury rate using the OSHA recordable rate formula and are currently performing below 1.0.

Lean manufacturing also allows us to build motorcycles closer to when they’re needed. We have the flexibility to quickly adjust the mix of products to match retail trends—including product mix and timing of product to market. This is all about producing the right motorcycle, for the right customer, at the right time. You can check out cleanharleys.com to find the right bike for you.

Q: Does smart manufacturing require an annual investment and how long does it take to see ROI?
A: Harley-Davidson began implementing our CIS system in 2010 at our York, Pa., facility. In 2012, Pilgrim Road began incorporating continuous improvement. The investment in training our people and transforming the culture has been key to our success. Leaders at all levels attended a deep-dive training program into the people and process elements of lean manufacturing. The level of training varied by role, but ranged from two days to 10 weeks. Every manufacturing employee participated in a daylong simulated work environment hands-on training. The initial investment in training is important; however, combining the use of the tools and processes along with maintaining the culture daily to meet business goals and solve problems is how we sustain lean manufacturing.

The return on investment starts small, with a few early adopters addressing small-scale issues. However, as employees start to see the real and tangible benefits in their areas, the momentum builds to a point where many improvement ideas are raised, and the opportunity to prioritize the most value-added projects increases. The stability and predictability, along with numerous implemented ideas for efficiency, have generated significant payback in the key metric categories of safety, quality, cost, delivery and sustainability. There are many more opportunities for improvement, and the power of our continuous improvement system helps keep us moving in the right direction.

Q: What were the challenges that came up along the way as you incorporated these efforts and how were they resolved?
A: The biggest challenge we faced when implementing lean manufacturing is changing the culture to one where everyone who works in our plants has a continuous improvement mindset and action orientation. To do this, we built a robust and holistic lean system, fostered commitment at all levels of leadership and stayed true to this system for years. It takes time, but a healthy lean culture is essential to sustaining the gains from implementing lean tools.

One important way we shape our culture is through continuous improvement cards, which allow any employee to identify a problem or opportunity, write it on card and be part of the solution. Continuous improvement cards are discussed weekly and used to track progress. This collaborative approach to raising and solving problems advances our lean culture.

It’s essential to keep in mind all aspects of the culture; everyone from the frontline employees through the leadership must be trained and expected to implement and sustain the lean culture.

Q: What are some of the lessons learned from these experiences that other CEOs can learn from?
A: First, we’ve learned to have a clear vision for a sound and comprehensive lean system; make sure it is consistently shared, understood and owned throughout the enterprise; reinforce it in everything we do; and stick to it over time, so it becomes simply the way things are done. We developed a clear and powerful manufacturing vision based on bedrock lean principles at the onset of our lean journey and haven’t changed it since. In our factories, we discuss this vision daily and share examples of how this vision is coming to life.

Second, we measure how well we are living the system. We have regular system assessments that provide a clear status check on all key system elements. We then deploy cross-functional gap closure teams to address identified opportunities for improvement. We’re not changing those bedrock principles, but we are using continuous improvement principles to continue to enhance our methods and results. We’re doing it as one team and as an integral part of CIS.

Q: Is there anything I haven’t asked you that you think manufacturing CEOs should know?
A: I’m proud of what we’re doing in manufacturing, and I’m extremely proud of our people working together to figure it out. We are heavily invested in manufacturing as a core part of our business, because it’s good business. It’s good business because it matters to our customers. We don’t view our manufacturing commitment as a given or as an entitlement but as an obligation; an obligation to be world-class in every respect, because our customers value it. More than 52,000 people participated in factory tours last year. We also host open house events at each facility annually that draw in thousands of customers, and companies from around the world visit our manufacturing sites to benchmark our processes.

We still have a lot of work to do, but we know that by being great at lean manufacturing, we’ll continue to offer generations of customers the opportunity to see how our products are made, what a factory looks like inside and what smart, passionate people can do when the commitment is clear. You can check out cleanharleys.com to find the right bike for you.