VINOD GUPTA SCHOOL OF MANAGEMENT

B2B Assignment The BOSE Corporation: The JIT II Program

SHUBHAM GUPTA 10BM60085

4/29/2012

The document discusses the case on Bose corporation’s JIT II program. The implications and the recommendations are made of the benefits of the said program.

Executive Summary

“Better Sound through Research” is the motto of Bose Corporation. Bose has been providing high quality

sound systems since 1968. Moreover, their policy for it was simple, better sound, better quality, better

business. For Bose to achieve this goal they need to either weigh their options to continue their

collaboration with their suppliers or start with their own in-house production of all the products. In-

house production would give them an advantage of complete control on quality of the product. Now the

questions are that does Bose need to continue with JIT II approach, which has been in effect in the

company? Or Bose should become vertically integrated to ensure that production lines are well

supplied, and to ensure that all components are in-house and best that can be manufactured? Our

group recommends that Bose Corporation should stay with JIT II approach. This would give them a

competitive edge within the continual changing technology in the industry. It would help built open

collaborative setting between Bose and some selected suppliers. The implementation for the JIT II effort

would take overall 3 years for all branches.

Recommendation

Implementation of JIT II:

Growth in Corporate Procurement budget was not keeping up with Bose Corporations needs of

increasing staffing levels. In response to this, JIT II was implemented in January 1991. This in effect

augmented the Corporate Procurement staff with vendor paid representative who acted as buyers

within Bose for their product lines. Several benefits of the program could be recognized.

1) Manufacturing Strategy: Bose always intended to increase its vertical integration to the

extent which was feasible. Even when sourcing parts from highly capable vendors, Bose

saw three potential problems.

The vendor and Bose each had their own priorities and agendas. These agendas

were often contradictory to the Bose’s interest.

A long-term relationship with vendor although may help vendors gather specialized

capital and develop particular expertise in manufacturing those parts. Although this

may have a negative impact on Bose as it might delay the ability of establishing

internal capabilities. Developing too much vertical integration might be only

sustainable if required staff be hired. Already they are facing a crunch situation in

case of Buyer staff.

Beeson believed that the vendors would never understand the company’s needs or

organization as well as Bose employees, and that, if all the components of cost could

be tracked accurately, it would almost always cost more to source a part externally

than to make it in-house, as long as the volume was sufficient. Hence having a

supplier’s man working as Bose employee might solve that problem.

2) Purchasing at Plants (Westboro)

Buyers at plants were responsible for managing quality, cost, and delivery. Unlike

corporate Procurement, most buyers at Westboro were not engineers, and instead

had come up through ranks as administrators or expediters. A supplier’s qualified

rep would have extensive knowledge of the various domains. He may understand

the current needs and future needs more properly and would be more capable of

making more informed decisions quickly.

Most of the buyer’s time at Westboro plant was spent in deciding and placing the

orders with the vendors. Another 15% buyer’s time was spent on revisions to

existing parts; usually this entailed updating documents or ensuring that revised

parts met quality levels. The remaining 10% buyer’s time was devoted to

renegotiating contracts with existing vendors.

Clearly a qualified rep from suppliers can save much of the above time.

3) Benefits of Buyer supplier collaboration :

The focus of most supplier alliances is achieving the simultaneous objectives of

continuous improvements along with squeezing cost out.

A high level of recognized interdependence and commitment is present.

Time spent by Bose Buyers

Time dedicated to decide what to order , placing new orders and modify schedules of the existing

Indicates time spent in revisions to the existing parts

time was devoted to renegotiating contracts with existing vendors.

75%

15%

Synergies can be created in alliances that cannot happen in transactional or even

collaborative relationships. The synergies result in reductions of both direct and

indirect costs.

Reduced time to market. Bose is always looking more innovation and new

technology to please music lovers. As such it needs to have a good new product

development framework in place to reduce the time to market its products. Such

collaboration can reduce the time to design, develop new products. Bose and

suppliers’ rep can discuss about the specifications of the products in its initial stage

so that time and cost be saved of last minute changes or cancellation of orders or

modification to the designs etc.

Openness and institutional trust enhance the inflow of technology from alliance

partners that lead to many successful new products. In 1999, Dell and IBM formed

an alliance worth $16 Billion over 10 years.

Also principles like JIT production, Kaizen principles could be more successfully

executed if the supplier rep is working in collaboration with Bose.

Under JIT II, a vendor rep would replace the vendor salesperson, the Bose buyer and

the Bose materials planner. Clearly a lot of cost would be saved in this process. The

cost estimated for the vendor to keep such a rep would be $80.000/year. The money

saved above could be shared with the vendors. Even if Bose decides to do otherwise,

Vendors like G&F and United Printing would be benefited by lesser contract

renegotiations and or Bose switching to new vendors. Also this would give them a

long term business.

Bose wants material when it is needed, not to sit in a warehouse. Responding to

constantly changing production schedules without creating costly inventory, or even

worse shutting down the line with late shipments, is United Printing's challenge. The

direct line of communication in a JIT II partnership lets us anticipate Bose's needs

before those needs become problems and those problems become a crisis.

Another issue raised was how to ensure that vendors supplied goods at fair prices

over the course of relationship. Bose could get the cost information of the vendors

who get into JIT II relationship. Most of the companies have successfully done it in

the past. By getting the cost structure of JIT II vendors would help in keeping a

check.

JIT II program

Before it started its JIT II program, Bose would forecast customer demand, set planning and

specifications, then send that information out to buyers for competitive bidding. The company

would analyze the bids and respond to the vendors' sales rep. The sales rep would place the

order with the plant, which would manufacture and ship.

Under the JIT II program, however, the process is simplified. After Bose forecasts customer

demand, the in plant checks every plant's inventory, combining and reducing unit costs for any

other needs, then orders the product to ship direct-to-stock to the Bose location.

It takes a leap of faith to share and entrust your JIT II partners with the information they need

to make it pay off for both parties, says Sherwin Greenblatt, Bose president. "Everybody wins

and performs better," he says. Stronger supplier alliances allow for more control over budgets

and headcount. The benefits for the supplier include increased volume and the opportunity to

expand the range of products offered.

What happened to JIT II?

Twelve years into this unique JIT II arrangement, both partners continue to hone their skills. United

Printing has stayed on the leading edge of commercial printing, and has added new services and

technologies. The daily challenges of being a JIT II partner keep us sharp and alert to the marketplace, all

as a result of Bose's original leap of faith.