Flexible Manufacturing Networksby Wes Merryman and Dan Meyer, CIRAS |
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Flexible manufacturing networks are
inter-company collaborations created to achieve a desired economic outcome that the
individual firms could not achieve separately. Such networks allow firms to develop joint
solutions to shared problems and opportunities. Networking firms combine resources to
Many large firms outsourcesome component fabrication and sub-assemblies to improve their flexibility in meeting customer requirements. Consequently, they look for agile, qualified firms to supply these parts. Many small firms without the capacity to be such qualified suppliers by themselves can be a key part of this supplier network only when they combine with other companies. The goal for small firms wanting to become a part of this expanding opportunity, then, is to specialize internally and learn to combine their core competencies with other firms. BackgroundOne of the first regions to try inter-firm industrial collaboration was northern Italy. This area experienced significant loss of mass-production jobs in the early 1970s. Among hundreds of small, technologically advanced manufacturers in the region interaction arose from economic, cultural, and historical conditions combined with government assistance to encourage collaboration. The Italian model involved independent trade associations funded by membership fees to provide common services such as accounting, financing, and training. Over the past 20 years, lame nursers of small Italian firms have participated in various forms of network activity because networking contributed to their profitability. Germany, Japan, and Denmark have also experienced successful network activities. Denmark suffered high unemployment and a growing trade deficit in the late 1980s. The European Common Market's scheduled beginning in 1992 created additional pressure for economic development. A decision was made by Denmark's government to encourage networking. It provided up to 50 percent of the cost of network development and a national training program for network brokers. With this assistance, manufacturing networks. in Denmark developed much faster than in Italy The concept of flexible networks was introduced in the United States in the mid-1980s. There was great doubt that they could succeed here because of the natural independence of firms and the fear of antitrust regulations. However, by 1991 there were over 50 documented networks in various stages of operation. The following describes some of the opportunities and experiences recently discovered in south-central Iowa while assisting the establishment of a local flexible manufacturing network. Evolution of a NetworkA foundry in south central Iowa discovered a substantial piece of business available if it could provide secondary machining prior to delivering castings. This outsourcing effort makes economic sense, since more jobs would be created locally and the customer would be purchasing a needed component, ready to assemble into their product. The foundry, with a focus on castings, not machining, faced a need for someone to network with them in order to take advantage of this opportunity. A check with another foundry and a large equipment maker in the area uncovered similar needs and opportunities. But the area lacked sufficient machining capacity. Of the two job shop machining firms available within a fifty mile radius, only one was using state-of-the-market equipment. To accommodate this opportunity, plans were made to form a jointly owned firm to act as a networking machine shop for the network owners and other non-competing firms. The news of this networking effort spread, with the result that both member firms modernized and expanded their operations. Since then, two additional firms have been established, each with state-of-the-market equipment, busily filling the need. During the network planning stage other opportunities surfaced. For example, the need to convert paper drawings to CAD (Computer Aided Design) and create CAD drawings for existing tooling presented itself when the firms equipped themselves for compliance with ISO 9000 quality systems. Another opportunity was performing "last piece" measurements with a computerized coordinate measuring machine, assuring that tools were up to specifications and ready for the next production run. Still another involved the manufacture of small fasteners and pins. These opportunities are ideal for an area manufacturing network. Again, these needs were filled before the network manufacturing organization could be established. One of the new machining firms established a computerized coordinate measuring machine service, a new "engineering" firm was established to do the CAD work, and a sizable joint venture metal fabrication, welding, finishing, and assembly operation was established. The local efforts to establish a manufacturing network is continuing, as large original equipment manufacturers increase their outsourcing, thus presenting new networking opportunities. Additionally, there are a number of smaller firms marketing proprietary products. They contract out parts which they are unable, or are improperly equipped, to make in-house. Since the effort to establish a manufacturing network has become known, several manufacturers and entrepreneurs have indicated an interest in having the network bid on their work. The plan now under consideration is for a limited liability hub organization to be established. Each partner and customer will be a stockholder and share in the network's direction and profits. The manufacturing members will continue developing their own businesses and produce network orders for commitments made to network customers. The network hub will generate leads, coordinate and schedule orders and product flow, and provide services and overall management. This effort envisions a growing network of established Iowa manufacturing firms partnering with each other, and with area resources, to produce quality products and services competitively and profitably. Its mission will be to enhance the growth, capability, competence, and profitability of network partners by facilitating their access to, and adoption of, state of-the-art technologies and management systems. Goals include
For assistanceManufacturing networks utilizing the personal computer, modems, and Iowa's technological resources can prosper in small town and rural areas. For details on these proposed network services to member firms and plans for developing additional business for them, please contact one of the following: Steve Weiss, Director Bryan Ziegler, Director |
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CIRAS News, Vol. 32, No. 1, Fall 1997 |
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