Cisco Systems is one of the best-known virtual enterprises. A contract manufacturer assembles the products from parts made by suppliers, and a materials-management company ensures the right amount of inventory is on hand, then delivers assembled products to customers. In most cases, Cisco never sees the products its customers receive. The components are made by parts suppliers, and final assembly is done by distributors. The manufacturer designs the product and manages the distributor's parts inventory.
Companies perform processes rather than produce complete products.
When these processes all work together, the final product results. Virtual integration goes far beyond outsourcing, in which a company lets others take care of nonessential functions. In a virtual enterprise, specialist firms perform critical processes-not because they're unimportant, but rather because they're so important that the original company can't afford to have them handled in a mediocre way. The key to successful virtual integration is to enable all companies involved, each of which is performing only certain processes, to work together as smoothly as they would if they were all one enterprise. Enter the Internet.