Executive keeping up with Bose Corporations needs
Executive Summary “Better Sound through Research” is the motto of Bose Corporation. Bose has been providing high quality sound systems since 1968. Moreover, their policy for it was simple, better sound, better quality, better business. For Bose to achieve this goal they need to either weigh their options to continue their collaboration 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 the questions are that does Bose need to continue with JIT II approach, which has been in effect in the company since past 3 years? Or Bose should become vertically integrated to ensure that production lines are well supplied, and to ensure that all components are in-house and best that can be manufactured? Our group recommends that Bose Corporation should stay with 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.The implementation for the JIT II effort would take overall 3 years for all branches. Summary of Recommendation Implementation of JIT II: Growth in Corporate Procurement budget was not keeping up with Bose Corporations needs of increasing staffing levels. In response to this, JIT II was implemented in January 1991.
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This in effect augmented the Corporate Procurement staff with vendor paid representative who acted as buyers within Bose for their product lines. After 3 years of JIT II implementation, several benefits of the program have been recognized. Discontinuation of JIT II:On the other hand, some people in the Bose management and staff are not convinced that JIT II should be continued. They contend that Bose should become more vertically integrated and JIT II may be harming this effort.
Our group though recommends that Bose Corporation should continue with JIT II approach, as even the people who do not support the system say that it has few “Grey Areas” in this approach. Analysis After going through the Bose Corporation case, our group pointed out the following situation in Bose Corporation: • Introduction of JIT II in Bose:In 1990, revenues of Bose Corporation were $720 million and Corporate Procurement was purchasing $300 million worth of materials. This budget reflected the corporate expansion of Bose.
However, most of the available resources were going into efforts to make the situation better in Japan. Corporate Procurement was not keeping up with their needed increases in staffing levels. In response to this JIT II was introduced in Bose in 1991. This in turn augmented the corporate procurement staff with vendor paid representatives who acted as buyers within the Bose. • Present JIT II situation in Bose:After 3 years of JIT II implementation, many benefits of the program have been recognized. On the other hand, some of the Bose’s management has not been satisfied with it.
They are of the viewpoint that JIT II should be discontinued and vertically integrated system should be developed. They believed that the benefits of JIT II are short-term benefits and it is harming their efforts to implement vertically integrated system. • Future of JIT II in Bose: Bose Corporation needs to decide whether it wants to continue with JIT II or go in for vertically integrated system, where in all the products are needed to be made in-house.If Bose continues with JIT II it needs to examine potential modifications to address valid concerns of the program’s detractors.
We too recommend that Bose should continue with the JIT II and make efforts to get buy-in and formalize JIT II as its corporate policy. JIT II : Negative Perceptions How long a JIT II relationship would last in company growing as fast as Bose? This was the question when Bose started to implement JIT II philosophy in the company. From the beginning, Bose wanted material only when it has need and not sitting in a warehouse.Responding to changing production schedules constantly without creating cost of inventory, or even shutting down the line with late shipments, is integrated Printing’s challenge. The direct line of communication in a JIT II partnership lets anticipation of Bose’s needs before those needs become problems and those problems become a crisis. However, some Bose’s managers believe that even JIT II has advantage; there still has some disadvantage from JIT II. o A long-term relationship with a JIT II supplier may develop dependence upon that supplier.
This may lead to customers’s loss of control over the procurement process. o JIT II program had not permanently improved vendor performance, but instead the increased attention paid to vendor had caused only a temporary change. o Supplier and Bose employees would never understand the company needs or organization. Therefore, if all components of cost could be tracked accurately, it would cost more to source a part externally than to make it in- house. o JIT II program would affect to decentralizing procurement, and it may lead to a centralization of sources for supplies.This make less compatible to Bose and supplies that prefer letting plants run their business.
o Supplier can gain full access of customer’s facilities and information. This may lead to the parts being more expensive than producing them in house. o JIT II saves time and money as well, but at the same time poses a substantial risk to the contracting company. JIT II: Positive Perceptions o Bose had a good supplier base and so vertical integration was not necessary.
o It was believed that vertical integration would drain money and attention away from the company’s core skills in acoustics and electronics. Suppliers provide engineering expertise and help in solving production problems related to the product. o JIT II advocated placing a representative, from the supplier, in plant. The representative would be treated as Bose employee but paid by the supplier and place customer orders to their company. This would reduce the time spent courting business or suppliers and renegotiating business arrangements. o It was believed that JIT II would, in contrast offer more control over the suppliers.
Now the supplier people would work directly under BOSE managers.Now the Bose managers would have access to their computer systems on their own floor space. o An in-plant employee from the supplier would be a “free” buyer for the customer and may help overcome deficient procurement budgets.
o Suppliers would provide input and expertise in the decision making which will improve flexibility and reduce reaction time to orders. With greater knowledge supplier can assist during design stage and help reduce the time of product introduction while allowing the customer to focus on their core competencies. o Supplier in-plant would be able to keep customer informed of the new product.
JIT will reduce in-process inventory and associated carrying costs, lead times and will dramatically improve organization’s return on investment, quality, and efficiency. o JIT emphasized on increased relationship with the suppliers to generate benefits and secure future. Recommendation o JIT II, even after several years of use, is a conflict in BOSE. The company looks forward to “better sound through research”.
In addition, the company is constantly seeking new markets and planning on expansion. Most of the company’s activities are focused on developing brand name in JAPAN. Vertical integration would increase control over plastic operations. It would ensure sufficient supply to the production lines and manufacture of best components. A whole lot of money would be involved in integrating vertically and buy suppliers, producing things in-house. o It would require recruitment of large skilled labor force to live up to the expectations of BOSE quality standards. In addition, most in-house operations would not be able to justify fill-in of spare machine capacity.
We feel that the day has not yet arrived for vertical integration. o We recommend use of JIT II in BOSE Corp.To increase the exposure of JIT II and its functioning, training sessions should be developed for management and employees. These sessions should focus towards making employees and management understand the uses and advantages of JIT and its implementation. o A policy should be developed to evaluate which vendors and parts should be entered into the JIT II program. In addition, a review method should be developed for evaluating those parts and vendors, which are already under JIT II. Timeline for JIT II Implementation o To succeed in JIT II, Bose must train all employees and implement the philosophy to suppliers together.
We have provided the timeline that identifies task and its expected duration. (See Exhibit-1) Conclusion After reviewing all the prospective of vertically integrating the system and JIT II, we have concluded that Bose Corporation should continue with the JIT II system and expand it to the other departments of the company. The implementation and extension of JIT II to the other departments will take 3 years. By bringing the suppliers, together Bose gets a leading edge in the competitive world of ever changing technology and thus it fulfills its motto of ““Better Sound Through Research”. Exhibit Exhibit-1: No |Tasks |Operational |Strategic | |1 |Corporate and training with managers |6 months |- | |2 |Analysis where JIT II needs to be implemented |- |1 year | |3 |Training all employees |6-8 months |- | |4 |Add supplier to JIT II program |- |1-2 years |