Lock digs into multiple

CUPERTINO, Calif.— Michael Lock, the new head of Ducati operations in North America, is under no illusions about the difficult task facing him.
“(Ours) is a self-inflicted tragedy,” he said last month, “and we have to snap out of it fast. People like to see things in black and white — what did you do and what are you going to do.”
Lock knows he’s going to have to do plenty. A quick look at Ducati North American sales figures through March shows that unit sales are only about half of what they were last year at this time, the lowest number since 1999.
And Lock has to smoothly integrate four major changes set in place last year: 1) the move of corporate headquarters from New Jersey to the former Apple Computer facility here which resulted in the loss of many key staff members; 2) the outsourcing of motorcycle warehousing and shipment to UPS Worldwide Freight Service in New Jersey; 3) the outsourcing of parts and accessories warehousing to Excel in Columbus, Ohio, and 4) the launch of a computer system that connects dealers with facilities in North America and the factory in Bologna, Italy.
Have these moves helped or hurt Ducati? “We will see the long-term benefits of these moves, there’s no doubt about that,” Lock told Powersports Business, “but, in the short term, they’re causing us problems. The combination of outsourcing those services and moving three time zones away and losing half the staff and changing (computer) systems…there were so many fast decisions involving so many parts of the company. But our dealers don’t care about the future; they live in the here and now. They’re the front line of our business and if you’re a dealer you might be wondering if we made the right decisions.”
Three Problem areas
Lock is focusing on three problem areas at Ducati:
1. Distribution of motorcycles to dealers. The allocation of motorcycles to dealers should be fairly straightforward, says Lock, but at the moment it’s “fairly cumbersome” because of the new computer system.
2. Processing of warranty claims. Again, a relatively simple process that’s been complicated by the introduction of the new computer system.
“We’ve had holes in our master file information,” says Lock, “and corruption of different files that caused problems for dealers even processing claims. We’ve got over the worst of it, but dealers will believe that only when we’re at 100%. Today, we’re at about 75% in our warranty system functions.”
3. Spare Parts Distribution. Another systems problem, says Lock, compounded by the moving of the warehouse from New Jersey to Columbus, Ohio.
Lock argues that the first step in solving these problems is getting the computer system running properly.
“What was never adequately considered,” he says, “was that a large part of the new system was developed in Bologna, nine hours ahead of us here. We never could communicate with our parent company. They were leaving work as we were getting to work. It was never anticipated that we would have as many technical problems as we did.”
But technical problems aside, Lock says Ducati made strategic errors as well in not planning for the possibility of problems
“The errors have been in a lack of strategic planning on Ducati’s part, and in crisis management. If a plan goes wrong, what are you going to do? Plan B is, ‘Oh xxxx.’ They didn’t think there would be a crisis and there was no crisis management.”
In retrospect, says Lock, too much probably was attempted at the same time without adequate planning. “I don’t think taking on as many huge projects simultaneously was an advisable route to take. It may be argued that we were pushed into a corner by other factors. I can see how we could have done a better job, but we didn’t get a lot of lucky breaks. But you can’t depend on those.”
Factory commitment
North America is Ducati’s second biggest market after Italy, but it should be the company’s largest market, says Lock, and the factory knows that. Lock and Chairman and CEO Federico Minoli are in almost daily contact.
The computer problems almost are under control, says Lock, and he says he expects the situation to be “ironed out” by June 1. “Things are nowhere near as bad today as they were in January and February. Once we’ve sorted out the bugs and the data corruption, then we
will turn our attention to smoothing out the process,” he said.
inventory. parts. dealers.
Beyond the computer system, Lock and Minoli have three key objectives this year for Ducati North America: Cleaning up machine inventory, restocking the parts warehouse and rebuilding dealer relationships.
Ducati’s moving aggressively to clean up its tough problem of excess machine inventory by sharply discounting non-current models anywhere from 15% to 20%. A 998, for example, has been reduced by more than $3,000 and now costs less than a 916 did in 1995.
“Inventory (of non-current models) is a big problem,” says Lock, “and dealers are hurting. We’ve been more successful at wholesaling than retailing.” Regarding the retail situation, Lock says, “It’s not that people don’t want to buy Ducati, it’s that non-currents were not market competitive. (Cleaning out inventory) is an essential part of our program; we can’t hang dealers out to dry on this. We had so many programs our dealers couldn’t understand them. So we simplified the whole thing. We have to get machines out the door and get to the end of the year with inventory under control.”
Lock’s second objective is to solve the distribution problem, primarily on the parts side. He points out that Ducati’s fill rate in the United Kingdom is 97% and Honda’s rate in Europe is about 96%.
In North America, Ducati’s fill rate is about 55%. “That’s just awful,” says Lock with a grimace. But, he points out, the gap is not in availability of parts, it’s in the stocking and processing of the information — a computer problem. “That,” he says, “tells me it’s in my control.” Lock said he expects the parts problem should be under control by the middle of this year.
For the first three months of this year, the computer system failed to accurately track inventory levels and regularly re-order parts,
a situation that has been corrected. Last month he began a massive ordering project to fill
the parts warehouse with stock; levels will be high enough to provide three months worth
of parts.
When the replenishment is completed, Ducati will have some 3 million parts worth about $10 million in stock.
The third priority, largely a result of the first two, is repairing the deteriorating dealer relationships. The task won’t be easy.
“It will take the rest of this year and the first part of next year before I can look them in the eye,” he says. “I’m fortunate because I already know about half the dealers personally because I helped set them up as Triumph dealers. But, ultimately, we will repair the relationship only by delivering on the business.”
Lock spent five years with Triumph including serving as CEO at Triumph USA from 1994 to 1997 when he set up the operation here.
While at Triumph, Lock worked closely with John Bloor, the man who’s poured more than $180 million into the successful effort to revive the Triumph brand.
“John taught me that your destiny is in your own hands. I felt that with Triumph, but I feel it even more with Ducati. I feel an overwhelming sense of potential of what we’ve got in the U.S. You can smell it in the air.”