A New Way Of Doing Business In Rural America

Mass production and large corporations have fueled our economy. It's changing. Downsizing. Shrinking. Wages are stagnant. Automation displaces more and more people. Mass production jobs move to Third World countries where labor is cheap.

Why? Computers. Software engineering. Control systems. Integrated circuits. Telecommunications. Together they have drastically reduced the cost of storing, processing, communicating and disseminating information. Cheap! Everything is affected - production, distribution, coordination.

Technology enables customized products to be produced for niche markets. Large companies can no longer get by with producing standardized products in large quantities. Large scale production facilities no longer have a competitive advantage. Small businesses thrive in this economic climate where new products are developed, marketed and then quickly replaced by more advanced products.

Flexible Manufacturing Networks: A new business form has emerged to compete in this new economy: Flexible Manufacturing Networks (FMNs). What is a FMN? An FMN is a coordinating group that brings together small firms to cooperate in the manufacture of items they individually can't produce by themselves.

Advances in information technology make these arrangements possible. Machines can be linked to machines, firms to firms, firms to suppliers and distributer, design processes with production processes and consumers to producers. Production need not be at one location to be efficient. Information is available accessible to each of the participating businesses.

FMNs foster innovation, flexibility, collaboration and engagement among participants. The organizing group (FMN) brings interested businesses together around a specific product or project. The businesses work out the various roles and functions and disband when the project or product no longer fits the market.

Six Steps of a FMN. 1. An emerging market niche and/or product is identified. 2. A set of firms forms a FMN quickly to design and produce the product. 3. FMN members communicate clearly and frequently during the process. 4. The FMN determines when the product is no longer profitable. 5. The FMN disbands when this is the case. 6. The firms in the disbanded FMN use what they have learned about partners to form new, even more successful FMNs.

FMNs encourage thinking like "Who do we need to involve to make this project successful? What resources are available to solve the problem? What additional resources need to be created so we can do this project?" The field of existing or potential businesses expands or shrinks to fit the size of the problem.

Trust and Cooperation. What makes FMNs possible are attitudes of cooperation and trust among several small business owners involved in the network. They are willing temporarily to become a part of a new business organized for a specific purpose. Each recognizes and trusts the expertise other partners bring to the joint project.

FMN partner members still feel like owners because they have so many choices in their field of possibilities. They don't feel like they've lost control. They are quickly impacted by the others in the network and are free to question if the existing structure is working. They learn who to involve and not involve in future ventures. More important, after a successful project they have learned to think and imagine in terms far beyond their particular business.

FMN participants reflect on and question past agreements and arrangements. They see what works and what doesn't. They take this into account when they form the next project. Reputation means a lot. FMNs build trust in small steps. The resource and capacities garnered during one venture are the material for new endeavors.

FMNs replace expensive corporate overhead with light, efficient networks. Relationships between businesses are time limited and product specific. Traditional companies are saddled with excess capacity and discourage collaboration outside the organization. Turf becomes too important in and outside the organization.

FMNs and Rural Communities. So how does this relate to rural America? Small businesses have an advantage. Rural America is full of small businesses. Small communities with their existing networks, communication and collaboration styles have an advantage.

The attitude of rural communities is to pull together to solve a problem. Community leaders are already used to cooperating and seeing the community as a whole. They know what is out there and what people can do. People know how to cut through red tape and bureaucracies. Business is done on a personal basis of trust and openness. The rural work ethic is another positive element.

What is new is the application of technology and FMN organizational structure to capture the resources of a community to meet needs in the marketplace. The FMN model fits rural culture. By grasping the possibilities of FMNs, rural communities are ideally suited to be major players in a rapidly changing, technology-driven economy. Using the FMN model, the Emilia-Romagna region of northern Italy moved from 17th to 2nd in per capita income from 1970 to 1985.

This column was based on an article "Flexible Manufacturing Networks: Strategies for Economic Renewal" written by June Holley and Roger Wilkens.