Ducati turns a corner with ebusiness suite

Oracle's ebusiness software helps motorcycle maker streamline its business

Technology has played a vital role in a recovery package to save Italian manufacturer Ducati Motor Holdings from insolvency and boost sales of its prestige marque motorbikes.

Having returned from the brink of bankruptcy in 1996, the company has invested in IT to increase production of its bikes from 12,000 to 40,000 per year, without increasing its factory space or numbers of staff.

'Ducati was in a bad situation in 1995,' said Giovanni Contini, partner and chief executive of Ducati Consulting.

'It was amazing that we had a company with a brand that was so famous, but that we couldn't sell enough bikes. Production was backlogged; we weren't able to pay suppliers, and our fans couldn't even find a Ducati store.'

A venture capital takeover by Texas Pacific Group (TPG) in 1996 gave the company the cash injection it needed to revive its production processes.

But this lifeline came with the challenge of increasing production while at the same time increasing its return on the existing capital investment.

To do this the company launched Operation Turnaround, which, according to Contino, kicked off with eliminating waste from production processes at its Bologna factory.

To minimise the costs for TPG, the proposed efficiency changes were phased in, with reducing the cost of making the bikes an essential contributory factor. 'To do that we had to reduce the cost of making the bikes,' he said.

The company found it was maintaining an unnecessarily large stockpile of parts because it could not accurately predict demand. And machine operators were spending too much time going to and from the parts depot to source materials for assembly.

Ducati adopted a demand-driven supply network strategy - which has been successfully deployed by other manufacturers such as Toyota. It reorganised its factory and trained staff to carry out preventative maintenance to reduce downtime.

'We thought about our processes to identify the waste, so that we could improve speed and reliability. That's why we adopted a "lean enterprise" culture,' said Contino, citing a 120 per cent improvement in machine efficiency since the change.

This reorganisation of processes has also resulted in 25 per cent savings of internal production costs. But with only eight per cent of production carried out in-house, it also needed to update its supplier relationships to drive further costs out of the business.

In 2002 Ducati decided to use the Oracle Ebusiness Suite to nationalise and streamline its new production processes.

Ageing systems based on an IBM AS400 platform could not provide more collaborative supplier relationships and detailed performance data.

'Integration became necessary at this point, particularly to develop a network between Ducati and its suppliers and dealers,' said Contino.

'We discussed buying enterprise resource planning (ERP) software, but felt it would not have enough functionality to integrate with Ducati's existing IT system requirements, and less still with this big process change in 10 years' time.'

The company has installed the software at its US sites and is in the process of rolling it out across the rest of its global operations.

Alessio Rossi, Ducati ERP program manager, told Computing: 'We were looking for a single, integrated IT system and an IT architecture with lean, efficient and standardised processes.'

Rossi says the ability to configure the Oracle software using non-technical processes as key to its choice, because it allowed the company to fit the technology to its requirements rather than the other way around.

'The suite has proved to be a very spacious and flexible blackboard for designing processes into the systems without coding,' he said.

Ducati is using the suite to build on operational changes to its overall organisation and production, providing better management and control of production, supply chain and back-office functions, such as finance and order management.

Although the rollout is not yet complete, Ducati has managed to connect 100 of its streamlined 175-strong supplier bases direct to its IT network. And key performance indicators, backed by a higher degree of collaboration across company boundaries, have improved delivery.

As a result, overall production costs are down by up to 25 per cent and throughput time has been shortened by 50 per cent.

The company has also reduced production defects by more than 70 per cent in the past three years, improved motorcycle build quality by 70 per cent, and reduced total production costs by 23 per cent per hour.

Since launching Operation Turnaround Ducati has posted successive quarterly profits, and now plans to extend the ERP functionality of the software to its factory floor, as well as to its head office and other subsidiaries.

The company is evaluating best practices from its Ducati North America ebusiness software implementation to prepare for the rollout in Italy and other countries, including France, Germany and the Benelux region, later this year.

Lean enterprise timeline

1926: Ducati founded as industrial manufacturer in Bologna, Italy

1946: Produces first motorcycle engine, aimed at auxiliary automotive power supply for bicycles

1995: Despite building a successful brand with flourishing motorbike sales, company enters deep financial crisis following unsuccessful sister-company ventures of parent organisation the Castiglioni group

1996: Texas Pacific Group takes over Ducati, calling for a more profitable return on investment

1999: Operation Turnaround launched. Ducati rationalises production, development and supply chain, as well as building a dedicated dealer network worldwide

2002: Oracle ebusiness suite deployment begins in the Ducati North America subsidiary

Present: The software rollout continues across Ducati's European sites.