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 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...
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