Bose Corporation: The JIT

II Program (A)
Presented by: Group 2
Apurva Mittal (161210)
Harpit Agrawal (161220)
Harshvardhan Chauhan (161223)
Mohammed Rehan Kadri (161233)
Pranjali Rastogi (161241)
 Brief on important case facts, about
the company
CASE FACTS

 Bose Corporation- Headquartered in Framingham, Massachusetts. Producer of of audio

premium speakers used in automobiles, high-fidelity systems, and consumer and
commercial broadcasting systems.
 20% of purchases come from foreign suppliers. 35% of purchases come from directly local
suppliers as well. Bose ships finished products directly to Delco, Honda, and Nissan
 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.
 Bose has adopted a unique system of marrying just-in-time (JIT) purchasing with global
sourcing
 Bose has developed a unique and effective system known as just-in-time (JIT) II.
 About The Company
 Founded -1964 by Amar Bose, MIT professor
 The business was based on innovations in acoustics and
electronics.
 In its initial years the company’s revenues were primarily
based on portable, battery-operated equipment.
 Bose launched the first successful model - 901 speakers,
which were followed by further successful products like the
 501 and 301 speakers. Bose entered the car stereo market
with a partnership with Delco division of GM and eventually
offered sound system to Honda, Acura, Audi, and Nissan
Bose Strategy

Sales spread in Japan, Europe, and the United States.

 Seek New Markets: In 1970, they entered Japan but weathered
losses till 1990 to become the highest selling manufacturer.
 Broader Channels of Distribution: From exclusive high-end specialty
store retailers to direct marketing.
 Producer of Systems and Components: In 1989, Acoustic Wave
Music System, an integrated, portable, high performance speakers,
receiver, and cassette tape deck, was introduced.
Manufacturing Facilities

 Westboro: Largest, most advanced, fully integrated plant.

Manufactured printed circuit boards and transducers.
 Quebec, Canada: Produced wooden speaker cabinets using a
complex construction.
 Ireland: Assembled finished speakers
 Michigan: Specialize in making speakers for the automotive market.
 Mexico: Produced small, inexpensive “Bookshelf” speakers.
Potential Problems

 Difference in Priorities: Vendors provided parts that fit their

capabilities and schedules and not Bose’s need.

 Developing Expertise: Relying on vendors would stop Bose from

developing expertise internally.

 Cost: It would always cost more to source a part externally.

How do Bose’s history, strategy, and
sourcing policies affect supplier relations?
Is Bose a good buyer?
 Bose always focused on high quality, they wanted to increase the
accountability in the firm. This effected their sourcing strategies and supplier
relationship.
 Bose preferred to be self reliant. They changed the policy where they
produced for other plants and now they manufactured components for
itself.
 They are always concerned whether the suppliers will be able to
understand the need of the organization or not.
 A vendor would not stay Bose’s vendor for long if they do not send the
correct parts. (Westboro)
 Bose was not considered as a good buyer because the vendors could
never develop a relationship with such an organization which didn’t trust
vendors with their needs.
Should Bose vertically integrate into
plastics? Should plant source their own
components locally?

 No, Bose should not vertically integrate into plastics.

 Plastics required high expertise which could not be compromised
with in order to meet Bose quality standards. Hence, Bose had 10
vendors for the same.
 There was a lot of cost and precision required to set up plastic
molding and manufacturing plants.
 It should not be sourced locally. They can use the plastic purchased
by Corporate Procurement team. It would help in building better
supplier relations.
Should Bose participate in the JIT II
program? Is JIT II a good idea for Bose?
 JIT II Program
 Replace vendor sales person with vendor representative (Reps).
 Reps determine order quantities and place order with the company.
 Reps have access to complete Bose facility.
Benefits:
 Reduce unnecessary inventory level
 Low working capital requirement
 Provide engineering expertise
 Saving in buyers time to place orders and adjusting delivery schedules of ordered parts.
Concerns:
 Overdependence on a few vendors.
 Access to company’s data may counter productive in future.
Should G&F participate in the JIT II
program? Is JIT II a good idea for G&F?

 Burden on the profit margins of G&F.

 Cost to G&F: A qualified rep cost $80,000 per year.
 At present, order level is $2.1 million and profit margin 10%.
 To meet the cost incurred on rep, G&F need increment in orders of $8,00,000per
year.

 Ease of managing change in schedules.

 G&F get detailed information about future orders
 G&F can plan production schedules efficiently.
 Reps can push to increase order quantity.
 Change in product specification can be tracked affectively.
 What are the potential benefits and risks for
both companies?

 BENEFITS

Bose
•Access to purchasing, product-expertise and
order fulfillment resource at zero cost
•G&F rep is aware of Bose’s needs
•Faster delivery – lower lead times
•Reduced number of suppliers
•Long-term relationships
•Better quality at reasonably low cost
• Quality ensures good sound reproduction
•Reduced waste in order processing and
inventory
Vendor
•Opportunity to work long term with Bose Corp.
–Possibility of bigger contract with Bose Corp.
– Continuous learning
•Relationship with Bose gets stronger – Social
Bonding
•Access to Bose systems, facilities and people
–Better synchronization of production and
delivery schedules
–Interaction with Bose gives insights
•Improved Profitability
 Risks
Bose Vendor
•Lack of top management buy-in/commitment
•Financial hit of $80,000 per year
•Confidentiality of information –Insufficient volumes from Bose may
•Loss of control on purchasing for Bose render relationship unviable
•Purchasing might object • A lot of investment in one customer –
•Contract makes switching difficult in case of poor problems at
supplier performance Bose may affect G&F
– Problems like strikes at supplier may hamper •Need for redesign of existing processes
supply for new system
•Possibility of unfair pricing –Inability to react to quick
–Effects of inflation & changes in raw material prices changes can hamper
on vendor price
relationship
•Lack of formal criteria to determine when and
•Inability to supply to upcoming plants in
with whom to establish JIT II relationships - can
Mexico and Michigan may affect
create
relationship
contractual liabilities
Thank You