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PGP30004Abhinav MaingiPGP30018Divya JaiswalPGP30019Fern SharmaPgp30020Gautam BansalPGP30036Neha NupurPGP30037Nishtha KhandelwalPGP30039Prateek SekhaniPGP30044Ekta RoongtaThe New, Improved Keiretsu

A Japanese term that refers to small, integrated supplier groupJapanese companies have long practiced keiretsu, the linking of companies into industrial groupsUniquely Japanese form of corporate organizationSystem of mutual alliances and cross-ownershipCompany stock is held by allied firmsLowers need for short-term profitsTwo types: horizontal and vertical

Keiretsu

Vertical KeiretsuHorizontal Keiretsu(Tate-pronounced as ta-tay)-is a pyramid structure, made up of one very large company and thousands of small companies subservient to it. Links manufacturers, suppliers, distributors, & lendersPartnerships extend across entire supply chainPrimarily cars and electronics industriesEx. Toyota, Nissan, Honda-Matsushita, Hitachi, Toshiba, Sony(Yoko)-is a group of very large companies with common ties to a powerful bank, united by shareholdings, trading relations and so on. Links sister firms of the same parent company.Cross holding pattern adoptedEx. Mitsubishi

*Students might be asked to consider what it would take to implement such a system in the U.S.

The Toyota groupThe Nissan groupThe Honda GroupThe Matsushita groupThe Hitachi groupThe Toshiba GroupThe Sony Group

BenefitsRisksSuppliers receive larger portions of the companys business and are hence more committed. JIT companies are more exposed to work stoppages or product shortage if the supplier fail to deliver on time. JIT companies have stronger control over their suppliers and supply chain, thus JIT production is possible. For example, the earthquake in western Japan in 1995 and the fire at one of Toyotas suppliers caused production disruptions to Toyota.

TYPICAL JAPANESE VERTICAL KEIRETSU

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A visual system to control the logistic chain from a production point of view. Kanban system originally came from the supermarket, where the supply is driven by the demand. It is a Pull system.Just-In-Time (JIT): A production strategy to improve a businesss return on investment by reducing in-process inventory and associated carrying costs. Simply as a strategy to eliminate source of manufacturing waste by producing the right part in the right place at the right time.

Instead of buying exclusively from companies they have long-term relationships, Toyota also sources from the global market.When setting target prices for long-term suppliers, Toyota looks at the prices offered by multiple global companies too.Instead of buying individual parts, Toyota tends to buy integrated components.Toyota encourage their suppliers to be more involved in product development at the early stage.

Despite the automakers tough demands, its relationships are still based on trust, cooperation, and educational support for suppliers. The level of mutual commitment and assistance is perhaps even greater than in the 1980s.Contracts governing the relationships are ambiguous, consisting of general statements and nonbinding targets. Toyota counts on its suppliers to go the extra mileto learn about and meet customers demands, help develop innovative processes, find and correct errors, and do whatever it takes to meet deadlines.

Toyota aims to build up suppliers stores of tacit knowledge through long-term sharing of work experiences, including attempts to solve problems together through trial and error.Toyota always examines the physical workplaces and productsthus the expression genchi genbutsu, which speaks to the importance of being present when problems arise.It expects systems suppliers to help improve product design by, for example, figuring out how to incorporate lighter materials without sacrificing strength.Toyota provides physical spaces that facilitate cooperation with and among suppliers

Vendors may be invited to a meeting known as anobeyaliterally, a big roomwhere they work with Toyota representatives from several departments, including design, engineering, production, quality, and purchasingObeya meetings help Toyota avoid a pitfall common in other companiesIn Toyotas system everyone is in the big room making decisions togetherSuppliers that demonstrate a willingness to understand the root causes of mistakes are the most likely to improve

Toyotas supplier relationships are closer to old KeiretsuDeveloped Keiretsu-like relationships overseasCreated Toyota Supplier Support Center to help U.S. vendors learn the Toyota Production SystemEstablished the Toyota Europe Association of Manufacturers, a group of about 70 companies that join together in study groupsOverseas, the company tends to be more explicit in its communications than it is in Japan, providing clearer rules and more-detailed specs

Toyotas Keiretsu-like practices is a program in which its engineers and those of its suppliers take up process-improvement projects in the suppliers factories

*Students might be asked to consider what it would take to implement such a system in the U.S.*