What are keiretsu

1. What are Keiretsu ?(P.NARI) Keiretsu is an organizational structure that is comprised of several aspects: Financial - cross shareholdings Managerial - exchanging of management expertise, advice, training Trade - preferential treatment given to partner firms Exclusion - keeps foreign competition out of domestic economy Political - tightly interwoven relationships with government Social - “old boys network” of presidents and senior executives Six main keiretsu business groups in Japan today.

2. Types of keiretsu The two types of  keiretsu ,  horizontal  and  vertical , Horizontal keiretsu The primary aspect of a horizontal  keiretsu  (also known as financial  keiretsu ) is that it is set up around a Japanese bank. The bank assists these companies with a range of financial services. The leading horizontal Japanese  keiretsu , also referred to as the “Big Six”, include: Fuyo, Sanwa, Sumitomo, Mitsubishi, Mitsui, and Dai-Ichi Kangyo bank groups.

3. Vertical keiretsu Vertical  keiretsu  (also known as industrial  keiretsu ) are used to link suppliers, manufacturers, and distributors of one industry. One or more sub companies are created to benefit the parent company (for example, Toyota or Honda). Banks have less influence on distribution  keiretsu . This vertical model is further divided into levels called tiers.

4. OVERPRODUCTION AND EXCESS INVENTORY. Another area of waste that is a special concern in the Toyota system is excess inventory. The ideal is to produce without accumulating inventory, a condition known as non-stock or just-in-time production. In such a process the company produces goods at the exact quantity and schedule that they are required by its customers. To produce more than customers actually need so than they need its considered overproduction, leading to a build-up of stock or inventory.

5. Overproduction can also occur internally when different steps of a manufacturing process and excess materials or semi-finished products accumulate. Systems like the Japanese  kanban  established a set of often simple visual cues in the factory (e.g., when no work-in-progress is waiting in a painted square on the floor, it is a signal to advance the next item into the process) to help coordinate the flow of materials and work.

6. Carrying inventory is wasteful because the company must store it or perform other additional handling that increases the total cost of its operations. By minimizing the need for such storage and handling, the company can reduce both the direct costs of holding/handling inventory as well as the indirect costs of tying up capital in the form of excess inventory.