Moving from its established core management with expertise in quality control and shifting to an outside vendor comes with risks for Bose, but each risk is countered by a benefit. First, Bose can keep control of its procurement processes for premium plastic casing through a single vendor while managing business logistics. Implementation of the JIT II program would remove duplication of labor costs by reducing Bose’s internal management team as JIT II allows a representative from G&F to identify problems on the production floor. Representatives work full-time at Bose, but are paid for by the vendor, so Bose bears no additional costs.Representatives diminish demand speculation for Bose as they determine order quantities reducing Bose’s excessive inventory. These representatives are from G&F, a reliable company with annual revenues of $12 million which already has an established relationship with Bose. With a future relationship with G&F, Bose can reduce its suppliers and therefore reduce risks and disruptions in its supply chain. Bose has expertise in sound, but not in the manufacturing of premium plastics that can further enhance its product line. With G&F, Bose can maintain its quality and focus on innovation, while G&F allows it to grow more profitable.
Although the JIT II program is essential for Bose, there are risks regarding liabilities and loss of Bose management control. If this relationship fails, Bose cannot easily turn to nine vendors previously available without reestablishing its internal management. Bose does not have a written agreement prepared for G&F and the sharing of proprietary information on quantities and prices of components purchased could disadvantage Bose in future negotiations. Bose cannot ensure that G&F supplies the desired plastic at fair prices since there are no other vendors for comparisons. Without multiple sources for plastic, Bose can no longer balance competitive bids to get the best value. However, Bose will overcome this by reducing internal costs.
Risks are also evident for G&F. If problems arise for G&F, like an inability to supply in Michigan and Mexico, the relationship could terminate. G&F is also taking on an extra financial burden of paying a representative to work at Bose facilities for $80,000 annually. Even the director of Purchasing and Logistics for Bose, Lance Dixon, is hesitant if any vendor would be willing to cover this cost. However, despite potential risks for G&F and Bose, the benefits of this JIT II program outweigh the risks. G&F could cement its future relationship with a corporation that is already its largest account financing over $2.1 million in annual revenue and generating a 10% before-tax profit margin on plastic sold. Therefore, increased profitability is possible, and G&F can adapt to customer needs by overseeing Bose facilities.
The winning criteria for Bose is quality and flexibility. For example, its 901Ⓡ speaker and 501® speaker with Direct/Reflecting technology consistently produce true hi-fi sound and has a variety of products with new innovations and technology. Cost and service are qualifying criteria since Bose does not offer the least-expensive speaker in the market and not all customers will wait for a particular speaker to become available. In the eyes of Bose, G&F’s winning criteria would be quality and flexibility. G&F has proven itself as a reputable partner producing premium plastic and G&F can alter its plastic to fit new innovations. G&F’s qualifying criteria is cost and service as buyers do not choose G&F because it is less expensive, and most companies provide good fill rates for plastic.