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Harley-Davidson, a U.S. icon, highlights offshoring's perils

Published on Jul 23, 2014 3:32 AM

CHICAGO (Reuters) - U.S. motorcycle maker Harley Davidson 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 back home.

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 showed.

Until this year, all Harley-badged motorcycles were built in the United States using parts that were almost exclusively sourced domestically. 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.

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