Supply Issues

12th April 2011

 

Dear Dealer Principal

 

Subject: PAM Supply Issues

I wanted to write out to all of our Dealer partners to provide some comments about the current issues which have been leading to poor supply of Parts, Accessories and core MotorClothes.  Firstly I wanted to apologise to all of you for the issues that this may be creating locally with your customers as we move into the riding season.  At Harley-Davidson we have a premium brand and maintaining that premium position is extremely important to us.  I recognize that we have not been offering a premium brand service to you of late and I wanted to say that I and my team are sorry for that.

A little bit of background on the issue.  As you may be aware, the USA Distribution Centre which was previously located in Franklin, Wisconsin, has moved to a new location in Greenwood, Indiana. The Physical Move commenced December 2010 and completed January 2011. During this time warehouse operations continued and extra stock was put into the EDC in advance to help preserve EMEA Dealer availability in case any situations arose that caused disruption in normal supply.

Initially the move was quite successful and the service levels achieved on Spare Parts from EDC during January and February averaged over 95% “first time pick”. However, as we moved further into the season and particularly close to the Quarter end we began to see more issues as the new Centre ramped up logistics to deal with demand.  Although this type of supply issue is not unusual with major changes in a logistic operation I know it is very frustrating for you at retail when you experience shortages on Parts and Accessories which stop your customers getting out on the road.

Currently our first time pick rates from the EDC for Parts, Accessories and for MotorClothes orders are 79%, 65% and 82% respectively and we have a significant amount of product on back order.  Although the situation is improving a little week by week I know that this is still below what we would expect to deliver to you.

Shipments from the US are now coming in at a much faster rate and we have brought on a significant number of extra workers at the EDC to help us to clear the orders and get them out to you as soon as possible.  We have also requested the Manager of the EDC to focus activities on clearing Accessories and Parts as the main short term priority (over MotorClothes) in order to help get our customers onto the road.

 

The situation has stabilised and older orders are now being cleared at a faster rate than new orders are coming in so we are catching up week by week, although not as quickly as I would like and not as quickly as we first thought would be the case.  In part we are victims of our own success due to the incredibly successful 2011 that we have seen year to date.  The volume of new orders from our Dealers, and orders shipped to Dealers, has been higher than ever before driven in part by motorcycle sales that have been more than 20% above last year.  We really want to keep that momentum going so we are doing all that we can to improve.

We continue to work to improve the situation though the continuous flow of product in and out will result in initial availability remaining below our desired levels for a further 3-4 weeks, as existing orders receive the first priority.

Once again, my apologies for the inconvenience that this is causing to you and to your customers.  Please bear with us.  We are providing the Country teams with weekly updates on back order levels, first time pick rates and shipment rates and I hope that they will be able to bring you steady news of improvement.

I thank you for your continued support.

 

Kind regards,

 

Rob Lindley

Vice President and Managing Director

Harley-Davidson Europe Ltd