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Dr Muhammad I.

Ramay
The Bose Corporation: JIT II Program (some possible answers)
Q-1 How do Boses history, strategy and sourcing policies affect supplier relations? Do you think
Bose is a good Buyer?
Bose Corporation- Headquartered in Framingham, Massachusetts, Founded by a teacher and
student from MIT.

Never lose your imagination. Always dream of things that are better and think about ways to reach those things.
Its who we are, and who well always be.
Forever dedicated to creating better products through research.

Dr. Amar Bose

Bose Supplier Selection and Relations with Suppliers


Bose is a producer of audio premium speakers used in automobiles, high-fidelity systems, and consumer and
commercial broadcasting systems. Bose has seen up and down, cold and warm relations with suppliers.

Suppliers Selection: The Company has developed a detailed supplier performance system that measures on-time
delivery, quality performance, technical improvements, and supplier suggestions. After six months of deliveries
without rejects, Bose encourages suppliers to apply for a certificate of achievement form, signifying that they are
qualified suppliers. As stated by Wayne Sauer, purchasing manager in Corporate Procurement, We do our
homework up front, and after screening we usually believe weve chosen the right supplier for them. But, if we
havent chosen right, the vendor isnt going to send them many bad parts and stay a Bose vendor for very long. For
Bose this strategy resulted in a loss of time and money. Apparently not enough research was conducted up front.
Entry efforts and loss in Japanese market in 1970 is one example. Bose management assumed that what is good at
home is good at globe.

Single Sourcing: Bose has then different sourcing strategies over the years; one of them had been single source
strategy. This strategy allowed full shipment orders with lower price per units. But there was a problem with this

strategy, if parts dont arrive in time and have some defects found at assembly line, delay of operations occur, and
thats exactly what happened at Bose. It hurt their relations with international buyers and suppliers.

Little Research: In the 1970s, Bose sought to enter agreements with the automobile industry, including G M,
Honda, Audi, and Nissan. These suppliers had a broad base of clients and the relationship seemed very promising.
But Bose made the mistake when trying to enter Japanese market, by assuming that the desire for their product was
universal, but Bose failed to enter the market. Eventually in 1982, Bose was well received by the Japanese market
but they made the initial mistake of entering the market without appropriate market research, which could have
expedited the process and prevented, loses.
Smaller Chain Store: Bose also entered into small market through Sears, Sounds play ground, Lechmere, and
others and when their product was available to everyone it was perceived as a low quality brand. Bose has seen up
and down trend in its relations with suppliers. Leaderships decisions at Bose had its effect on relations with
suppliers, as they focused on effective coordination, scheduling, purchasing and inventory. But the low time was
when Bose entered into plastic parts agreement with G&F. The reasons being
G&F was not clear if they would supply all these parts to all plants?
Bose did not have clear strategy regarding sourcing policy.
At this initial point Bose was not a smart buyer.
Research was minimum, and a strong long term brand of Bose was not created.
Conclusion: Over the years Boses supplier relations strategy has improved, a good example is its Westboro plant.
Bose generally have achieved good results. It achieved lead time of 10 days, it used to be 4 to 6 weeks. Supplier
relation declined in another area and that was plastic parts area. Again Bose made a mistake by not having a clear
strategy regarding sourcing policy.
So the conclusion to question one is that Bose had up and down, good and bad relations with suppliers. They had
enough share of bad decisions, and main reason have been a minimum amount of research and did not use Bosesupplier relations to create a strong International brand. Overall, Bose could have been a more effective buyer.

Question no 2: Where is the buying and selling done in this context?


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 Printings challenge. The direct line of communication
in a JIT II partnership lets us anticipate Bose 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.

According to company President Sherwin Greenblatt, there are lots of paths to success. What he gives employees is
"a framework of freedom." That means getting good people and paying them well, but mostly giving them the
opportunity, within business driven parameters, to be creative. There are always people wanting quality products. If
you have them, your business will survive better than if you simply compete on lowest cost. 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
Bose's vendor engineering function resides in the procurement organization, so purchasing can assist suppliers,
helping G+F Industries, for example, reach very high quality levels in plastic injection molding, through better
process control.
Purchasing at Westboro
Until 1988, no purchasing had been done by the plants; instead, all items had been purchased by Corporate
Procurement but delivered to the plants.
By 1990, purchasing at Bose Corporation was more decentralized. The plants in Westboro, Canada, and Ireland did
their own day-to-day purchasing, typically against contracts negotiated centrally. It was expected that the planned
facility in Michigan would also manage its incoming material flow.
Each production line at Westboro had its own operations manager and support organization. Jim Tabor, plant
materials manager, reported formally to Walt Hussey, plant manager, and informally to Lance Dixon.
Westboro spent about $140 million per year on items purchased from an active base of about 200 vendors. About
50% of the plants purchasing dollars were spent in five categories: electronic components, plastics, printing,
corrugated boxes/packaging, and cables/cords.
15% of buyers time was spent on revisions to existing parts; usually this entailed updating documents or ensuring
that revised parts met quality levels. The remaining 10% of buyers time was devoted to renegotiating contracts with
existing vendors or, occasionally, switching to new vendors.
Purchasing was planned in a three-stage cycle:
Business planning. The marketing department at Bose Corporation prepared multi-year business plans.
Aggregate production planning. Based on the business plan, Westboro prepared a production plan that specified
the capacity, tooling, and material volumes that would be needed over the next one to two years.
Production scheduling. Based on the aggregate production plan, schedulers at Westboro prepared a detailed
master schedule outlining requirements for capacity, personnel, and material over the coming 12 months.
Production for earlier months was scheduled at a greater level of disaggregation than for later months.
Purchasing supervisors supervised a group of buyers who procured all materials for one production line. Buyers
were responsible for managing quality, cost, and delivery. Unlike Corporate Procurement, most buyers at Westboro
were not engineers, and instead had come up through the ranks as administrators or expediters. Buyers at Westboro
typically started on easier commodities such as hardware or operating supplies, and then moved on to more difficult
categories such as plastics and electronics.
Corporate procurement
In 1990, Corporate Procurement at Bose purchased materials totaling $300 million. Corporate Procurement was
headed by Lance Dixon, director of Purchasing and Logistics. Dixon reported to Tom Beeson, vice president for
Manufacturing.
When Bose began to develop the Acoustic Wave Music System, Corporate Procurement contacted vendors of
AM/FM tuners to obtain design advice and product specifications. Management invests in technology, trains their
people, and truly have patience for longer term projects. Employees stay at Bose for decades, which allows for deep
knowledge of products / technology and strong relationships.

Question no 3

Should Bose participate in the JIT II program? Should G&F?


Potential Benefits and risks for both companies?
If I was working for Bose how would I evaluate the decision?

Why JIT II is Needed?


The issue with Bose was that, it needed parts and material when it is needed, not to sit in a warehouse like it used to
be in auto industry before JIT.
Challenge for suppliers is fulfilling changing production schedules without creating costly inventory, or even worse
shutting down the line with late shipments The direct line of communication in a JIT II partnership lets them
anticipate Bose's needs before those needs become problems, and those problems become a crisis.
Any manufacturer before starting JIT program, need to forecast customer demand, set planning and specifications,
then send that information out to buyers for competitive bidding. Under the JIT II program, however, the process is
simplified. After Bose forecasts customer demand, the inplant 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.
By studying various augments in favor of JIT, I came to a conclusion that JIT II benefits both the supplier and
customer (BOSE).

Benefits for Suppliers and Bose:


Through JIT II, supplier increases their share of Bose business, improve their profitability, and develop new
products. Bose gains full time purchasing, production planning, and order fulfillment personnel at no charge, Gets
lower ordering processing, inventory handling, and delivery cost, In-plants are continuously involved in cost
reduction, quality improvement and value analysis. I recommend that Bose Corporation should join 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.

Reasons:
An investigation of company literature revealed that growth in Corporate Procurement budget was not keeping up
with Bose Corporations needs of increasing staffing levels. This in effect is the reason that vendor paid
representative who acted as buyers within Bose for their product lines was available on site.
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 Boses 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
companys 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 suppliers man working as Bose employee might solve that problem.
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.
Benefits of having Suppliers Rep on Site:
A suppliers 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.
Clearly a qualified rep from suppliers can save much of the above time. . 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 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 plants inventory, combining
and reducing unit costs for any other needs, then orders the product to ship direct-to-stock to the Bose location.
Time Saving with JIT II:
Most of the buyers time at Westboro plant was spent in deciding and placing the orders with the vendors. Another
15% buyers time was spent on revisions to existing parts; usually this entailed updating documents or ensuring that
revised parts met quality levels. The remaining 10% buyers time was devoted to renegotiating contracts with
existing vendors. Time spent by Bose Buyers Time dedicated to decide what to order , placing new orders and
modify 15% schedules of the existing Indicates time spent in revisions to the existing 75% parts time was devoted to
renegotiating contracts with existing vendors.
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. 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.

Cost Savings with JIT II:


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.
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. They need 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.
Conclusion:
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 Green Blatt, 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 at Bose after the case was published? 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 Boses original leap of faith.
References:
https://prezi.com/0mbgg9t9l0hh/copy-of-bose-corporation-case-study/
By David Marble26September 1998JIT II Partnerships Require Leap of Faith
Tom Jose V, Sijo M T, Praveen, Implementation of JIT in industries- A Case Study International Journal of
Science, Engineering and Technology Research (IJSETR) Volume 2, Issue 2, February 2013
https://en.wikipedia.org/wiki/Bose_Corporation
http://www.ame.org/sites/default/files/target_articles/91Q5A3.pdf
https://www.glassdoor.com
http://www.slideshare.net/