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November 11, 1996 01:00 AM

MONORAIL JUMPS ABOARD COMPUTER MARKET

Clare Goldsberry PLASTICS NEWS CORRESPONDENT
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    Touting a bold manufacturing concept, Monorail Inc. entered the computer fray last week, promising a full-feature personal computer for less than $1,000. Although many in the computer industry question the wisdom of entering the PC market at a time when prices and profit margins are down, Monorail executives believe they know how to be a successful player.

    Andrew Watson, vice president of marketing for Monorail, said, ``We've seen the good times and the bad times in this industry, and the bad times have taught us all [at Monorail] to compete more effectively in this market.''

    The new Atlanta-based company, led by a cadre of former Compaq Computer Corp. executives, created a plan to manufacture a PC and sell it for under $1,000. This would be accomplished by removing much of the manufacturing overhead, the firm said.

    Led by former Compaq executive Doug Johns, the group put together an organization with a minimum of infrastructure. The group concluded that in order to break the $1,000 price barrier, it would have to eliminate overhead costs, Monorail said.

    Unlike established computer makers, which maintain all but a few manufacturing functions in-house, Monorail chose to work with Phelps Technologies Inc., a contract manufacturer in Kansas City, Mo., and Complex Plastics Cos. of Boulder, Colo., a mold maker and custom injection molder. Monorail oversees product development and design, marketing, distribution and customer service. Phelps manufactures the product.

    Michael Phelps, owner of Phelps Technologies, said the company began as a metal-stamping house. Then customers asked Phelps to put metal parts together, and eventually asked them to buy the plastic housings and assemble units.

    It started contract manufacturing with Compaq's Prolinea line of PCs, ultimately producing 1 million units that were shipped to Compaq complete except for the ``brains,'' Phelps said. That project led to similar contract work for other large original equipment makers such as Dell Computer, Xerox Corp., AT&T Co. and IBM.

    ``I feel that this is the direction that suppliers are headed,'' Phelps said. ``More and more of our customers are outsourcing more of the manufacturing of their products. They want to engineer and market, but don't want to manufacture.''

    This is the first time Phelps will assemble the entire computer, and then test the units and ship directly to customers.

    Phelps will purchase all parts from Complex.

    ``We've worked with Complex in the past on the Compaq computers, and we've installed a new sophisticated computer system to track all the inventory from the various suppliers to work out a JIT system so that cash flow isn't a problem,'' Phelps said.

    Phelps hired about 170 in the past two weeks as the firm ramps up production, and expects to hire more. Currently, the company has 500-600 employees, and the firm expects that to increase to 1,000 by the end of the year. The firm operates from a recently built, 200,000-square-foot plant. It has a 48,000-square-foot facility in Kansas City, Mo., and a 60,000-square-foot plant in Houston.

    Complex provides all the ABS and polycarbonate/ABS components for the computer. The project has been under way for almost a year, said Don Miller, vice president of Complex Tooling.

    The company's strategic alliance with Phelps formed several years ago on Compaq projects means the two companies are accustomed to working together.

    ``Creating strategic alliances is something we have to do in order to provide value-added services that our customers demand,'' Miller said.

    Monorail employs 40, about half of whom formerly worked for Compaq. Paul J. Perry, director of materials management, oversees the implementation of just-in-time systems. Perry, who formerly purchased molded parts for Compaq, said that what Monorail does with its suppliers is unique.

    ``We've successfully married ourselves and the suppliers in the first real partnership that has ever been done in this business,'' Perry said. ``We fully depend on Complex and Phelps to use the talents we know they have to produce an extraordinary product for us.''

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