CASE STUDY PRESENTATION ON

BOSE CORP : JIT II IMPLEMENTATION PROGRAM (A)

PRESENTED BY : GROUP 2
SECTION : A
Alankrit Johri(171236)
Devdatt Kulkarni(171237)
Janardan(171239)
Raj Mehta(171243)
Sunny Harsoda(171244)
 CASE FACTS
 Companies involved in case:
G&F Industries, Bose Corporation
 People involved in the case:
John Argitis – President, G&F Industries
Lance Dixon – Director Purchasing & Logistics, Bose Corp.
Tom Beeson – Vice President Manufacturing, Bose Corp.
Amar Bose – Chairman, Bose Corp.
Sherwin Greenblatt – President, Bose Corp.
Wayne Sauer – Purchasing Manager in Corporate Procurement at Bose Corp.
Joe Giordano – Vice President Finance, Bose Corp.
 CASE FACTS
 Founded by Dr. Amar Bose in 1964.
 First employee of the company - Sherwin Greenblatt.
 Company motto – “Better sound through research”
 Company mission – “provide outstanding sound experience to everyone in the whole world”
 Headquarters of Bose Corp. were located in
Westboro, Massachusetts
Ste-Marie, Quebec
Carrickmacross, Ireland
 Initial 3 years all the company’s revenues were earned by developing portable battery-operated equipment.
 In 1968, Bose corporations launched 901® speakers. Two years later they introduced 501® speakers. In
1973, Bose introduced 301® speakers.
 Corporate Procurement process- till 1990 in which no plants did purchases independently.
 Westboro plant spent about 140million dollars per year from active base of 200 vendors.
 In 1990, Dixon proposed JIT II.
 Company Strategies

 3 Aspects of company’s strategy:

 Constantly sought new markets around the world and have exceptional
perseverance in opening markets.
 Sought broader channels of distribution.
 Produce complete systems as well as components.
 Corporate Procurement process- till 1990 in which no plants did purchases
independently.
 Company Strategies
 4 types of personnel in procurement process:
 Design Engineer,
 Materials planner,
 Buyer,
 Vendor Salesperson
 From 1990, purchasing at Bose Corp. was more decentralized.
 Westboro plant spent about 140million dollars per year from active base of 200 vendors.
 3 stage cycle of purchases under decentralized approach:
 Business planning,
 Aggregate production planning,
 Production scheduling.
 In 1990, Dixon proposed JIT II.
 JIT II STRATEGY

 A vendor representative (the “rep”) would replace the vendor salesperson, the
Bose buyer and the Bose materials planner.
 He would be authorized to decide what, when and how much to order for a
particular range of products or services.
 Reps would determine the order quantities placing orders to their company to
supply Bose.
 The reps would be stationed full time in the Bose facility.
 The rep would be empowered to use the Bose computer systems, but would be
hired by the vendor and paid by the vendor.
 Issues in Bose Corporation
 To implement JIT II program following issues were to be addressed:
1. Vendors will be interested or not
 First, the vendors will not be interested.
 We need to make them aware about the new approach of BOSE (JIT II) .
 The benefits of JIT from both the perspectives should be explained
 Long term benefits of the approach is to be highlighted
 CBA should be done to make them interested in this approach (Placing one Rep instead
of 3)
 Confidentiality of information
 Bose corporation should increase the business offered to Vendors participating in the JIT
II program
 Help vendors in planning their schedule better
 Make them aware of the benefits of being part of JIT II
2. If Vendors agreed, how to deal with other issues:
 Treating Vendors
 Initially a restricted access to be given
 Confidential information about competitors will not be
 shared and so as other sensitive information.
 Access to necessary documents is ensured
 Over a period of time , the restriction will be minimized to reach the full potential
of JIT II approach
 Competitors
 Competitors should be made sure that confidentiality of critical information will
be maintained
 Number of suppliers will be drastically reduced in the future
3. How long this approach should last

 This should be a perpetual relationship between the Manufacturer and the supplier
 This enhances the relationship with the supplier, results in enhanced
 Flexibility
 Profits
 Innovative capability
 Better
Bose’s history, strategy and sourcing policies affect supplier relations? Is Bose a good
Buyer?
Ans. Suppliers Selection: 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.

Little Research: They 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.

No, they weren’t a good buyer. While Dixon wanted to be Self-reliant, the core ideology
of Dr. Amar Bose was to provide the best Sound System in the world and not to
manufacture the best components.
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. Overall, Bose could
have been a more effective buyer.
Should Bose vertically integrate into plastics? Should plant source their components
locally?

Ans. Yes, they should vertically integrate into plastics.

• Currently they are sourcing plastic from 10 vendors & they are expecting to spend around
$14 millions on plastics.

• As per the analysis Bose is paying around 10% profit before tax. This can be saved if they
themselves produce the plastic components. This will finally result in saving around $1.4
million. Thus bose should vertically integrate into the plastic components.

• When it comes to procuring locally, the main constraint is the quality constraint, there are
high chances that the local vendors might not be able to reach the quality standards of Bose
& if they meet the standards the cost might go high. Moreover there are also chances of late
delivery as the work done might be unorganised.
•
Should Bose participate in JIT II program? Is JIT II a good idea for Bose?

Ans. Yes, Bose should participate in JIT II program

• The issue with Bose was that, vendors provided parts and material according to their capabilities
and because of that Bose did not necessarily receive the parts and materials which were needed.

• Other issue was, relying on the vendors would never allow Bose to develop expertise and will
delay the process of establishing internal capabilities in manufacturing those parts which
vendors were not able to provide.

• Also it is difficult for the vendors to understand the company’s needs every time. This program
will give Bose capabilities to meet its own need.

• Sourcing parts externally than to make it in house would be more costlier , hence with this
program Bose will also save its cost.
Should G&F participate in JIT II program? Is JIT II a good idea for G&F ?

Ans. Yes, G&F should participate in JIT II program

Usually the 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 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.
What are the potential benefits and risks for both companies?

Benefits to Bose:
• Access to purchasing, product-expertise and order fulfilment 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 (warehouse and storage) – higher turnover, lower cost

• Reduced paperwork
 Benefits to G&F:

 Relationship with Bose gets stronger – Social Bonding

 Improved Profitability

 Access to Bose systems, facilities and people

 Better synchronization of production and delivery schedules
 Interaction with Bose gives insights

 Opportunity to work long term with Bose Corp.

 Key/Strategic Account for G&F - $2.1 million of revenues and 10% PBIT
 Possibility of bigger contract with Bose Corp.
 Continuous learning
 Risks to Bose:

 Lack of top management buy-in/commitment

 Confidentiality of information
 Loss of control on purchasing for Bose
 Purchasing might object
 Lack of formal criteria to determine when and with whom to establish JIT II relationships -
can create contractual liabilities
 Possibility of unfair pricing
 Effects of inflation & changes in raw material prices on vendor price
 Contract makes switching difficult in case of poor supplier performance
 Problems like strikes at supplier may hamper supply
 Risks to G&F:

 Inability to supply to upcoming plants in Mexico and Michigan may affect relationship

 Need for redesign of existing processes for new system

 Inability to react to quick changes can hamper relationship

 A lot of investment in one customer – problems at Bose may affect G&F

 Financial hit of $80,000 per year

 Insufficient volumes from Bose may render relationship unviable