How Did Ducati Become 2nd Most Profitable Motorcycle Maker in the World?
2. How did Ducati become the second most profitable motorcycle maker in the world despite its small scale?
Platform Approach: Ducati divided the bike into a small number of component and sub-component assemblies. A supplier was responsible for managing and delivering the component. The platform approach minimizes detailed, multi-step assembly processes. Consequently, fewer Ducati man-hours are needed to assemble a motorcycle. The assembly expertise of each component is concentrated at the supplier so that Ducati assemblers can apply higher-value labor on the overall bike assembly.
High Degree of Component Outsourcing: As of 2001, Ducati outsourced 87% of its components to suppliers. The company planned to increase that rate to 90%. As mentioned above, outsourcing component manufacturing to suppliers results in a concentration of expertise and higher levels of quality, as discussed below.
Mission-driven Supplier Management: Ducati has the fortune of being proximate to the Emelian District of engineering talent. This district is comprised of a large number of component suppliers who possess profound levels of expertise in the kinds of technology Ducati exploited for its motorcycles. The interdependent relationships in that district led to joint activities that improved technical innovation. Ducati then developed supplier relationships with their mission of quality and high-performance in mind. Ducati reduced the number of suppliers from 200 to 130 and with the exception of a few key suppliers, formed short-term contracts with their component suppliers to keep them hungry and competitive for the firm’s business. As a result, in a few short years from 1996 to 2000, Ducati’s reputation shifted from being one of mediocre reliability to one of high quality.
Not only did this approach to supplier management improve quality and control costs but it also reduced downstream technical support and warranty costs.
Minimize component variety through standardization: Variety
Platform Approach: Ducati divided the bike into a small number of component and sub-component assemblies. A supplier was responsible for managing and delivering the component. The platform approach minimizes detailed, multi-step assembly processes. Consequently, fewer Ducati man-hours are needed to assemble a motorcycle. The assembly expertise of each component is concentrated at the supplier so that Ducati assemblers can apply higher-value labor on the overall bike assembly.
High Degree of Component Outsourcing: As of 2001, Ducati outsourced 87% of its components to suppliers. The company planned to increase that rate to 90%. As mentioned above, outsourcing component manufacturing to suppliers results in a concentration of expertise and higher levels of quality, as discussed below.
Mission-driven Supplier Management: Ducati has the fortune of being proximate to the Emelian District of engineering talent. This district is comprised of a large number of component suppliers who possess profound levels of expertise in the kinds of technology Ducati exploited for its motorcycles. The interdependent relationships in that district led to joint activities that improved technical innovation. Ducati then developed supplier relationships with their mission of quality and high-performance in mind. Ducati reduced the number of suppliers from 200 to 130 and with the exception of a few key suppliers, formed short-term contracts with their component suppliers to keep them hungry and competitive for the firm’s business. As a result, in a few short years from 1996 to 2000, Ducati’s reputation shifted from being one of mediocre reliability to one of high quality.
Not only did this approach to supplier management improve quality and control costs but it also reduced downstream technical support and warranty costs.
Minimize component variety through standardization: Variety