Keiretsu, supplier engagment article in HBR, Sept '13 issue ..

It was an interesting article by Prof Katsuki Aoki and Tomas Taro Leneffors in the Sept '13 issue of HBR. 

 

A keiretsu is a type of business group that originated in Japan. It refers to a network of companies with interlocking business relationships and shareholdings. The concept of a keiretsu is meant to foster long-term relationships and stability among its members, and is characterized by inter-company cross-shareholdings, joint business ventures, and the sharing of resources and information.

There are two main types of keiretsu: horizontal and vertical. Horizontal keiretsu refers to a network of companies in the same industry that work together, while vertical keiretsu refers to a network of companies that work together across different stages of production, from raw materials to finished goods.

The concept of a keiretsu has been influential in Japanese business culture and has been studied as a model for business cooperation and inter-firm relationships. However, the dominance of keiretsu in Japanese corporate structure has declined in recent years with the rise of globalization and international competition.

Benefits of Keiretsu are

1. Keiretsu helps in bringing innovation,  

2. reduce product development time and costs of products by allowing the OEMs who work with the suppliers, training suppliers' engineers, bringing suppliers' engineers into new product development teams at the OEM. 

3. Keiretsu helps the suppliers by making their organisation a learning organisation, helping OEMs to be more competitive.

Important points regarding Keiretsu are ..

1. develop trust and good relationship with suppliers 

2. do not be specific in what suppliers need to achieve as stated in the terms of engagement. Let there be vagueness which helps the supplier to improvise and come up with startling changes and improvements. 

3. Instead of buying individual parts, suppliers are encouraged to supply integrated systems of components. 

4. suppliers are encouraged to bring in changes like reducing weight, improving product performance etc voluntarily 

5. encourage obeya meetings, (large hall) where all stakeholders are consulted (similar to concurrent engineering) and consensus arrived at before final design is approved 

6. suppliers willing to experiment and learn from mistakes and experience are the most promising ones who need to be nourished,.

ge..