By Dawn Baetsen, president of D.E. Baetsen & Associates LLC
There is no argument-developments in advanced manufacturing positively impact manufacturing in many ways such as cost efficiencies, quality, consistency, and speed to market to name of few. Manufacturing still helps drive economies and advanced manufacturing in making developments happen at a rapid pace to fuel strategic growth and competition. According to the National Association of Manufacturers, for every dollar spent in manufacturing another $1.37 is added to the U.S. national economy, the largest of any industry. Manufacturing in the U.S. contributes over $2 trillion to the economy, provides good jobs and fuels the middle class. However, our economy is not out of the woods from the recession. Maintaining the momentum to keep manufacturing moving in the right direction and to exceed pre-recession levels will take considerable effort. Roadblocks remain in skilled labor, energy costs, location, innovation to commercialization, and the ability for the small to mid-size manufacturer to identify with the benefits of, and embrace, advanced manufacturing.
Since the recession, government initiatives in many countries identified the need to provide support to the manufacturing base in order to remain competitive, to support research and development and move it to the shop floor. The United States also moved in the same direction and answered with the National Network for Manufacturing Innovation (NNMI). The goal of NNMI is to work with newly-organized and monetarily-supported institutes to create a research-to-manufacturing infrastructure, which can be shared to support U.S. manufacturers and shift the competitive advantage back to the United States with advanced manufacturing as a critical tool. This new initiative recognizes the need for communities, educators, workers, businesses and government to work together to achieve these goals.
The U.S. Council of Advisors on Science and Technology defines advanced manufacturing as a family of activities that (a) depend on the use and coordination of information, automation, computation, software, sensing, and networking, and/or (b) make use of cutting edge materials and emerging capabilities enabled by the physical and biological sciences, for example nanotechnology, chemistry, and biology. This involves both new ways to manufacture existing products, and especially the manufacture of new products emerging from new advanced technologies. This doesn’t mean that all advanced manufacturing is new and/or emerging; there are existing developments and products that meet the definition and are in use to a certain degree. In addition, there is existing advanced manufacturing that is underutilized or has not been commercialized to the fullest extent; although, we are seeing a tremendous resurgence in research and development and installation of advanced manufacturing. Many view this endeavor as a means to sustain manufacturing growth in the U.S. and fuel growth through advanced manufacturing deployment in the market place.
Large companies have the capability to strategically evaluate various advanced manufacturing uses and implement when cost and need is an argument for deployment. Larger companies also have research, development, and testing capabilities to evaluate the impact on operations. However, small and medium-sized companies lack these capabilities and find it more difficult to strategically evaluate all that advanced manufacturing contributes to production growth and cost efficiencies. In addition, small and medium-sized companies do not view the investment as cost effective; although, research by the International Federation of Robotics illustrates automation through robotics can now be implemented at a lower cost threshold while improving performance. Lower cost advanced manufacturing options are opening the door for small and medium-sized manufacturers to invest in affordable systems sized to their needs. However, the small manufacturer requires assistance with bridging available technology to the shop floor.
The goal of the NNMInnovation is to expand use of advanced manufacturing including the small operation. The NNMI project allows joint research and development and the sharing of advanced manufacturing activities in order to enhance and grow the manufacturing base in the United States. Therefore, our federal government is supporting up to 45 specialized Manufacturing Institutes in a ten year time span. These Institutes, like the Digital Design and Manufacturing (3D Printing included) Institute in Chicago, are a collaborative public and private partnership of education, community, research and development, workforce, and private for-profit companies seeking to jointly develop manufacturing technologies, solve industry related issues, and to share and illustrate these technologies that serve to enhance U.S. manufacturing competitiveness. Since 2012, Additive Manufacturing, Lightweight Technology, Wide Bandgap Semiconductors, and Advanced Fiber-Reinforced Polymer Composites institutes have been organized and are located in regions across the United States. I encourage you to go to www.manufacturing.gov for more information.
Some will argue more automation and implementation of advanced manufacturing in factories results in fewer jobs available to the workforce. However, the U.S. lost manufacturing jobs as a result of the recession but also from off shore moves by manufacturers seeking low cost labor. Growing the manufacturing job base now requires expanding the industry. Manufacturers are no longer just moving where low cost labor is plenty. A recent L.E.K. Consulting survey of large companies across 10 industries notes proximity to customer is the number one consideration with research and development and production closely integrated for end market customization-a critical component. The study also indicates the U.S. is becoming more attractive as a location with narrowing cost differentials in energy and labor. Advanced manufacturing has contributed to closing the competitive gap with lower cost labor intensive countries. U.S. manufacturing is answering with increased use of advanced applications coupled with lower energy costs which go hand in hand with advanced manufacturing installations.
As manufacturers automate and enhance production through various new and emerging technologies; Manufacturing requires a skilled workforce readily adaptable to new and emerging technologies. The skill set of the traditional production worker in new and expanding facilities is much more sophisticated. The existing skilled workforce will need to shift its focus to more technology supported tasks, which will require training to retain the existing workforce. In addition, the supporting educational systems will need to continue to partner and expand relationships with manufacturers in order to customize training for the individual manufacturers or industry while also training the prospective workforce with skills aligned with employer needs. The aging workforce knowledge base also needs to be addressed working with our K-12 systems and employer forecasted workforce needs.
A recent 17th Global Survey of CEO’s by PWC identify the talent pipeline and human capital strategy to be a problematic issue. The survey indicates CEOs place blame for the skills shortage with government using heavy regulations as a roadblock and how skill shortages are addressed by government in general. Finding a skilled and/or talented workforce is a high priority for CEOs but how to manage the challenge is a struggle for CEOs. The survey indicates 93 percent of those surveyed globally recognize the need to make a change in strategy for attracting and retaining talent; however, 61 percent of CEOs haven’t started any strategy development. The workforce is not just a government issue. The PWC survey suggests corporations also fail to address the issues. It will take a combination of effort from education, starting with K-12 through the highest levels of education and corporate human resources and management to develop a strategy to solve the problem. For example, an aerospace manufacturer is addressing skill issues internally while continuing to work with local educators. The company has redefined its human capital strategy. The company hires based on a company defined basic skill set, certified or degreed graduates of community colleges or universities, and high school graduates. The company works with local training providers to outline basic skill set needs and those training providers adjusted the curricula to include the minimum skill sets required of the company. New hires are tested at the pre-hire process and those that meet the basic skill sets are trained to the specifics of this highly-successful aerospace company’s needs for the shop floor and other operational areas. The employees, while working on the job to gain experience, also attend a customized educational curriculum which expands on basic skill sets and provides the necessary additional skills required for precision manufacturing critical for aerospace.
Not all firms can afford their own university and don’t necessarily need to train employees for high precision skill sets. However, the alternative is to partner with regional training providers and education. Creative initiatives are emerging across the country to address demand. Almost all states have training support through workforce development boards or other systems to address employer needs. Some regions are returning to the traditional journeyman and apprentice programs, which require partnering with local education to provide the combination of training and on-the-job training for final certification. Many regions are considering the German model of early K-12 placement of a job-career-path education and focused training in the student’s respective career choice. This approach feeds forecasted workforce needs of the region’s employers. Again, it is a partnering effort at all levels. Government can provide monetary support for customized training of new hires or retraining in the case of new high technology investment requiring new skill sets.
It is also important for the region to have core STEM (science, technology, electronics and math) courses taught in the public school system K-12, technical trade curriculums, and traditional institutions of higher learning. As a region supports manufacturing with a ready workforce, so to the manufacturer should work with institutions to provide access to jobs through on-the-job training, apprenticeships, and paid work study programs.
Small and Mid-size Manufacturing
The largest U.S. companies have the capital to invest in some of the most technologically advanced manufacturing system, which do compete with low cost manufacturing in competing countries. The multi-nationals and original equipment manufacturers drive the supply chain. This group has expectations for its suppliers, small and mid-size companies. Suppliers must be cost competitive is rule number one, and the single biggest factor for the small company. There is also the expectation the supplier has internal technical skills, capital, applied knowledge, appropriate technology and the specialized tools required to deliver timely and at a competitive cost. The reality is not all of these components exist in the small firm. In order to survive, the small business must be customer responsive, globally competitive, and sustainable from a business growth perspective. However, there are many recognized gaps to serving its customers while sustaining and growing the business. This group does lack technical resources despite residing in a country that abounds in resources and the most progressive advanced manufacturing activities. A lack of engineers with current skills is missing ,although staff possess the “old school” skills acquired as they grew up with the business. Owners are reluctant to seek new talent generally because new hires lack knowledge of what happens on the factory floor and also lack practical knowledge of simple-process improvement tools. Small and mid-size businesses need new hires to hit the ground running. There continues to be a lack of capital which limits investment in process technologies and workforce skills if any is made at all. As we discuss how advanced manufacturing can create a competitive environment for a manufacturer, the small and mid-size firm does not know how to make the transition to new technologies, processes and systems. In addition, a small company’s manufacturing process is its intellectual property and if they are considering and do move to off shore locations that allows emerging economies to figure out how to design the product opening, the door for narrowing market share and new competition.
The solution to sustaining a small and mid-size manufacturing base is to provide this group with practical tools, low cost solutions, and support for the business with applied engineering resources that will facilitate a transition to integrating advanced manufacturing technology where feasible. What is unique to advanced manufacturing now is the availability of low cost solutions which translate to increased productivity while maintaining consistent quality that cannot be guaranteed with a human labor force. Traditionally, human labor has been more cost effective for the small and mid-size enterprise than the cost of investing in advanced manufacturing. Now the cost gap has narrowed and small and mid-size manufacturing should be encouraged to take a strategic look at implementing viable advanced technologies such as robotics and 3D printing.
A critical road block for small business is evaluating and translating how advanced manufacturing can help to improve productivity, quality, and competitiveness. In that regard, every state has a manufacturing center that provides assistance to small and medium-sized manufacturers; however, not all are aware these centers exist. Some centers, the Colorado Association for Manufacturing Technology (CAMT) for example, are identifying the need to work closely with this group to strategically-evaluate operations, assist with translating available advanced manufacturing technologies to the individual manufacturer’s unique operations and helping the firm integrate the solutions that best fit with the company’s immediate and long term goals. These manufacturing centers can be the bridge with the NNMI initiative and the small and mid-size firms they serve. The centers like CAMT can help to translate advanced manufacturing technology tools for its customers and identify where efficiencies can be introduced at reasonable, affordable costs to the small business.
Community Support in the Location Decision Process
There is evidence U.S. companies are reshoring or merely expanding operations in the U.S. with new, productivity-enhanced facilities which produce product at competitive prices. Companies now strategically locate where growth originates and where research and development can be closely aligned with production. The fact remains either production or distribution will locate to fast growing demand markets.
When considering the next location either for reshoring or expansion, immediate and forecasted workforce availability is obviously a top priority. The community must be able to provide a comprehensive solution to a prospective manufacturers skills requirements in order to be in the running. However, other critical factors come under scrutiny when a new, advanced manufacturing facility is being considered. Currently, the United States offers a strong argument for manufacturers to consider backshoring, onshoring, or the next state-of-the-art production plant. The availability of low cost advanced manufacturing, rising labor costs in developing economies, domestic production of natural gas, lower energy costs, and the regulatory protection of intellectual property support the argument for a U.S. address. The U.S. continues to be a top destination for the world’s foreign direct investments.
Communities should outline its strengths from a regional perspective and illustrate a strong partnership with key organizations able to address the specific needs of the prospective employer whether it is workforce, energy cost concerns, or a sophisticated supplier base. Manufacturers look for regions where new innovations and technologies are available. Collaborative innovative initiatives help a community to grow and sustain its manufacturing base. Long distance supply chain functionality is also on the location decision list of manufacturers along with traditional transportation infrastructure and cost elements. Consideration for taxes, the regulatory climate and incentives has not changed and will always be scrutinized before a short list of sites is finalized.
In conclusion, our government and communities are critical to powering up, supporting, and accelerating advanced manufacturing initiatives which is driving growth in our manufacturing base. The regions that can address the new workforce skill set requirements and facilitate long term labor availability will emerge as a preferred location. Creating a support system that reaches out to the small and mid-size firm to solve problems and remove roadblocks to enable growth and sustainability will further stabilize regional economies and will enhance a community’s location attractiveness.
About the Author:
Dawn has over 28 years of site location, incentives, and economic development consulting experience. She is considered an industry expert in negotiated incentives and managed compliance. Before starting D.E. Baetsen & Associates LLC (“Baetsen Associates”), she co-founded and managed Atlas Insight, LLC now in New Jersey. Dawn was also the Midwest Regional Practice Leader in the Business Location Incentive and Site Selection group at BDO Seidman, and was formerly managing director of the Michigan Economic Development Corporation’s Global Attraction Division. Throughout her career Dawn has assisted numerous companies, economic development organizations, small businesses and government agencies with their business attraction and retention policies, and has helped write and implement incentive legislation.