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Bose Corporation: The JIT II Program

Submitted to: Prof. G. Shainesh Customer Relationship Management Term VI

Case Analysis: Grp-09 Manish Kumar Urele(0911033) Shubhajeet Mazumdar(0911051) Suhas S Shetiya (0911055) Vijay Kumar (0911207) Neeraj Kumar Agrawal(0911257)

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Contents

1. 2. 3. 4

Bose & Supplier relations Buying & Selling context Participation in JIT II by Bose and G&F?

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Bose History

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Bose strategy & Sourcing Policies


 Corporate Procurement Buying Center
  Design engineer, Materials Planner, Buyer Vendor salesperson from selling organization visits Bose to get orders

Exploring new markets Highest selling manufacturer in Japan, France, Holland & Australia Believed in good sound is universal

Broader channels of distribution High-end specialty stores Electronic retailers Direct marketing

Produced systems and components Integrated systems trend Home theater systems Plug and play equipment

 Pre-1988
 Centralized purchasing by Corporate Procurement; delivered to plants  No purchasing by plants

 1990
  Decentralized Purchasing by plants against contracts negotiated centrally

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Bose-Supplier Relations
Increased dependence postpones internal development

Long term supply of similar part increases specialization

Backward integration Careful selection of

Vendors supply components based on their capability

Components not necessarily what Bose wants from the vendor

vendors Vendors not considered partners

Lack of understanding about buyers and their needs

Costlier to source externally than to make inhouse

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Bose as a buyer

 Expected more commitment from suppliers  Lesser variation from component specified to reduce cost and manufacturing errors  Frequently monitored technology used by vendors  Finalized vendor only after close monitoring of pilot project

BOSE manufactures high quality audio systems which are technically superior and looking for vendors on the same line would help them simplify the process

Traditional Supply Chain

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JIT & JIT II


JIT II

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JIT II Program
Process

JIT II, a customer-supplier partnership concept implemented through system integration JIT II links engineering, planning, and purchasing departments System integration is achieved as sequential processes No longer separated by functional or organizational walls. A supplier's sales representative - in-plant representative Works full-time in a customer firm Is paid by the supplier The customer serves as the host organization Functions as an employee of the customer's purchasing department Attending planning meetings Determining material needs. The in-plant is then authorized to purchase materials from the supplier for the customer The customer's regular purchasing staff is free to concentrate on non-JIT II suppliers In plant representative
Vendor Planning Purchasing Engineering

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Purchasing methods
Traditional
Smaller lot sizes

JIT

Relatively large lot sizes More frequent deliveries Less deliveries at higher quantities Long-term contracts Lowest price is main objective Minimal paper work Time consuming, formal paperwork Less formal communication Formal communication Shorter lead times Longer lead times JIT II Supplier comes into the organization

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Benefits of JIT II
Bose G&F
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 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

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 (warehouse and storage) Reduced paperwork higher turnover, lower cost

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Risks of JIT II
Bose G&F
Financial hit of $80,000 per year Insufficient volumes from Bose may render relationship unviable A lot of investment in one customer problems at Bose may affect G&F Need for redesign of existing processes for new system Inability to react to quick changes can hamper relationship Inability to supply to upcoming plants in Mexico and Michigan may affect relationship

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

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Recommendations

Bose needs to incentivize G&F Prestige of being a preferred supplier Bigger share of business for G&F Reduction in costs can boost profitability for G&F and Bose Collaboration in other areas such as product design as incentive for G&F to participate Open access for G&F representative to systems, facilities and personnel Badges for G&F representative - treated as Bose employees

Explore possibility of structural bonding through internet and EDI technology to lower costs Define formal criteria to select JIT II suppliers Bose needs to monitor incoming quality Collaboration in quality improvement

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THANK YOU