Question

Case Study #1 SUPPLY CHAIN MANAGEMENT AT BOSE CORPORATION

Bose Corporation, headquartered in Framingham, Massachusetts, offers an excellent example of integrated supply chain management.   Bose, a producer of audio premium speakers used in automobiles, high-fidelity systems, and consumer and commercial broadcasting systems, was founded in 1964 by Dr. Bose of MIT.   Bose currently maintains plants in Massachusetts and Michigan as well as Canada, Mexico, and Ireland.   Its purchasing organization, while decentralized, has some overlap that requires coordination between sites.   It manages this coordination by using conference calls between managers, electronic communication, and joint problem solving.   The company is moving toward single sourcing many of its 800 to 1,000 parts, which include corrugated paper, particle board and wood, plastic injected molded parts, fasteners, glues, woofers, and fabric.

Some product components, such as woofers, are sourced overseas.   For example, at the Hillsdale, Michigan, plant, foreign sourcing accounts for 20% of purchases, with the remainder of suppliers located immediately within the state of Michigan.   About 35% of the parts purchased at this site are single sourced, with approximately half of the components arriving with no incoming inspection performed. In turn, Bose ships finished products directly to Delco, Honda, and Nissan and has a record of no missed deliveries.   Normal lead time to customers is 60 working days, but Bose can expedite shipments in one week and airfreight them if necessary.

The company has developed a detailed supplier performance system that measures on-time delivery, quality performance, technical improvements, and supplier suggestions. A report is generated twice a month from this system and sent to the supplier providing feedback about supplier performance. If there is a three-week trend of poor performance, Bose will usually establish a specific goal for improvement that the supplier must attain. Examples include 10% delivery improvement every month until 100% conformance is achieved, or 5% quality improvement until a 1% defect level is reached over a four-month period. In one case, a supplier sent a rejected shipment back to Bose without explanation and with no corrective action taken. When no significant improvement occurred, another supplier replaced the delinquent supplier.

Bose has few written contracts with suppliers. After six months of deliveries without rejects, Bose encourages suppliers to apply for a certificate of achievement form, signifying that they are qualified suppliers. One of the primary criteria for gaining certification involves how well the supplier responds to corrective action requests. One of the biggest problems observed is that suppliers often correct problems on individual parts covered by a corrective action form without extending these corrective actions to other part families and applicable parts.

Bose has adopted a unique system of marrying just-in-time (JIT) purchasing with global sourcing. Approximately half of the dollar value of Bose’s total purchases are made overseas, with the majority of the sourcing done in Asia. Because foreign sourcing does not support just-in-time deliveries, Bose “had to find a way to blend low inventory with buying from distant sources,” says the director of purchasing and logistics for Bose.

Visualizing itself as a customer-driven organization, Bose now uses a sophisticated transportation system—what Bose’s manager of logistics calls “the best EDI system in the country.” Working closely with a national less-than-truckload carrier for the bulk of its domestic freight movements, including shipments arriving at a U.S. port from oversees, Bose implemented an electronic data interchange (EDI) system that does much more than simple tracking. The system operates close to real time and allows two-way communication between every one of the freight handler’s 230 terminals and Bose. Information is updated several times daily and is downloaded automatically, enabling Bose to perform shipping analysis and distribution channel modeling to achieve reliable lowest total cost scenarios. The company can also request removal from a terminal of any shipment that it must expedite with an air shipment.

This state-of-the-art system provides a snapshot of what is happening on a daily basis and keeps Bose’s managers on top of everyday occurrences and decisions. Management proactively manages logistics time elements in pursuit of better customer service. The next step is to implement this system with all major suppliers rather than just with transportation suppliers. In the future, Bose plans to automate its entire materials system.

Perhaps one of the most unique features of Bose’s procurement and logistics system is the development of JIT II. The basic premise of JIT II is simple: The person who can do the best job of ordering and managing inventory of a particular item is the supplier himself. Bose negotiated with each supplier to provide a full-time employee at the Bose plant who was responsible for ordering, shipping, and receiving materials from that plant, as well as managing on-site inventories of the items.   This was done through an EDI connection between Bose’s plant and the supplier’s facility.   Collocating suppliers and buyers was so successful that Bose is now implementing it at all plant locations. In fact, many other companies have also begun to implement collocation of suppliers.

Assignment Questions (answer all questions)

The following assignment questions relate to ideas and concepts presented throughout this text.

1.       Discuss how the strategy development process (Chapter 6) might work at a company like Bose.

2.       What should be the relationship between Bose’s supply management strategy and the development of its performance measurement system (Chapter 19)?

3.       Can a just-in-time purchase system operate without total quality from suppliers (Chapter 8)?

4.       Bose is moving toward single sourcing (Chapter 7) many of its purchased part requirements. Discuss why the company might want to do this. Are there any risks to that approach?

5.       Discuss some of the difficulties a company like Bose might experience when trying to implement just-in-time purchasing with international suppliers (Chapter 7).

6.       Why does Bose have to source so much of its purchase requirements from offshore suppliers (Chapter 7)?

7.       Why has Bose developed its supplier performance measurement system (Chapter 19)

Answer 1

1. a client driven association, Bose currently utilizes an advanced transportation system.The organization has built up a bitty gritty provider execution framework that measures on-time conveyance, quality execution, specialized enhancements, and provider proposals.

2. Bose's supply the executives technique underscores the improvement of world-class providers who can carry with them innovation, execution, conveyance, quality, and administration capacities. In that capacity, Bose's execution estimation framework would measure provider execution in every one of these zones. As referenced for the situation, Bose measures on-time conveyance, quality execution, specialized upgrades, and provider recommendations. They likewise measure coordination execution for their shipments.The organization has built up a point by point provider execution framework that measures on-time conveyance, quality execution, specialized enhancements, and provider proposals.

3. Quality is particularly basic in an in the nick of time acquiring framework, since low quality can result in over the top expensive deferrals. For example, if a shipment with rejects touches base at Bose's accepting docks, it must be sent back to the provider. Since Bose conveys next to no stock, such events can close down the line at times (for example the line comes up short on parts, since the provider's shipment was normal that day!) This implies Bose's conveyances to its clients presently turned out to be postponed, bringing about issues and possibly loss of piece of the overall industry, and so forth. To avoid this, Bose must monitor its provider's quality.

4.Companies are moving to single sourcing to decrease unpredictability in their provider organize. Single sourcing can prompt key banding together, which is common continuous relationship including a dedication over an all-inclusive time span, and a sharing of data and the hazard and rewards of the relationship has numerous points of interest, including

Influence expanded volume

Hoard provider innovation

Get most reduced cost

Access structure/designing

Diminish quality/process difference

Access capacities

Increment provider responsibility

Lower regulatory expenses

there are numerous advantages to different sources too, including: Minimize limit limitations

Access to quickly changing innovation

Diminish source hazard

– Supply disturbance – Quality variety – Weather, strikes, and so on.

5. There are numerous issues related with attempting to actualize JIT buying with outside providers. This incorporates the accompanying:

Long lead-times

Expanded stock

Issues with correspondence of particulars and changes

Distinctive time zones

Diverse dialects

Social contrasts which may emerge

Potential postponements in conveyances at traditions and fringes

Protected innovation issues present in various nations Potential quality issues, and others.

6. Given the quantity of issues that may happen with JIT obtaining from seaward providers, for what reason is Bose doing as such? The appropriate response lies in the way that worldwide providers frequently give items improved innovation, and regularly at a lower cost. Most hardware providers are situated in Asia Pacific areas, so it is normal that Bose should choose the most skilled providers with whom to work together. To contend in a worldwide economy, one must source from worldwide providers.

7.Bose's provider execution estimation framework is a noteworthy part of their provider improvement technique. Providers are estimated on their on-time conveyance, quality conformance, specialized enhancements, administration (responsiveness to extraordinary demands), and process duration. By intently checking these key measures, Bose can drive consistent improvement inside their supply base. At the point when provider execution begins to slack, the provider is promptly told and alarmed, enabling them to take restorative measures to tackle the issue. Provider's top administration pay attention to these measures very. In one case, a provider had a late conveyance because of a bottleneck on their shop floor. Staff from the provider organization called Bose acquiring at Hills dale and really begged them not to incorporate the occurrence in the week by week execution report, as they would not like to need to confront the VP of the organization who gave exceptionally close consideration to it!