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VINOD GUPTA SCHOOL OF MANAGEMENT B2B Assignment The BOSE Corporation: The JIT II Program SHUBHAM GUPTA 10BM60085 4/29/2012The document discusses the case on Bose corporation’s JIT II program. The implications and therecommendations 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 qualitysound systems since 1968. Moreover, their policy for it was simple, better sound, better quality, betterbusiness. For Bose to achieve this goal they need to either weigh their options to continue theircollaboration 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 thequestions are that does Bose need to continue with JIT II approach, which has been in effect in thecompany? Or Bose should become vertically integrated to ensure that production lines are wellsupplied, and to ensure that all components are in-house and best that can be manufactured? Ourgroup recommends that Bose Corporation should stay with JIT II approach. This would give them acompetitive edge within the continual changing technology in the industry. It would help built opencollaborative setting between Bose and some selected suppliers. The implementation for the JIT II effortwould take overall 3 years for all branches.RecommendationImplementation of JIT II:Growth in Corporate Procurement budget was not keeping up with Bose Corporations needs ofincreasing staffing levels. In response to this, JIT II was implemented in January 1991. This in effectaugmented the Corporate Procurement staff with vendor paid representative who acted as buyerswithin 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. 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. 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.
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 Printings challenge. The direct line of communication in a JIT II partnership lets us anticipate Boses 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 programBefore it started its JIT II program, Bose would forecast customer demand, set planning andspecifications, 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 theorder with the plant, which would manufacture and ship.Under the JIT II program, however, the process is simplified. After Bose forecasts customerdemand, the in plant checks every plants inventory, combining and reducing unit costs for anyother 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 needto make it pay off for both parties, says Sherwin Greenblatt, Bose president. "Everybody winsand performs better," he says. Stronger supplier alliances allow for more control over budgetsand headcount. The benefits for the supplier include increased volume and the opportunity toexpand 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. UnitedPrinting has stayed on the leading edge of commercial printing, and has added new services andtechnologies. The daily challenges of being a JIT II partner keep us sharp and alert to the marketplace, allas a result of Boses original leap of faith.