Business Description/Value Proposition

The Flexcell Group (TFG) is a flexible manufacturing network that has been developing agile manufacturing practices and operating as a virtual corporation since 1990. TFG consists of 8 autonomous core companies (expanding to nearly 30), each with expertise in a different area. As a group, these companies are able to offer a wide variety of services which none of the companies could offer individually, which allows them to bundle services based on their customers’ needs. Depending on the customer requirements, TFG can offer more or less services with varying configurations within TFG.

While members of the TFG network, the member companies continue to operate as independent companies with their own customer base, that might or might not use the services of TFG. Any company within TFG can make a sale, and TFG companies generally work in the molding, tooling, and contract machining industries, both on the manufacturing side as well as on the service side. TFG’s web-site lists over 25 core competencies or services that it can offer customers, through the coordination of activities with member companies. Some of these services include CAD/CAM design, mechanical engineering consulting, and patterns and molding manufacturing. This gives TFG the ability to work on a product from idea to design. At any one time, approximately 3 companies will be working on a TFG project.

History According to an article by William Landay in Reengineering Magazine (May, 1996), the idea for TFG came from Terry Brummett, who was working as a management consultant to a supplier of patterns for metal foundry casting. When he came to Columbus, Indiana, he found an unusual supply base consisting of a cluster of network ships and technical support firms which fed off the city’s two largest manufacturers, Cummins Engine Company and Arvin Industries. At the time, Cummins and Arvin were focusing on their own core competencies and asking their suppliers to do things they had never done before, including R&D. One 60 year-old firm with $3 million in sales suddenly was faced with the need for a $5 million investment in new equipment to meet this demand. Brummett suggested a network initially as a means to share resources as a means for these smaller suppliers to offer the growing number of services demanded by their customers and continue to be financially viable.

Operating Issues

A key to success in a flexible network such as The Flexcell Group is trust among the member companies. When the company first started, there was no legal documentation among TFG members. The first legal documents were signed only recently at the insistance of a client. The trust has to extend from between companies to between people working in these companies. This, in turn, requires a whole new way of thinking about how business should be conducted and requires a major investment of resources by TFG to properly train people in this area. The trust factor is cited by TFG as one of the most crucial ingredients in order to function properly.

One issue in a flexible network such as this is resource allocation. Since any company can make a sale, and only some portion of a company’s sales will require the services of other TFG companies, how does TFG allocate capacity and services among the member companies. To this end, TFG has not made a major investment in technology, such as videoconferencing and EDI. Rather, the Company relies on meetings, email, and telephone conversations to properly coordinate work. TFG indicates that the regular coordination of activities takes significant effort, but it can be properly managed. It becomes more difficult when unexpected situations arise that require unanticipated use of resources among TFG companies.

Mr. Brummett mentioned that while TFG could at some point benefit from investment in information technology to better coordinate resources and take the strain off the “facilitators” (i.e. what in a hierarchical organization would be considered a president or CEO), the most important thing is to change the way people think about doing business and organizing themselves. He mentioned that many companies think about technology as a key to success and that they make significant capital investments without changing the way they think about how they should be organized.

Why This Company is Interesting

There are several reasons that this company is interesting. First, it is a flexible, virtual organization composed of autonomous companies. This is an innovative organizational structure with tangible benefits to their customers. Second, this virtual corporation operates in fairly mature industries, namely moldings and tooling. It is common to hear of virtual corporations which are in high tech industries, but this is an example of several companies trying to reconfigure themselves after decades of traditional, hierarchical operation to become more competitive. Thirdly, as admitted by FlexCell’s senior personnel, the use of technology has so far been minimal. The key is trust, getting people to work together.