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Breaking manufacturing monoliths

Speakers at Sun event foresee dawn of virtual companies, mass customization

By Michael O'Connell

July  1995
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Last month's "Insights" conference in San Francisco reinforced Sun Microsystems Inc.'s vision of the virtual company as a key segment of its future customers.

[Insights logo]The Sun-sponsored event, designed to "influence the influencers" such as industry analysts, consultants, and members of the press, focused on the manufacturing segment and featured an array of speakers, ranging from Sun's worldwide VP of logistics to a high-ranking member of the US Department of Commerce.

Many spoke of the virtual corporations of the not-too-distant future -- companies that combine their own vision and unique knowledge and technology, or core competencies, with those of a number of business partners to deliver marketable goods and services to customers.

[Insights icon]SUBHEAD Flexible Operations Gary Bachula, US Department of Commerce Deputy Under Secretary of Technology, described virtual corporations as those with flat organizational structures and without rigid hierarchies. They will be characterized by flexible operations that are not constrained by long lead times, and will be responsive to customer needs.

Such companies boast obvious competitive advantages over today's traditional corporations, and can do what traditional companies cannot, such as custom-fit footwear, Bachula said. By employing the proper technologies and partnering with the right supporting vendors, companies will be able to create new markets and improve old ones. Other custom-fit items in the apparel arena include blue jeans, suits (dress and swim), and dresses.

For example, Bachula expects such companies will be able transform the custom footwear market from a niche delivering only 100,000 custom-fitting shoes into a major sector with 10 million custom products sold per year. The virtual company structure, he says, will reduce turnaround time as well as price.

Virtual corporations benefit from maximized leveraged partnerships, lower overhead and capital expenditures, and global time-based competition, said Kathleen Holmgren, Sun's worldwide VP of logistics. Such businesses can add capacity incrementally, thereby growing as their business grows instead of paying up front for capacity that may be untapped for months or years to come.


By concentrating on their strengths and asking partners to concentrate on their strengths, virtual companies are able to leverage their core competencies.

[Insights icon]SUBHEAD Technology spurs growth Bachula notes that technology is not only the key to the success of future virtual companies, but has played a crucial role in growth historically.

"Over 50 percent of America's growth from 1948 to 1985 is due to technology," he said. Bachula added that manufacturing plants that adopt new technology will create 15 percent more jobs, 14 percent more wages, and 22 percent less failures than those without investment in technology.

Even today, companies are reaping rewards from employing current technology.

Firms such as Amgen Inc, a pharmaceutical company, are embracing the latest craze -- the World Wide Web -- as a means to distribute previously paper-based information to key staff across the globe, and are in the process of converting all of the company library material to the HTML format so that they can be viewed on browsers such as Mosaic or Netscape.
-- Michael O'Connell

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