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 initiatives.!
!
Another option is a backward vertical integration strategy. The power tool company could purchase their suppliers. Owning all the components of the supply chain would result in the same cost reduction opportunities that a Keiretsu offers but poses much more of a risk. It takes substantial capital and sufficient managerial talent to purchase the supply companies. Management could easily be spread too thin. Increased specialization and rapid technology change can also be a risk if management can not keep up with the changes. Without a large market share, adequate capital, and efficient management I would recommend the power tool company does not adopt a vertical integration strategy.!
!
If capital and management is an issue then a virtual company strategy may best fit the power tool company. Rapid technology changes requires increased specialization. Creating a virtual company eliminates the risk specialization poses in vertical integration and requires very little capital. Virtual companies create a variety relationships with suppliers. Long term, short term, partnerships, and subcontractor relationships are utilized to provide expertise in specialized components of the organizations from administrative activities to manufacturing. With a low capital investment a virtual company's create efficiency by utilizing specialized management expertise. Their flexibility and speed also contribute to their efficiency. Although a virtual can reduce many risk inherent in other supply chain strategies it is less likely to generate the profit margins a successful Keiretsu can. The suppliers do not have the same obligation as they do in a Keiretsu therefore virtual companies have less of influence on their suppliers. This could result in higher purchasing costs, questionable quality and supplier knock offs.!
!
!
B. Discuss metrics that could be used to measure performance of the supply chain.!
!
!
Continual measurement of supply chain performance is essential for a manager to evaluate and make changes. The manager
