Task 3

A. Recommend, with sufficient support, the adoption of one of the following strategies by the power tool company: a Keiretsu network, a virtual company, a vertical integration, or a different supply chain strategy.

An efficient supply chain is fundamental to the success of any organization. The expense of the supply chain is usually an organizations largest cost therefore implementing a strategy that effectively minimizes costs while maintaining product quality is an effective way to increase profits. The best way to minimize costs and maximize product quality is to adopt a lean operations strategy that includes just in time (JIT) initiatives. Central to the JIT technique is continuous problem solving. JIT requires that items and materials are ordered only when needed minimizing inventory. When inventory is minimized wasted costs in layout, quality, and procurement are easily spotted and immediately dealt with. With JIT very few suppliers are chosen creating large commitments to the organization. The suppliers should also use JIT and offer their expertise in design and quality control to the supply chain. Since the owners of the power tool company are willing to own or invest in any component of the supply chain I would recommend they initiate a Keiretsu. A Keiretsu is a company coalition which includes few key suppliers and secondary suppliers. The power tool company would support key members of the Keiretsu through ownership or loans. The suppliers are assured stability and a long term relationships and in return are expected to provide expertise and consistent quality. A Keiretsu reduces supply chain costs because it eliminates the wasted expenses associated with using many vendors. It eliminates the bidding process, duplicate activities, reduces returned products do to quality issues, and minimizes inventory costs by utilizing JIT