Outsource locally: manufacturing networks.

THE MANUFACTURING Alliance of the Red River Valley is a flexible manufacturing network: a collection of small firms that both cooperate and compete, working together on projects that no single member could complete alone. The alliance seeks out contracts from Boeing, Caterpillar, and other companies, then distributes the work to its members, whose close proximity --they're all in the Rockford, Illinois, area--allows them to easily collaborate.

In effect, this stands outsourcing's image on its head, sending work to local enterprises rather than abroad. That's an attractive idea for the Rockford region, which has lost almost 14,000 manufacturing jobs in the last decade.

The organization is only two years old, and it's hard to predict how well it will succeed. But such networks have already proven profitable elsewhere: They dominate the economy of Emilia-Romagna, in northern Italy, and have a foothold in several other parts of the world, most notably Denmark.

In Emilia-Romagna, around 90,000 manufacturing enterprises, frequently family- or employee-owned, will collaborate as needed, forming ad hoc alliances for particular tasks. One result is that the region's dominant form of economic organization is a network, not a hierarchy, with workplaces that look more like an artisan's shop than an assembly line. Another is a vast increase in local wealth. Among the regions of Italy, Emilia-Romagna ranked 17th in per capita income in 1970. By 1985 it was second.

That model of manufacturing hasn't taken off in America, except arguably in Silicon Valley, but the idea has attracted both attention and action. A few dozen networks have been set up around the country, with varying levels of success; the newest is the Chicago Manufacturing Renaissance Center, located less than 90 miles from the Rockford project. Network enthusiasts hope to spark a revolution as radical as the changes in Italy. Or, more modestly, to save--and create--a few good jobs.