18 May 2005

The Web

Ducati’s lean road with Oracle

The principle of “lean” has always dominated thinking at Ducati. While other motorcycle brands were busy adding power and weight to their machines, the legendary Italian manufacturer always believed in keeping weight to the minimum. That in turn helps deliver Ducati’s trademark stability while the bike is leaning hard over into a fast, sweeping bend.
Now the company has embraced lean principles throughout its manufacturing process as part of a major turnaround in its operations. And the results are as impressive as Ducati’s track record of racing successes: production costs down by up to 25 per cent, throughput time shortened by 50 per cent and motorcycle build quality before delivery increased by 70 per cent.
These results are the culmination of a three-year drive towards achieving a “lean enterprise” led by Giovanni Contino and Filippo Pellerey, joint managing directors of Ducati Consulting, which was set up to mastermind the project.
Founded in 1926 in Bologna, Northern Italy, as an industrial components manufacturer, Ducati produced its first motorcycle engine in 1946 and went on to build a great reputation for off-road bikes. The modern history of Ducati as a superbike maker began in 1972 when its newly introduced 750 V-twin took first and second places in the Imola 200 and gave birth to a legend.
Today, Ducati Motor Holding is one of the world's leading motorcycle manufacturers. It is listed on the New York and Milan Stock Exchanges and has a brand presence in 40 countries worldwide.
The move to lean manufacturing follows the acquisition of Ducati in 1996 by the Texas Pacific Group (TPG). The new parent began by changing the international subsidiary structure and revamping the dealer network, then instigated “Operation Turnaround” in 1999 to improve return on investment.
The new management wanted to fill its newly improved dealer network with motorcycles, so its first goal was to increase production volumes from 12,000 bikes a year to 40,000 within five years. This would have to be achieved in the existing factory space, and without increasing the number of employees.
Ducati’s solution was to outsource as many non-core activities as possible and focus its own efforts on assembly and research and development. Pellerey, who headed a five-strong process improvement team, took up the challenge. “We wanted to eliminate all non-value-adding activity, eliminate waste and improve quality, all without any major new investment,” he said. “We decided that outsourcing and embracing lean principles were the keys to achieving these targets.
Since the greatest potential for improvement lay with the supply chain, the team was joined by Giovanni Contino, who at the time was Ducati’s purchasing and logistics director. He started to export the company’s new lean culture to its suppliers.
Sixty percent of Ducati’s procurement comes from Italy, because of the rich automotive heritage in Northern Italy, 25 per cent from other EU countries and the rest from Japan. At the moment the first 100 suppliers are directly connected to Ducati’s IT network.
Ducati started this process before selecting the enterprise software that would make the lean approach universal, repeatable and scalable.
IBM was engaged to help find the ideal software solution, as the old IT system based on an IBM AS/400 platform was not up to the task. Each department was consulted and asked to present their requirements for actual needs and future perspectives. The final recommendation, after a software selection process conducted among the major world software providers, was to implement the Oracle E-Business Suite.
Ducati deployed the Oracle E-Business Suite in two phases. The first phase was implemented at Ducati North America in 2004 with the support of Oracle Consulting and is now about to be rolled out to the rest of the Ducati network. When the implementation is complete, more than 1,000 Ducati employees will be connected to the system.
The Oracle E-Business Suite is a suite of Internet business applications that automate critical business processes, offering customers choice and flexibility in implementing business applications. Its open architecture and single data model allow applications to be deployed as individual modules, business flows, or as an entire integrated suite. Its back-office systems and supply chain modules will play a critical role in helping Ducati reap the benefits of lean manufacturing principles.

The Malta Financial & Business Times is published weekly on Wednesdays.
Website is updated weekly on Thursdays at 15.00CET
Copyright © Newsworks Ltd., Malta
Editor: Kurt Sansone
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail