Harley-Davidson CEO Matt Levatich talked with smart manufacturing advocate John Bernaden about leadership while hosting the fourth annual Smart Manufacturing CEO Summit: (Read more about the summit below)
What helped develop your career path from manufacturing engineer to CEO?
What is most important for anybody at any level is to not wait for someone to tell them what to do. I think that is what applies to me in how I’ve approached my job throughout my career. If you’re waiting for someone to come down with the tablets to say here is how to run your factory, you’re not going to be anything more than you’ve always been.
What are you doing to make your factory or your network of factories indispensable to advance the company’s performance? However, it could be that the dialogue is all about cost and you’re just getting beat down to cut costs and cut costs by those people upstairs. Well, I think that the answer then is a flanking one. Can you offer more?
How did you develop your strategic thinking skills? As you know, some people suggest that it’s innate like natural-born leaders.
Strategic thinking comes from some other integrated fundamental attributes like curiosity, motivation, and determination. I don’t think that someone can be strategic if they are not curious about what might happen, and ask what if, or why not?
To me, those are thoughts that are motivated by a curious mind. But if you’re not a curious person, I don’ think that you can be strategic. So I look at these more fundamental human traits.
Strategy can be learned, but not by somebody who doesn’t have those traits.
I want everyone to be the best and brightest in every function, hourly people, everybody. But we start by thinking about what things are required for Harley-Davidson to be great.
For example, in our plants we talk about how we didn’t need to make brackets and miscellaneous materials to be great. But we need to be great at four core critical processes like paint, frame fabrication, sheet metal, and assembly. And we’re going to invest in those processes. So we need the best and brightest people running these processes like our paint strategies, figuring out the technologies to deploy so we have the best paint.
What advice do you have for those who want to transform their manufacturing from being just a cost center into a profit center that their CEO invests in with smart strategies and technologies to increase revenues?
In my own mind, I never use the word spending. If we’re talking about spending, then we should ask ourselves why are we not using the word “investment?” Because if it is only spending, it is subject to elimination. If I hear people talk about spending, I dig a little.
All spending can be thought of as investment, like a marketing investment, new product investment, warranty investment, and including manufacturing investments. So if you’re talking about manufacturing as an expense, why are you not talking about it as an investment? See how people’s mentality changes when you start thinking about the investment in worker safety or the investment in smart manufacturing. It’s a subtle but important concept.
Some of it is just lazy parlance. We can actually change the tone of our thinking and company if we think of every dollar as an investment, not some of it as spending or an expense.
So is Manufacturing a high potential career path up to CEO at Harley-Davidson?
Yes. But a single function mentality isn’t enough anymore.
If you want to become CEO someday, there’s a competency and dexterity that you have to possess in strategic decision-making as well as knowledge of numerous functions. My view is that you should spend some time in other functions, the sooner the better. It gets really hard to take a senior VP who has grown up in manufacturing, engineering, product development and supply chain and make them the senior VP of sales and marketing.
What I would rather have is the 23-year-old work in product development, work in manufacturing, then spend some time in business development or the commercial side of the business, bringing those perspectives into every job they have. I want the manufacturing person understanding why we have this flexible manufacturing strategy and connecting it with what we are trying to do for the customer. The sooner the better.
The same advice goes for global experience. I meet with students a lot. I love talking with students and I tell them that my single most important advice to you is to find a way to live and work outside the United States as soon as possible. Not just travel. Live and work outside your home culture. For those of you in the room who are international students, you’re already doing it by coming here to study. For the Americans in the room, get out of Dodge. ASAP!
SMART MANUFACTURING CEO SUMMIT SYNOPSIS
The latest technologies like 3-D printing, robotics or the internet of things often make big headlines. However, more than 150 CEOs at the fourth annual Smart Manufacturing Summit this spring learned that technology should be their last concern.
Harley-Davidson CEO Matt Levatich, who hosted the event along with the Chief Executive Group, emphasized the importance of developing a clear manufacturing strategy first. “You have to know how to use your manufacturing to gain a competitive advantage; and then you apply technology to support that strategy,” Levatich said.
For example, to more efficiently respond to the company’s highly seasonal sales, Harley-Davidson established a “surge strategy” to flexibly achieve up to a 50-percent swing in production annually. To execute that strategy, the company started what Levatich calls a “seismic transformation” in 2010.
Before this transformation, Harley-Davidson built motorcycles in October to December that were not going to be retailed until May to July – making long-term bets on model mix, content, color and destination — and getting 40 percent of them wrong. “Before 2010, 40 percent of the motorcycles we delivered to one dealer ended up sold by a different dealer,” he said.
“Our new flexible manufacturing strategy is all about getting the right motorcycle to the right customer at the right time. To do that, we needed to produce as close to demand as possible so we can adapt.”
H-D’s manufacturing transformation involved three phases: labor, systems and capital.
Labor agreements had to be negotiated to allow highly flexible shop rules as well as about a 30-percent influx of temporary workers during seasonal surges in production. Noncore processes were also outsourced to suppliers who could better respond to these seasonal swings. That then required a greater investment in ERP systems to manage supplier surges in raw materials.
Lastly, the company consolidated 42 pre-WWII factory buildings with four old assembly lines into one modern factory with a single flexible assembly line capable of building any model motorcycle on any day. “There’s obviously a whole lot of technology and a major capital investment that’s necessary to build any model in a single line on any day,” he emphasized.
Thus, H-D’s on-going investments in world-class smart manufacturing technologies are based on this business strategy and guiding principles that now enable more dynamic responsiveness to their customers, which gives the company a competitive advantage.
Smart technologies support their common assembly architecture and standard production processes whether for speed, quality or real-time feedback. They are also key to effectively bringing in 30 percent “casual workers” during the seasonal surge, according to Levatich. “They’ve got to work safely and do their jobs consistently every day just like everyone else; so we have to have discipline and rigor. There’s no freedom in manufacturing anymore.”
Unlike some CEOs who historically viewed their factories as cost centers to be cut, Levatich doesn’t like to talk about manufacturing as an “expense.” Instead, he sees it in terms of strategic investments. “Where are technologies applicable in helping us achieve our strategy?” is the key question he asks his team.
“Any investment you make should support a strategy and have a return. CEOs need to encourage manufacturing leadership and engineers to adopt that mentality. This isn’t about bells and whistles.”
Levatich drove home that message with a couple key questions for the CEOs to ask their own operations teams.
“Are you clear about our manufacturing strategy? In our case, it’s about the flexibility and responsiveness of serving the customer.”
“Are you clear about how this technology investment helps you be better at that strategy? And if it doesn’t make your organization better along a clearly defined strategic path, why are we talking about it?”
“In many cases, I believe that what’s needed most is for manufacturing leaders and engineers to clearly define that strategic path.”
Levatich’s prudent advice proved to be invaluable in helping CEOs frame and absorb two days of presentations, breakout discussions and plant tours describing the many innovative technologies that are changing manufacturing today.
His presentation raised one key question among several CEOs during a breakout session regarding whether a Smart Manufacturing strategy can be achieved by making incremental changes in an existing facility or does it require a “major transformation” such as constructing a new factory.
Similar to Harley-Davidson’s strategy, an executive from Polaris Industries, Inc. said they decided this year to build a new 600,000 square-foot smart manufacturing plant in Huntsville, Ala., to be able to design a lean and flexible facility that will have multiple assembly lines for its off-road vehicle production. Core processes will include vehicle assembly, chassis and body painting, welding, fabrication and injection molding. At full capacity it will employ at least 1,700 workers.
He said that Polaris chose Huntsville due to its skilled workforce, history of technology and innovation, existing utility infrastructure and strong local and state resources supporting economic development. The company looked at 124 sites in 14 states before narrowing the field to three finalists.
Dr. Dean Bartles, SME President as well as Executive Director of the Digital Manufacturing and Design Innovation Institute encouraged attendees to continue their education and best practice sharing by joining his institute. The federally-funded organization is currently sponsoring more than two dozen R&D projects to enable factories across America to deploy digital manufacturing and design technologies so they can become more efficient and cost-competitive.
Matthew Mulherin, CEO, Newport News Shipbuilding and Alan McLenaghan, CEO, SAGE Electochromics talked about how new digital designs drive their production processes, allowing an unprecedented degree of integration between information, communication and manufacturing systems. Rick Smith, President of the Additive Manufacturing Council, also showed ways that 3-D printing technologies can provide more cost-effective solutions for producing complex parts from digital files.
Ted Doheney, CEO of Joy Global, explained how they are solving some of the mining industries toughest challenges using the big data from their mammoth machines. In a partnership with one customer, Longwell Mining, Joy Global helped them take their operational excellence to a new level achieving a 64 percent improvement in safety, 60 percent higher production, and 40 percent lower costs through their advanced data analytical services. Todd Teske, Briggs & Stratton CEO, similarly said the internet of things is impacting even their small engine business, enabling them to provide new services solutions like more cost-effectively managing warranty returns for home & garden stores.
Lastly, Nicholas Pinchuk, Snap-On Tool’s CEO, Fernando Palacios, Executive Vice President, Miller Coors, and Patrick Dempsey, President & CEO, the Barnes Group, discussed their leadership and talent management strategies in this new digital era. All three feel millennials could be a key catalyst for unleashing the coming fourth industrial revolution, but expressed concerns about the challenges in recruiting and retaining them.
Some key takeaways during breakout sessions include the need to develop an Employee Value Proposition to clearly promote “what’s in if for the Millennial candidate” and the importance of becoming an employer of choice, as well as painting a picture of where employees can be in five years to keep them engaged and motivated.
Some CEOs also came to get an advance warning about how Smart Manufacturing may change or even disrupt their current businesses. In a breakout session on that topic, some said they worry about the internet-driven sharing economy like Uber or AirBnB. “The sharing model has been around for years with machine shops in Milwaukee,” one CEO exclaimed. “Call Henry, he’s got capacity this week.” As the sharing economy expands into the manufacturing industry, he thought this sharing of surplus capacity will happen on a wider scale with more efficiency.
Another CEO said “One thing that scares me is total integration of the supply chain via the digital thread. The largest global companies will then put even more pressure on us tier two and tier three suppliers; and more transparency will give them more leverage on pricing.“
When asked how they are leading their companies to respond to these threats/opportunities? A CEO suggested that “Our product is not a commodity. But internally, some of the things we do are commodities. We need to think about what we can share or outsource. Our tool room is the first thing we’ll replace with additive manufacturing. We will replace our highest skilled machinists with kids running 3-D printers.”
“We have a ‘bird dog’ employee researching and looking forward and bringing things to our attention,” another offered.
“Our customers now make buying decisions about our products online,” said another attendee. “Our American operations are becoming more like our German operations; we are using capital to replace labor with robotics and advanced manufacturing to reduce costs and streamline operations.”
Chief Executive Group organizers announced that next spring’s Smart Manufacturing Summit will be in Seattle hosted by Dennis Mulenburg, Chairman & CEO of Boeing Corporation. CEO attendees will get a special factory tour to see Boeing’s labor-saving strategies such as using new automated, guided robots that will fasten fuselage panels together, drilling and filling the more 60,000 fasteners that are installed by hand today.
Alan Mulally, CEO of Ford Motor Company, hosted the historic first summit three years ago. Ford’s renovated billion-dollar F-150 Truck plant stands out as a state-of-the-art showcase of smart manufacturing in America. You can find more media coverage about that first summit in this PDF.
“The combination of automation and information is the next wave of productivity,” Keith Nosbusch, CEO of Rockwell Automation, proclaimed during that first summit. You can view Nosbusch’s entire presentation here. “The seamless (IT) integration of the enterprise, the supply chain and the plant floor is becoming the next wave of competitive differentiation,” he added.
Other summits were hosted by the CEOs of Caterpillar Corp. and Cummins Engines.