Reference no: EM1327194

Dixon Audio Systems had developed a reputation as a leading producer of speakers, audio systems and car stereos. Dixon accomplished this through creating strict organizational quality standards and demanding the same these same standards from their suppliers. Meeting quality standards was critical, particularly of plastic parts. These parts were sourced from a number of vendors and required considerable experience and skill to make. However, as Dixon's quality standards increased, the number of defective components returns to vendors also increased. This was increasingly holding up production and cost the company in excess inventory and unmet orders. Dixon's director of purchasing proposed a new approach to dealing with the vendor quality problem. She proposed that they develop a new arraignment with their vendor of plastic components, D&S Plastics. Under the relationship D&S Plastics would become Dixon's JIT supplier. The arraignment would require D&S to station a full time representative at Dixon's headquarters. The representative would be paid by D&S but would work as a buyer for Dixon, placing orders to D&S. The representative would also monitor material requirements on plastic components to D&S supplied to Dixon and become involved in manufacturing planning at Dixon. The plan would provide the D&S representative full access to Dixons facilities and computer system. D&S Plastics would be a sole supplier to Dixon and was guaranteed business, provided it maintained the quality and delivery requirements. Dixon was assured a reliable supply of plastic components parts. The proposed arrangement would completely change the way in which the two companies worked together and had a number of risks. Dixon's managers worried that the company would lose control of its procurement process Although Dixon was one of D&S biggest accounts, D&S worried that it would lose control of its operations. Many factors had to be considered before embarking on this type of arraignment.

a. Identify the pros and cons of a JIT relationship from D&D's point of view?

b. Identify the pros and cons of a JIT relationship from Dixon Plastics point of view?

c. What factors should Dixon and D&S consider before making a decision on the relationship?