“Eliminate the Trade Deficit” Resonates in Halls of Congress

March 21st, 2017

 “You were ahead of the curve on trade.” This was the common refrain heard last week by members of the Coalition for a Prosperous America who attended our annual fly-in to Washington, D. C. We had eight teams of members visiting Congressional Representatives and Senators on March 14th and 15th. As Chair of our developing California chapter, it was my fifth year attending the CPA fly-in, and our simple message of eliminating the trade deficit resonated well in the halls of Congress.

No one could deny that we have a huge deficit as shown on the chart below:

 

The annual trade deficit has reduced our U. S. GDP by some 3% to 5.5% each year, and those reductions compound over time.

There is no historical record of any other country in history running 41 years of consecutive trade deficits. Why is this important? Because every billion dollars of net imports costs 4,500 American jobs according to conservative estimates. So last year’s $502 billion deficit equates to 2.25 million jobs lost.

As a result, our Labor Force Participation is in serious decline. The U. S. is the only G7 nation with a DECLINE in LFPR since 1998 for workers ages 15-64. It peaked at 77.4% in 1998 and dropped down five points to 72.6% in 2015, meaning that over 7 million people dropped out of labor force since 1998.

The remedy recommended by the Coalition for a Prosperous America is simple: Congress should establish a national goal to eliminate the trade deficit.

Balanced trade over time is the goal of free trade and of fair trade. Balanced trade will re-industrialize our country, enable massive job creation, grow our wealth and effectively neutralize foreign mercantilism. Trade policy must address true drivers of deficit, these countries and their practices. Many of these countries have export-oriented growth strategies in which they rely upon the US market to consume their exports rather than increasing their internal consumption. China, Germany, Japan and other countries pursue net exports through strategic mercantilism, not free trade. Currency manipulation, value added taxes, state influenced enterprises, and other
tactics are used.

The following top 10 countries account for 90% of America’s 2016 goods trade deficit:

Rank Country 1992 Deficit 2016 Deficit Change 1992-2016
1 China -$18B -$355B -$337B
2 Mexico -$6B -$115B -$121B
3 Japan -$50B -$75B -$25B
4 Germany -$8B -$70B -$62B
5 Canada -$15B -$58B -$53B
6 Ireland +5B -$36B -$37B
7 Vietnam $0B -$34B -$34B
8 South Korea -$2B -$30B -$30B
9 Italy -$4B -$30B -$26B
10 India -$2B -$30B -$28B

Note: These figures are based on U.S. Commerce Dept. data subtracting Imports for Consumption from Domestic Exports which are intended to strip out goods that enter and leave the U.S. simply for re-export, without having any significant value added to them inside the U.S.

Currency manipulation and misalignment are key tactics that the above countries use to gain an advantage in trade. Currency manipulation is trade cheating, because it is both an illegal tariff and a subsidy.

Foreign governments intervene in foreign exchange markets by buying dollars. More than 20 countries have intervened in foreign exchange markets to undervalue their currencies in the past ten years. These countries account for one-third of the world economy and two-thirds of the world’s current account surpluses. Gagnon has calculated that “A country’s current account balance increases between 60 and 100 cents for each dollar spent on intervention.”

“The largest loser is the United States, whose trade and current account deficits have been $200 billion to $500 billion per year larger as a result. The United States has thus suffered 1 million to 5 million job losses.” (Bergsten, 2012) The U. S. economy cannot produce jobs and wealth without addressing this problem. The Coalition for a Prosperous America proposes the following solutions:

• U.S. trade enforcement law should treat currency undervaluation as a countervailable subsidy
• Tariffs should be applied against currency manipulators to neutralize their unearned advantage
• Government policy should pursue a dollar priced at equilibrium rather than accept a persistently overvalued dollar
• Trade agreements should include effective controls on currency manipulation and misalignment

Border Adjustable Consumption Taxes (aka VATs) are a tariff by another name. They are allowed under WTO rules and range from 12% to 24% with the average being 17% globally. This means that virtually all foreign countries tax our exports at this average 17% VAT. They subsidize domestic shipments abroad with rebating the VAT to their manufacturers. The U.S. does not have a VAT to offset this advantage.

Consumption taxes are a tax on consumption as opposed to income, wealth, property, or wages. A Goods and Service Tax (GST) and a Value Added Tax (VAT) are consumption taxes. They are usually a tax only on the “value added” to a product, material, or service. Over 150 countries have such taxes, but the U. S. does not.

The U. S. negotiated tariff reductions or elimination in good faith with our trading partners under NAFTA and the Central America Free Trade Agreement (CAFTA, but Mexico instituted a 15% VAT, and Central America established a 12% VAT.

After 40 years of tariff reduction under various trade agreements, other countries replaced tariffs with VATs, but the U. S. did not. Thus, American exporters face nearly the same border taxes as they did in the early 1970s.

To solve this problem, the Coalition for a Prosperous America proposes that Congress implement a border adjustable consumption tax (VAT) and use the proceeds to credit against the payroll taxes paid by all workers and businesses. The benefits would be:

• Reduce the cost of labor in the U.S.
• Give every worker a raise
• Lower the price of U.S. exports
• Levy a tax on imports

In President Obama’s 2016 budget, Payroll Taxes were projected to be 31% of the revenue or $1.11 trillion. If a 12.9% VAT were set, it would produce approximately $1.45 trillion in tax revenue, completely offsetting the revenue from Payroll Taxes. All Payroll Taxes could be eliminated with a credit. With a 15% VAT, other tax reform or domestic production cost reduction could be funded. European Union countries use their VATs to provide another revenue stream to allow them to reduce their corporate taxes to be more globally competitive.

The benefit of giving a Payroll Tax credit out of VAT funds is that it would offset the regressiveness of a VAT by elimination of the regressive Payroll Tax. There would be no impact on prices of domestic goods and services, but prices of imported goods and services would increase. This would incentivize consumers to buy Made in USA products instead of imports. In addition, it would reduce the cost of production for U. S. producers enabling them to be more competitive in the global marketplace.

Our Coalition members also encouraged Congress to reinstate the Country of Origin Labeling (COOL) that was struck down by an unelected foreign tribunal of the World Trade Organization. Congress caved in to the WTO ruling and passed repeal legislation that exceeded the WTO ruling eliminating COOL for beef and pork, as well as for ground beef and ground pork.

Canada and Mexico want to export their cattle, hogs, beef, and pork to the U. S. without informational labeling that reveals where the cattle and hogs were born, raised, and slaughtered. Right now, meat packers are able to import cattle and hogs and slaughter them to get the USDA stamp. Consumers want to know where cattle and hogs were born and raised, not just slaughtered for reasons of food safety.

Congressional Representatives and Senators need to have the courage to reinstate COOL and vigorously defend our national sovereignty and consumer choice against international interference. COOL legislation enables consumers to Buy American in the grocery store. It prevents consumer deception and empowers consumers to buy food produced under the safety regime of their choosing. It would help to jumpstart America’s ailing rural economy through supporting domestic producers and preventing industry consolidation.

The final message that is critical is that the U. S. must modernize its foreign investment rules to protect American companies that are critical to our national security and economic security. Investors from countries like China, Japan, and South Korea are making strategic acquisitions of U. S. companies and land that threaten our security and future prosperity. These same countries either severely restrict or do not allow 100% acquisition of companies in their country. The Committee on Foreign Investment in the U.S. (CFIUS) can block incoming investment based upon national security concerns, but not for economic strategy reasons as other countries do.

Congress must update the laws governing foreign investment to include economic security and allow longer review periods, beyond 30 days, for CFIUS to review proposed investments. This would allow more time to gauge systemic threats to U. S. interests in addition to individual cases. The legislation should include a “net benefit” test to encompass American economic interests where proposed acquisitions of companies that are important to future U. S. technology and employment are concerned (both civilian and defense related).

The question now is – Will Congress have the courage to take the bold action needed to eliminate the trade deficit, address currency manipulation, reinstate COOL and control foreign investments? Time will tell.

 

Why Universities are Important to Rebuilding U.S. Manufacturing

March 8th, 2017

The fact that more and more manufacturers are returning manufacturing to the U. S. or keeping manufacturing here instead of moving to Mexico or Asia is good news, but on February 23, 2017, President Trump met with two dozen manufacturing CEOs at the White House.

While they “declared their collective commitment to restoring factory jobs lost to foreign competition,” some of the CEOs “suggested that there were still plenty of openings for U.S. factory jobs but too few qualified people to fill them. They urged the White House to support vocational training for the high-tech skills that today’s manufacturers increasingly require…The jobs are there, but the skills are not,” one executive said during meetings with White House officials that preceded a session with the president.”

“We were challenged by the president to … come up with a program to make sure the American worker is trained for the manufacturing jobs of tomorrow,” Reed Cordish, a White House official, said after Thursday’s meetings.”

Training today’s workers in the skills they will need for the jobs of the future in manufacturing is important, but we also need to educate the next generation of manufacturing workers. We need more engineers to rebuild American manufacturing, and universities play a key role in providing this education.

Last week, I had the opportunity to interview Dr. David B. Williams, Executive Dean of the Professional Colleges and Dean of The College of Engineering at The Ohio State University, located in Columbus, Ohio, to discuss the role universities are playing in rebuilding manufacturing and educating the next generation of manufacturing workers.

His official biography on the University website states, “Williams is involved in many university-industry economic development partnerships. He serves on the boards of ASM International, the State of Ohio’s Third Frontier Advisory Board, Lightweight Innovations for Tomorrow (formerly American Lightweight Materials Manufacturing Innovation Institute), Columbus 2020, Metro Early College STEM School, EWI, Ohio Aerospace & Aviation Council, and the Transportation Research Center.”

Dean Williams said, “Ohio State University is a manufacturing R&D and training Powerhouse. Manufacturing is a critical part of the state of Ohio’s economy and accounts for 17 percent of the state’s GPD. It is also the state’s largest industry sector. We have partnered with over two hundred manufacturers in developing and funding research that can be used in their industries. It is a very important part of the college. We use the talent of our professors, graduate, and undergrad students and technology. OSU is committed to innovating applied research for product design, technology commercialization, and manufacturing for industry through its programs.”

Dean Williams mentioned that on October 1, 2016 the Center for Design and Manufacturing Excellence (CDME) was designated as a new Manufacturing Extension Partnership (MEP) affiliate organization, and that Ohio State’s MEP program will work directly with manufacturers to identify and execute growth strategies. Afterward, I was provided with information that states: “The Ohio State University’s Center for Design and Manufacturing Excellence (CDME) will receive up to $8.6 million in federal, state and industry funding over the next five years to lead a program facilitating growth of small- and mid-sized manufacturing companies in the 15 county central Ohio region. The program is funded by the National Institute of Standards and Technologies, with matching funds provided by the Ohio Development Services Agency, which administers operations through seven regional affiliates.”

I found the information about Central Ohio’s manufacturing interesting very interesting: “The central Ohio manufacturing economy is comprised of approximately 3,350 self-identified manufacturing companies across the 15 Central Ohio counties. More than 90 percent of them have 50 or fewer employees. Many small and medium-sized manufacturing companies are aware of the growth challenges they face, but still require assistance to overcome them.” The size of companies is similar to San Diego County, in which 97% have fewer than 50 employees.

Dean Williams told me that the Center’s Executive Director, John Bair, is a successful entrepreneur, not an academic, and added that they had invited him to head up the Center after he had sold his company and semi-retired.”

He added, “We invite manufacturers to bring their problems to us, and then we put together teams of experts to work with them to solve these problems. The company gets to keep any of the Intellectual Property developed in the process of working together.

Dean Williams also said that Ohio State is home to the Ohio Manufacturing Institute, which “serves as a public policy mechanism for manufacturing within the state and nationally that facilitates the use of available technical resources for economic development.” He said, “OMI acts like a clearinghouse for Ohio to provide manufacturers with the tools they need to collaborate with a statewide network of technical resources. Its state and national policy recommendations reflect a thoughtful response to industry problems and issues OMI also engages in outreach programs that support manufacturers—from small to medium-size firms to original equipment manufacturers—by aligning with industries, academic institutions, technology support organizations and government.”

As an example, Dean Williams said, “We have had a long relationship with Honda since they moved to Marysville in 1978, which is about 45 miles northwest of here. About five years ago, we started partnering with Honda to help them develop solutions to some of their manufacturing problems. Their high-end NSX brand is currently made with advanced engineered materials and is produced at only a rate of 7-8 vehicles per day. They want to produce the Accord using the same materials and technology. At the Center, we have put together teams of experts to solve this problem.”

Dean Williams said, “Hundreds of students study abroad for part of the education. Their experience abroad strengthens their performance and helps train the people necessary to maintain and repair the machines. They are still lots of manufacturers in Ohio. We graduate about 2,000 engineers per year and about half of them stay in Ohio. There are 14 engineering colleges in Ohio, and we have the educational base to drive the 21st Century manufacturing.” Since the U.S. is only graduating about 50,000 engineers a year compared to the estimated 500,000 per year in China, Ohio State University is doing more than their fair share.

With regard to the next generation of manufacturing workers, he said, “A big part of the problem is that parents think manufacturing is like what it was in the past, so they don’t want their children to get involved in manufacturing. I was at SpaceX recently and met the chief welding engineer, and she was a graduate of Ohio State with a degree in welding. Young men and women can even get a Masters Degree in ‘joining’ through Ohio State’s online welding engineering master’s program: https://online.osu.edu/program/mswe. This discipline includes a deep understanding of the properties and testing of materials that can be welded.”

He said, “We are part of seven of the National Networks of Manufacturing Innovation (NNMIs). One of them is LIFT, which I looked up and found that it is “an industry-led, government funded consortium. By reimagining processes and procedures, the highly linked and leveraged network is facilitating technology transfer into supply chain companies and empowering the lightweight metals workforce.” Ohio State University, the University of Michigan in Detroit and EWI are the founding members of this NNMI consortium that was established February 25, 2014 following a competitive process led by the U.S. Department of Defense under the Lightweight and Modern Metals Manufacturing Innovation (LM3I).

Dean Williams stated, “We also partner with the community colleges under an economic grant program to develop the existing workforce through continuing education. Overall, through a variety of programs and camps, we interact with 70-80 high schools on a semi-regular basis. One program is Hometown Ambassadors, where students talk to younger students at their High School alma maters to help them understand the opportunities in manufacturing today.”

Since Dean Williams is on the board of ASM International, it was fitting that Ohio State University’s Department of Materials Science and Engineering hosted the ASM Education Foundation’s Materials Camps for two years (2013 and 2015). These one-week training camps provide the opportunity for high-school teachers to work hands-on with metals, ceramics, polymers and composites and learn how to incorporate these activities and demos into their science classes.

The Lightweight Innovations for Tomorrow (LIFT) was a partner with ASM International and the ASM Educational Foundation for the 2015 camp. “Curriculum content on the use of lightweight metals and new technologies [were] integrated into the programs at 45 camps around the nation…designed to enrich, stimulate and enhance the technical competence and teaching skills of middle and high school STEM teachers.”

Summer camps for teachers and students are important to attracting the next generation of manufacturing workers. More universities need to get involved with the summer camps and other programs of ASM International, the National Association of Manufacturers’ Manufacturing Institute “Dream it. Do it” program, and Project Lead the Way.

Advanced Technologies being developed at Carlsbad Gateway Center

March 1st, 2017

For the last couple of years, I have been the guest of several economic and Chamber of Commerce organizations to visit their region to tour manufacturing plants and write articles about their region’s industries, but two weeks ago, I was invited to visit an industrial park right in my back yard ? the Carlsbad Gateway Center, a Makers’ place with over 80 businesses in a 16.5 acres business park (Carlsbad is 25 miles north of the City of San Diego).

Courtney Rose of Olive PR introduced me to Toni Adamopoulos, Property Mgr. of the business park. She said, “The tenant mix includes innovation, food production, health and wellness, new technology, in addition to standard and warehouse uses. The park’s small spaces, affordable rents, flexible zoning, and wide array of  allowed permitting makes it a perfect location for small, start up, and incubator businesses to get started on their road to success in a welcoming park-like setting. Besides technology companies, the zoning permits storefront businesses such as a bakery, coffee shop, craft beer, and Kombucha beverage.”

We first visited Emcraft Systems founded by Kent Meyer and colleagues in Moscow, Russia in 2012. Kent said, “We started the company six years ago to design, build, sell, and support ARM Cortex-A and Cortex-M System-On-Modules (SOMs), which are micro controller systems programmed with Linux.” Emcraft is a California LLC headquartered in Carlsbad, and with an engineering office in Moscow, near Moscow State University. Emcraft partners met in Silicon Valley in 1998 while working on a Posix real-time operating system, and the relationship has lasted across several companies and cities. Kent continued, “We have about 6,000 customers in 36 countries, all using our system on modules or Linux/uClinux kits. All of our manufacturing is done in the U.S. We use independent contractors instead of having employees, and we form teams to handle different projects for customers.”

He explained, “We are working to highly automate the effort of embedding Linux and ARM microcontrollers for the coming wave of intelligent systems. Our customers use our system on modules to speed their time to market, and we are optimizing the design and manufacturing processes to meet the pricing needs of the market. We have found a way to be very productive with our team of 20 local and remotely cooperating engineering contractors, with our main office and manufacturing based in the US.”

In addition to Emcraft Systems, Kent is involved in local STEAM education. He has worked with local schools and the Carlsbad Education Foundation (CEF) to teach robotics and programming to youth. CEF is a 501(c) (3) non-profit organization that provides private support for public education programs throughout the Carlsbad Unified School District. The Foundation is also located in the Carlsbad Gateway Center.

We got into a discussion about attracting the next generation of engineers that is too long to cover in this article, but Meyer called the next generation the “Minecraft” generation because of the technological skills and interest learned through the online collaboration and building in that game. He started as a robotics coach over six years ago when his own kids were doing LEGO robotics with the FIRST LEGO League (FLL) for fourth to sixth graders, which was funded by the Carlsbad Ed Foundation. After doing that, he said, “We came up with our own little curriculum where the robotics could be used to teach interested kids in a very productive way, while also trying to find entrepreneurial ways to improve the ratio of students to technology to get as close to a one-to-one ratio with tech as possible.”

He said that they recently developed an “IoT Educational Platform” using Chromebooks, Linux, MQTT and Node-Red to see what kids might come up with when taught IoT concepts. The effort culminated in a presentation to the Carnegie Mellon SATURN conference in San Diego, where the kids showed a highly interactive MQTT platform of over 60 nodes all communicating and collaborating (robots, drones, lights, toys, etc) and connected to Skype and email over Node-Red. The effort won Kent and the team the distinction of “2016 Top Embedded Innovator” by Embedded Computing Design magazine. Click on this link to read the interview with Mr. Meyer after the award.

Next we met with Dr. Robert Boock, CEO/CTO and Co-Founder, of Glucovation. Dr. Boock previously served as the Senior Technical Director of Research and Development at Dexcom where he was responsible for managing the research and development of Dexcom’s CGM membranes and biotechnologies. He was part of the group that developed materials for Dexcom’s SEVEN PLUS. He was a co-inventor of G4 PLATINUM sensor and was a key player in its development and commercialization. He holds more than 44 patents and over 100 pending patents as well as having more than 25 peer reviewed journal articles.

Dr. Boock said, “Our company was formed to develop the most advanced Continuous Glucose Monitor (CGM) that will be affordable to those desiring to monitor their diabetes.” I have several partners, and we are now up to 12 people. They will realize development and work on licensing Agreements. We have signed a deal with a Chinese company and are negotiating a deal with another Chinese company.

He explained, “We are creating a technology that doesn’t require finger sticking. We are trying to develop a simpler but just as accurate method that doesn’t require any action by the user. We want to penetrate the Type II market, which is reaching epidemic proportions. Our product will prevent its escalation. We think that we will have the right product at the right time. Type I is 2% of the population, and Type II has escalated to an estimated 13% of the population. We would rather increase the breadth of our reach rather than make more profit. Outside the U.S., this epidemic of diabetes has the potential to bankrupt countries.”

He continued, “Dexcom and Medtronic are the two biggest players in the continuous monitoring field, which takes a reading every five minutes. They have only penetrated 15% of the Type I population. The future of Type I treatment will be the artificial pancreas (sensors within a pump).

He added, “We can also measure lactate which is a precursor to septic shock, and we could also monitor burning of ketones to know if a person is burning fat when exercising. We are developing a suite of sensors that will monitor five to six of the active metabolites.”

Finally, he said, “We are doing development in cooperation with our licensees, but we are the owner of the core technology. We should be moving into the Chinese market in 2018. The U. S. is more difficult because there is a PMA one-year review cycle after clinical trials, but in China it is only a six-month review cycle. We are doing trials in China, but haven’t started in the U. S. yet.”

Since I am aware of how long it takes to develop any biotech or medical device product before it finally gets to market, I found his last comment very apropos:  “We don’t do it for the money; it’s a calling.”

Our last meeting was with Martin Bouliane, founder and President of R&3D Engineering. He is a mechanical engineer who started his career in 1993 involved in product development. He worked with Cirque du Soleil for a while as a product designer. He was previously the owner of R&3D Engineering in Canada, where the company was primarily focused on consumer product design from 2000-2007. He moved from Quebec, Canada to California in 2007.

Bouliane said, “After moving to California, I worked for two medical device companies before re-launching R&3D Engineering as a U.S. company in 2012. The company was originally focused on medical device design, but some of my customers turned to me to help them get into production. I started working with robots that they purchased from Fanuc. A team from Fanuc visited our company and invited me to become an authorized Fanuc robot integrator. We now focus on custom robotic automation design and fabrication for about 75% of our business, and we have grown to a dozen employees.”

He added, “One of our biggest problems is finding skilled people as we need people who can make things work. We have a customer who makes desalination filters, and we started working with them two years ago and have designed a robot system to move the filters, which were heavy for workers to move around. Some of our local customers have been in the biotech and pharmaceutical industry for high volume production of disposables. We are creating a system for one company that dispenses oil, and are building machines to produce the blister pack for the oil.”

He explained, “One of the big reasons for advances in automation is that machine vision has become more and more advanced, so we can program the robots to do inline inspection. We also design and build the peripheral systems to surround the robots. The robot might be only 10% of the system, and we can configure the robot to do multiple tasks. More and more companies are benefiting from integrating robotics and automation into their manufacturing operations.”

This interview was eye opening to me because I had seen very little automation or use of robotics in local companies with which I do business. The main reason is that 97% of San Diego County Advanced Manufacturing businesses are companies with fewer than 50 employees. Another reason is that I do not do business with biotech companies as they do not buy the type of fabrication services I represent. I recruited Mr. Bouliane to speak at our upcoming March Tech San Diego Operations Roundtable event on the subject of the advances in robots, automation, Artificial Intelligence, and machine vision. He will also discuss the future of automation and robotics and give his opinion on whether jobs will be lost or created. There is a wide divergence of opinions on the answer to this question, so it will be interesting to hear his opinion.

EPI Report Claims U.S.-China Trade Deficit Cost 3.4 Million Jobs

February 14th, 2017

On January 31, 2017, the Economic Policy Institute released a report, “Growth in U.S.–China trade deficit between 2001 and 2015 cost 3.4 million jobs,” written by Robert Scott.

Scott explained that when China entered into the World Trade Organization (WTO) in 2001, “it was supposed to bring it into compliance with an enforceable, rules-based regime that would require China to open its markets to imports from the United States and other nations by reducing Chinese tariffs and addressing nontariff barriers to trade.”

However, Scott wrote, “China both subsidizes and dumps massive quantities of exports. Specifically it blocks imports, pirates software and technology from foreign producers, manipulates its currency, invests in massive amounts of excess production capacity in a range of basic industries, often through state owned enterprises (SOEs) (investments that lead to dumping), and operates as a refuse lot for carbon and other industrial pollutants. China has also engaged in extensive and sustained currency manipulation over the past two decades, resulting in persistent currency misalignments.”

As a result, “China’s trade-distorting practices, aided by China’s currency manipulation and misalignment, and its suppression of wages and labor rights, resulted in a flood of dumped and subsidized imports that greatly exceed the growth of U.S. exports to China.”

He added, “the WTO agreement spurred foreign direct investment (FDI) in Chinese enterprises and the outsourcing of U.S. manufacturing plants, which has expanded China’s manufacturing sector at the expense of the United States, thereby affecting the trade balance between the two countries. Finally, the core of the agreement failed to include any protections to maintain or improve labor or environmental standards or to prohibit currency manipulation.”

These trade policies have resulted in an enormous trade deficit with China. Scott, stated, “From 2001 to 2015, imports from China increased dramatically, rising from $102.3 billion in 2001 to $483.2 billion in 2015… U.S. exports to China rose at a rapid rate from 2001 to 2015, but from a much smaller base, from $19.2 billion in 2001 to $116.1 billion in 2015. As a result, China’s exports to the United States in 2015 were more than four times greater than U.S. exports to China. These trade figures make the China trade relationship the United States’ most imbalanced trade relationship by far…”

He explained, “Overall, the U.S. goods trade deficit with China rose from $83.0 billion in 2001 to $367.2 billion in 2015, an increase of $284.1 billion. Put another way, since China entered the WTO in 2001, the U.S. trade deficit with China has increased annually by $20.3 billion, or 11.2 percent, on average.

Between 2008 and 2015, the U.S. goods trade deficit with China increased $100.8 billion. This 37.9 percent increase occurred despite the collapse in world trade between 2008 and 2009 caused by the Great Recession and a decline in the U.S. trade deficit with the rest of the world of 30.2 percent between 2008 and 2015. As a result, China’s share of the overall U.S. goods trade deficit increased from 32.0 percent in 2008 to 48.2 percent in 2015.” Scott notes that the figures in this paragraph derive from his analysis of USITC 2016 data.”

Previously, the U. S. had a trade surplus in advanced technology products, but now we have lost that comparative advantage. Scott stated, “Global trade in advanced technology products… is instead dominated by China. This broad category of high-end technology products includes the more advanced elements of the computer and electronic parts industry as well as other sectors such as biotechnology, life sciences, aerospace, and nuclear technology. In 2015, the United States had a $120.7 billion deficit in advanced technology products with China, and this deficit was responsible for 32.9 percent of the total U.S.–China goods trade deficit. In contrast, the United States had a $28.9 billion surplus in advanced technology products with the rest of the world in 2015.”

Scott stated, “Due to the trade deficit with China 3.4 million jobs were lost between 2001 and 2015, including 1.3 million jobs lost since the first year of the Great Recession in 2008. Nearly three-fourths (74.3 percent) of the jobs lost between 2001 and 2015 were in manufacturing (2.6 million manufacturing jobs displaced).

After explaining how EPI calculated the loss of jobs due to the U.S.-China trade deficit, he wrote, “U.S. exports to China in 2001 supported 171,900 jobs, but U.S. imports displaced production that would have supported 1,129,600 jobs. Therefore, the $83.0 billion trade deficit in 2001 displaced 957,700 jobs in that year. Net job displacement rose to 3,077,000 jobs in 2008 and 4,401,000 jobs in 2015.
That means that since China’s entry into the WTO in 2001 and through 2015, the increase in the U.S.–China trade deficit eliminated or displaced 3,443,300 U.S. jobs…the U.S. trade deficit with China increased by $100.8 billion (or 37.9 percent) between 2008 and 2015. During that period, the number of jobs displaced increased by 43.0 percent.”

Scott states, “The growing trade deficit with China has cost jobs in all 50 states and the District of Columbia, and in every congressional district in the United States.” The report calculates job loss by state and Congressional District, stating that “The trade deficit in the computer and electronic parts industry grew the most, and 1,238,300 jobs were lost or displaced, 36.0 percent of the 2001–2015 total. As a result, many of the hardest-hit congressional districts (in terms of the share of jobs lost) were in California, Texas, Oregon, Massachusetts, Minnesota, and Arizona, where jobs in that industry are concentrated. Some districts in Georgia, Illinois, New York, and North Carolina were also especially hard-hit by trade-related job displacement in a variety of manufacturing industries, including computer and electronic parts, textiles and apparel, and furniture. In addition, surging imports of steel, aluminum, and other capital intensive products threaten hundreds of thousands of jobs in these key industries as well.”

It was interesting to note that of the top 20 hardest-hit districts, eight were in California, four were in Texas, and there was one district each in Oregon, Georgia, Massachusetts, Illinois, Minnesota, New York, North Carolina, and Arizona.

The three hardest-hit congressional districts were all located in Silicon Valley in California. The 17th District lost 60,900 jobs, the 18th lost 49,500 jobs, and the 19th lost 39,400 jobs for a total loss of 149,800 jobs. His explanation for why this occurred is “Although the San Francisco Bay Area has experienced rapid growth over the past decade in software and related industries, this growth has come at the expense of direct employment in the production of computer and electronic parts.”

In summarizing the lost wages from the increasing trade deficit with China, Scott stated, “U.S. workers who were directly displaced by trade with China between 2001 and 2011 lost a collective $37.0 billion in wages as a result of accepting lower-paying jobs in nontraded industries or industries that export to China assuming, conservatively, that those workers are re-employed in nontraded goods industries…”
In addition, Scott wrote, “According to the most recent Bureau of Labor Statistics survey covering displaced workers (BLS 2016b), more than one-third (36.7 percent) of manufacturing workers displaced from January 2013 to December 2015 were still not working, including 21.7 percent who were not in the labor force, i.e., no longer even looking for work.”

As I have written in previous articles, Scott concludes, “The rapid growth of U.S. imports of computer and electronic parts from China also represents a threat to national security because it is connected to the outsourcing of U.S. defense products, as explained by Brigadier General John Adams (2015). The outsourcing of the defense industry makes the United States vulnerable to disruption of supply chains for key missile and communications components. Outsourcing has also reduced the quality of military equipment: a congressional report found nearly 1 million counterfeit components in the supply chain for “critical” defense systems (Senate Armed Services Committee 2012). And outsourcing has eroded the capacity of the defense industrial base for cost innovation, knowledge generation, and support for domestic employment (Alliance for American Manufacturing 2016).

Foreign Direct Investment by American companies in factories in China has also played a key role in the growth of China’s manufacturing sector and “the shift of manufacturing production and jobs from the United States to China since China entered the WTO in 2001.” Scott notes that “China is the largest recipient of FDI of all developing countries (Xing 2010) and is the third-largest recipient of FDI over the past three decades, trailing only the United States and the United Kingdom.” He wrote, “For many years, foreign-invested enterprises (both joint ventures and wholly owned subsidiaries) were responsible for roughly two-thirds of China’s global trade surplus…However, due to China’s indigenous innovation policies and other measures that have pushed out foreign investors, often through forced takeovers and illegal theft of intellectual property, this share has fallen sharply to only one-third in 2015…”

However, the most serious consequences of the U.S.-China trade deficit are:
• The United States net international investment position (NIIP) declined from -$2.3 trillion in 2001, before China joined the WTO, to $-7.2 trillion in 2015 (BEA 2016b).
• Each year that the United States runs a trade deficit is a year that it must borrow from abroad to finance this excess of consumption over domestic production.
• The United States ran a trade surplus in nearly every year between 1946 and 1975, and by 1975 had become the largest net lender in the world.
• The United States has run increasingly large trade deficits in every year since 1976, and has become the world’s largest net debtor.

In summary, Scott stated, “The U.S.–China trade relationship needs to undergo a fundamental change. Addressing unfair trade, weak labor, and environmental standards in China, and ending currency manipulation and misalignment should be our top trade and economic priorities with China. It is time for the United States to respond to the growing chorus of calls from economists, workers, businesses, and Congress (Scott 2014b) and take action to stop unfair trade and illegal currency manipulation by China and other countries.”

According to my calculations, our trade deficit with China and other countries since 1994 when NAFTA went into effect has added up to nearly $11 trillion dollars. President Trump has set the goal of reducing the trade deficit. I say we need to eliminate the trade deficit by implementing the smart trade policies recommended by the Coalition for a Prosperous America that address all of the trade misalignment issues mentioned in the EPI report.

San Diego Tackles Housing Affordability and Skills Gap for STEM Careers

January 31st, 2017

Workforce development is critical to San Diego’s economy, so this topic was featured at the 33rd Annual San Diego County Economic Roundtable I attended on January 19, 2017. After the two presentations by the two economists covered in my last article, the next presenter was Tina Ngo Bartel, Director of Business Programs and Research for the San Diego Workforce Partnership, which has about a $40 million budget. She said, “My department does the research for new programs and then implements them. We did research on small business and found that 95% have fewer than 50 employees. We collaborate with the San Diego Employers Association to provide H.R. services for small businesses and have set up a free hotline for help on such topics as Workers Compensation, changes to labor law and wages, termination, employee discipline issues, etc.”

She described a new program they have to connect employers with job seekers instead of doing all day job fairs. They are doing Hiring Happy Hours at a local brewery where job seekers and employers can connect in a more informal, fun atmosphere. They are customized and targeted to specific industries, such as health care and manufacturing.

Next, she described their Connect2Careers program, which is “a summer employment program that addresses San Diego’s ongoing skills gap by providing meaningful work experiences that prepare young adults ages 16–24 for in-demand jobs. By aligning the career aspirations and educational backgrounds of young adults with businesses committed to developing our emerging workforce, C2C creates a positive experience for both employers and youth.”

Ms. Ngo Bartel said that they had released a report on Apprenticeship programs in November 2016. San Diego County has employers in a variety of industries that sponsor or participate in apprenticeship programs. According to the report, specialty trade contractors and local government provide the most apprenticeship opportunities. SDWP is working with the building industry on an apprenticeship career pathway in which there is no cost to the participants for the training and employment. At the end of the apprenticeship, there is guaranteed employment. She also said that the Urban Corps has a pre-apprenticeship program for youth without a high school diploma.

She stated that Able-Disabled Advocacy (A-DA) received a federal grant in November 2015 to develop apprenticeship programs for occupations that do not traditionally have registered apprenticeships in the region: project managers, computer support specialists–networking, and computer support specialists–cyber security (i.e., project management, ICT). The Able-disabled Academy offers an ICT program training in ICT skills.

She added, “San Diego has the first life science apprenticeship program in the nation created by Miramar College in partnership with Rx Research Services.” The press release of January 29, 2016, stated, “San Diego Miramar College will receive a $600,000 Innovative Apprentices for the Life Sciences Industry grant to grow the number of apprenticeships in nine areas: microbiology quality control technician; chemistry quality control technician; regulatory compliance associate; regulatory affairs specialist; clinical research coordinator; quality assurance associate/GXP auditor; clinical trial assistant; drug safety advocate; and clinical data coordinator. Miramar College, home of the Southern California Biotechnology Center, will be the lead education agency in partnership with Rx Research Services Inc., the apprenticeship sponsor.”

She concluded by saying that the SDWP will be doing an update on San Diego’s priority sectors of Advanced Manufacturing, Clean Energy, Health Care, Information and Communication Technologies, and Life Sciences and will release the report at their Workforce Conference in November 2017.

The lack of affordable housing in California’s metropolitan areas of San Francisco, Los Angeles, and San Diego has reached crisis status. Historically, San Diego salaries have been substantially lower than the other two regions, so it has become even more critical. The median home price hit $507,500 in November 2016, up 11 percent from a year ago. Rents have been escalating due to the high demand and limited supply of affordable homes. Both of these factors are impacting employers being able to recruit skilled workers from other parts of the country and impacting our region’s ability to keep new college graduates in the region.

This is why the next speaker was Deborah Ruane, Executive V. P. and Chief Strategy Officer of the San Diego Housing Commission, whose mission is “To provide affordable, safe and quality homes for low-and moderate-income families and individuals in the City of San Diego and to provide opportunities to improve the quality of life for the families that the San Diego Housing Commission serves.” The SDHC website includes this statement as part of its mission: “Become a national model in initiating and implementing new, progressive ideas to address affordable housing needs across the country.”

Ms. Ruane said, “Our Board of Directors asked me to find out why it was so expensive to build affordable housing. It costs $300,000 per unit.” She said that one problem is that they have constraints from many of their funders for housing, such as must have solar, must be near a school, near public transit, look as nice as neighborhood, all of which add to the cost. Economist Lynn Reaser of Point Loma Nazarene College estimates the costs related to government are $40 billion. This impacts our regional GDP in the amount of $2.4 billion.

She explained, “We started with the McKinsey Global Institute report, ‘Tackling the Affordable Housing Challenge” and came up 60 factors that affect cost, most of which are related to local, state, and Federal government. We narrowed the list down to the top 11. The first eight are within San Diego’s purview to change. One is related to state government, and two to the Federal government.” The list is:

  1. Set annual production goals
  2. Incentivize more 80/20 development
  3. Defer development fees
  4. Reduce parking requirement
  5. Reduce commerce space requirements
  6. Unlock land and increase ground leases
  7. Approve community plans with Master Environmental Impact Report
  8. Support California Environmental Quality Act reform
  9. Increase state and Federal resources
  10. Align state oversight
  11. Increase State and Federal resources

She said that McKinsey was so impressed with the work they were doing that they issued a subsequent report in October 2016 on “Closing California’s Housing Gap,” which “provides a tool kit for fixing a chronic housing shortage in the world’s sixth biggest economy.”

She concluded saying, “If we can make these changes, the City could reduce the costs of market rate housing by $54 million and by $23 million for affordable housing. We have made movement on nine of the issues, and we will issue a year-end report next month.”

The next speaker was Gina Campion-Cain, CEO of American National Investments. Her presentation was focused on the commercial real estate market. The most interesting points of her presentation with regard to my focus on manufacturing is that corporate campuses are being developed with rich amenities for employees, such as fitness centers, restaurants, coffee stops, and “grab and go” marketplaces. She also touched on the changes in the design of open office floor plans instead of cubicles to facilitate more collaboration among workers.

The last speaker was Matt Doyle, Ed.D, Assistant Superintendent of the Vista Unified School District who spoke on “Innovation in Education – Addressing Student Engagement and Lifelong Success.” Dr. Doyle said the Vista school district has 22,000 students of which 10% are homeless, some since kindergarten, who are now getting “full-ride” scholarships. (Vista is located about 30 miles northeast of the City of San Diego.)

Highlighting the most important points of his presentation, he stated, “The biggest education issue is student engagement. In our school district, student engagement drops from 76% in elementary school down to 44% in high school. When I started four years ago, I had conversations with about 2,000 students. I took all of the words students had to say about school and put them in a program called ‘Wordle’ and the one that came up was ‘irrelevant.’ It is a similar trend around the country.”

He stated, “To resolve the engagement issue, we need to re-imagine education and develop work-ready talent using a Strengths-based Education Model. It’s not about preparing for college, but more about preparing students for careers. We are using tools used by industry and work with business partners of the Vista Innovation Center. We use technology as an infrastructure and are one-to-one in devices for students.”

He explained, “The goal is to be a self-regulated learner. We create a personal learning pathway for students and develop a student profile. We have developed a competency-based program so as soon as student demonstrates their knowledge in a subject, they can move on. What we are finding is many of our students are able to move into college classes as a junior or senior. The goal is to prepare the student or the pathway…not the path for the student.”

Continuing, he said, “Students are working alongside teachers. We are creating opportunities for students to learn. Our learning environment is different. A teacher is no longer at the front of a class with rows of student desks. At the center of student success is the concept of collaboration. It’s a brave new world. We are trying to move beyond the traditional mindset.” Dr. Doyle stated, “The results in our super school have been a  99% reduction in disciplinary incidents, a 50% reduction in absenteeism, 62% of increasing GPA by one percentage point in half a year, a 27% reduction in ‘Ds’ and a 33% reduction in ‘Fs’.”

He concluded saying, “We are reaching out to business and having meaningful conversations about essential skills. Clean energy is one of the priority sectors in north San Diego County along with advanced manufacturing. This is part of a project called the Talent Cities Solution to narrow the talent gap and feed the talent pipeline. We are working with Solatube in the clean technology field, and middle school students are having conversations about what skills are needed in that industry. We are trying to ‘marry’ companies with students so they students can be employable when they finish their education. We want to help companies “on-board” students. We are creating learners that are flexible and nimble because that is what industry needs.”

Public/private collaborations that incorporate new ideas and innovative  programs for solving the housing affordability crisis, solving the skills gap in workforce development, and educating the next generation of youth for STEM careers make San Diego a role model for other regions.

 

Workshops for Warriors Aims to go National

January 10th, 2017

On December 9, 2016, I revisited Workshops for Warriors to find out what had been accomplished in the past four years since I had toured the facility during their first Manufacturing Day on October 5, 2012 and met retired naval officer Hernán Luis y Prado, founder and president of Workshops for Warriors (WFW).

The article  I wrote in 2012 described how Hernán and his wife had self-financed the training they began providing in their own garage while Hernán was still in the service and how they moved into their first small building in 2011. Their first outside funding came from Goodrich Aerostructures, in Chula Vista, California, and they moved into a building twice the size in October 2011. Over the years, Goodrich Aerostructures has donated nearly $1 million in equipment and materials to help WFW build out its class offerings.

Hernán spent over an hour with me on this visit and told me that in January 2016, WFW became approved as a licensed school in California and is the only accredited school training veterans in the manufacturing skills of machining and welding. He said, “Workshops for Warriors (WFW) is a Board-governed 501 (c) 3 nonprofit organization that provides quality hands-on training, accredited STEM educational programs, and opportunities to earn third party nationally recognized credentials to enable Veterans, Wounded Warriors, and Transitioning Service Members to be successfully trained and placed in their chosen advanced manufacturing career field. Through the generosity of private and corporate donations, WFW is able to provide training at no cost to the Veterans, so that they can focus on school and not survival.”

The WFW website states that they address two challenges: “The need for lifelong employment among Veterans transitioning from the service, and the limited pipeline of skilled workers in the advanced manufacturing industry. According to a 2015 Ford Foundation report, more than 2.3 million advanced manufacturing jobs in the United States are unfilled due to lack of skilled labor.” Their current 10,000 square feet building has 11 CNC machines, 18 welding booths, capable of handling 120 graduates per year. Their goal is to have 45,000 square feet with 40 CNC machines and 40 welding booths, capable of handling 450+ graduates per year.

I asked if their curriculum has expanded since 2012, and he said that WFW teaches:

  • Computer-Aided Design
  • Computer-Aided Manufacturing
  • Machinery Repair and Maintenance
  • CNC and manual Machining and Turning
  • Welding and Fabrication

He said that students are now able to earn nationally recognized portable credentials from The American Welding Society (AWS), the National Institute for Metalworking Skills (NIMS), Mastercam University,

SolidWorks, Immerse2Learn, and the National Coalition of Certification Centers (NC3).

According to the website, Workshops for Warriors graduates are now employed by such companies as:  BAE Systems, Barrett, Benchmade, Cubic Corporation, Fox Fury Lighting Solutions, Gates Underwater Products, Gehring, General Dynamics NASSCO, Rogue Fitness, SpaceX, SPAWAR, and UTC Aerospace Systems.

Hernán said, “Workshops for Warriors is already making significant, lasting improvements, and we are building a better, stronger future for veterans, their families, and the U.S. economy by:

  • Reducing unemployment for veterans.
  • Meeting U.S. market demand for more trained, certified manufacturing workers.
  • Enhancing economic stability in the San Diego region.
  • Supporting growth of the U.S. manufacturing sector.
  • Helping more veterans successfully transition to civilian life—with hope and a renewed purpose through a secure civilian career path.”

When I asked what his biggest challenge is, he said reliable funding is number one because:

  • Students cannot use GI bill benefits
  • Classes are free to Veterans
  • Facility costs are $200,000 per month
  • Average cost per student per semester is $20,268
  • With a needs based living stipend provided, student cost per semester is $30,268

He said it is a five step process to receive Federal funding, and they are in the middle of step 4 (Operate as a licensed school for 2 years and pass BPPE audit). They hope to be able to accept Federal funding by April 2019.

I asked how they are funded now, and he responded, “We keep costs and overhead low so that 83% of our donations go straight to training veterans. We have machinery donated or on loan to us. We receive donated or discounted materials (computers, software, metals, tools), and we have time donated by some of our instructors and staff. We collaborate with other nonprofits, and we receive private donations from manufacturing industry leaders and foundations, as well as individual financial donations. We have seven members on our Board of Directors and twenty-seven on our Board of Advisors.”

The list of donors and sponsors has grown to such a long list of companies and organizations that I would not do justice to all of the partners to provide only a partial list. It would take up a whole page to list just the companies and organizations that have donated over $10,000 since 2014.

I asked Hernán what his plans for expansion are, and he said, “Workshops for Warriors is a nationally viable advanced manufacturing training pipeline that is ready to be scaled and replicated across America. Once the GI Bill is accepted at WFW, we will be self-sustaining and ready for expansion.” He added, “WFW has proven metrics and data for investors since 2011. We have audited financials since 2012 that are available on our website.”

Hernán introduced me to some of their new staff:  Amanda DiSilvestro, Marketing Manager, and John Jones, the new Director of Development. Hernán said, “John served with me in Iraq, and when I saw him years later in a wheel chair and learned that he lost both legs after I had returned home from Iraq, John was one of the reasons that I started Workshops for Warriors. We are honored to have him on our team.”

John said, “I had to retire from military service due to the injuries that I sustained during my second deployment. I worked in the nonprofit arena for ten years, ranging from Major Gifts Officer, Executive Director, and National Spokesperson for various military charities.  I wanted to work with an organization that had a more direct impact on the lives of veterans and chose to join Workshops for Warriors.”

John explained that they have begun a two year Capital Campaign to raise $21 million to expand nationally. He said, “We have raised 18% of our goal. Phase 1 of building our first of three buildings is scheduled to be completed by fall 2017. Our current San Diego headquarters will become a Train-the-Trainer and Veteran Incubator facility. Our plan is to create 103 WFW facilities across the USA located in areas with high military transition populations and advanced manufacturing training nodes. Our formal Capital Campaign will be launched at a special gala on April 20th on the U.S.S. Midway.”

He said, “Our program is called Rebuilding America’s Advanced Manufacturing Force. The purpose is to eliminate Veteran unemployment and underemployment, replenish the lack of talent pipeline for the manufacturing industry, and make a social and economic impact (individual to family to community to the Nation.)”

The national program will include:

  • Train-the-Trainer Blueprint
  • Sustainable Model Development
  • Strategic Partnership for National Footprint
  • Tuition/Scholarships
  • Staff & Top-Tier Teachers
  • Job Counseling & Placement
  • Land acquisition
  • Equipment, furniture & fixtures
  • New and renovated construction

Hernán told me that they have several short testimonials on their website from some of their graduates, but he showed me a video by Scott Leoncini and his wife about the impact on their family from graduating from WFW and becoming an instructor, which can be viewed here.

Before I left, I was invited to attend their Fall Graduation Ceremony event for machinists and welders the next week on Friday, December 16, 2016, which I did.

At the ceremony, Hernán said that they had 36 Veterans, Wounded Warriors, and Transitioning Service Members graduate from with nationally recognized credentials from the above-mentioned organizations. Each of the graduates was introduced as they came forward to receive their certificates. After this ceremony, Workshops for Warriors has now trained 338 with a combined 1,400 credentials. A video of the graduation ceremony is available here.

At the graduation ceremony, Summer Jamison, Market Director Executive Director of J.P. Morgan Chase & Co., announced that they were donating $75,000 to WFW toward their Capital Campaign.

Also, Tiffany Rau, Public and Government Relations Manager, Southern California, presented Workshops for Warriors with a $40,000 grant from the Tesoro Foundation at the graduation ceremony. The funds will be used to help the school purchase a new Haas Automation Computer Numeric Controlled (CNC) Mill VF-2, a piece of equipment that supports hands-on learning of CNC machining.

The featured speaker at the ceremony was Ira E Friedman, Education Manager, Precision Tools, for The L.S. Starrett Company, a long-time sponsor and donor to WFW. I was so inspired by his speech that I requested a written transcription and feel compelled to quote a few excerpts. Mr. Friedman said, “Suffice it to say that you will be honored all the days of your life for your service. This investment that you have made in yourselves at Workshop for Warriors will change your lives and the lives of your families and friends forever. I would like to ask you all one question today. What contributions will you make to humanity and how will you help to change this world as a result of your experiences at Workshops for Warriors? To reach your full potential, you will need to have good friends, mentors and especially teachers. This select group of people will prove to be your gyroscopes, your guidance system and when you look back over your shoulder, your life’s treasures!”

After giving good advice about being a mentor, a friend, and contributing member of society, he shared his personal story of how his elementary school teacher mentored him and changed his life. He was nearsighted, had a lisp, and was severely behind in reading and writing. Instead of having to write a story about a canoe, his teacher instructed him and helped him build a 1/4 model of a canoe as his assignment. When it was a success, he realized that he wasn’t “dumb” after all. His teacher helped him get his eyes tested to get glasses and therapy to eliminate his lisp. He went on to being successful in Junior High and High School, even captaining the Wrestling Team. He went on to college and was one of 28 students selected for a full ride to Woods Hole Oceanographic Institute.

In conclusion, he said, “Mr. Jenkins saved my life! This one individual invested in me and was the catalytic ingredient to my success in life. I have gone on to become a productive member of society, (married my childhood sweetheart 50 years ago) and most of all started to give back the precious gift that was given to me so many years ago, that of becoming a Mentor and Teacher. As I fade into the twilight of my career in Metrology some 64 years later, I owe the magic ingredient to Mr. Jenkins.

You see I had the fuel within me all along, he found the spark to ignite it. Finally, I will charge you all today with this one request. Whether you become business owners, NASCAR builders or a Metrology nerd like me; Teach Someone, Mentor Someone-Anyone. Do what Hernán and Workshops for Warriors has done for you and what Mr. Jenkins did for me – change the world!”

 

You can help change the world by donating to the Workshops for Warriors Capital Campaign.

ToolingU-SME Report Reveals Manufacturers Are Not Addressing Skills Gap

December 14th, 2016

In 2011, I attended the imX Expo (interactive manufacturing eXperience) in Las Vegas when Tooling U-SME ” announced their Mission Critical: Workforce 2021 initiative and “sounded the alarm that the future success of manufacturing is at risk by the end of the decade if industry does not address the growing skills gap.” The event was sponsored by SME (formerly the Society of Manufacturing Engineers) and the American Machine Tool Distributors’ Association (AMTDA).

At that event, Tooling U-SME, “the world’s leading provider of training and workforce development solutions for manufacturing companies and educational institutions,” introduced a free one-of-a-kind “Workforce 2021 Assessment” tool for companies to use to assess and gauge their company’s performance because they had identified that there would be a critical shortage of skilled workers by 2021 that would threaten the future of manufacturing in America. “By answering a short series of questions about a company’s knowledge retention, readiness of future skill requirements, and the status of employee development programs, a company is able to assess their ability to meet current and future workforce challenges.”

In a September 5, 2016 commentary in The Hill contributor Grant Phillips wrote that the National Association of Manufacturers found there are “600,000 unfilled jobs in manufacturing primarily due to a lack of skilled labor. It is this skills mismatch that plagues the US labor market…”

On September 8, 2016, ToolingU-SME, released a report that showed the progress towards achieving the goal of the Mission Critical: Workforce 2021. Based on five years of insights from the Workforce 2021 Assessment tool, the report states, “the results are not encouraging. Responses show there has been little advancement. While it’s not too late, companies must take action now to ensure a healthier next decade.” The report quotes from report, “The Skills Gap in US Manufacturing: 2015 and Beyond” by Deloitte and The Manufacturing Institute, which states, “Over the next decade, nearly 3.5 million manufacturing jobs will likely need to be filled. The skills gap is expected to result in 2 million of those jobs remaining unfilled.”

ToolingU-SME Vice President Jeannine Kunz wrote in the cover letter, “only a very small number of worldclass organizations are prepared for the extreme talent gap predicted by the year 2021. Some of these companies started planning years ago to address the coming labor shortage. Others were forced to take reactionary steps when faced with a shrinking employee pool. Regardless, they started formal training programs, introduced apprenticeships, built relationships with educators and more…At Tooling U-SME, we are concerned that more manufacturers aren’t taking action since this has a big impact on the long-term health and competitiveness of the industry as a whole. There is a false sense of security among many manufacturers who are not recognizing these future challenges or investing in the development of their workforce today.”

The companies that responded to the survey fall into five categories:  procrastinator, strategist, role model, and visionary.

The procrastinators nearly make up the majority of the respondents because 49% said that “their company has not begun assessing their manufacturing employee’s current skills against skills they will require in the future.” In fact, only “1 out of 20 (5%) acknowledge conducting a complete assessment of all staff.” Since “nearly 9 out of 10 respondents (88%) said their company is having problems finding skilled works in manufacturing,” you would think there would be more urgency to address this problem. This problem will only get worse because “14% of respondents say they will lose a full quarter (25%) or more of their workforce to retirements in the next five years.”

The highlights of the report are:

  • “Key findings from responses to the survey from manufacturers of all sizes
  • Insights on business pains, such as hiring needs, training resources, mentoring and talent development
  • Best practices to immediately start ensuring your workforce is ready for the next decade”

The key findings are:

  • “Less than one-third (29%) of respondents would characterize their company’s talent development as good or excellent”
  • “30% say their company has no community involvement (internships, co-op, etc) to help develop the proper skills of their incoming workers.”
  • “54% don’t budget for employee development”
  • “33% say their job-related training options are minimal”
  • “88% say their company is below average when it comes to offering outside resources to upgrade the skill sets of employees”

While 74% agree that training needs in the organization impact a wide range of levels throughout the company…3 out of 4 (75%) say their company does not offer a structured training program on manufacturing skills. In addition, “less than half (45%) say their company has personnel designated to manage training and employee development.”

The report identifies issues related to the skills gap that need to be addressed immediately:

  1. Incoming employees — finding them
  2. Incoming employees — training them
  3. Incumbent workers — upgrading their skills to keep up with changing technology

With regard to finding manufacturing employees, I commented that we need a national manufacturing database of skilled workers when I gave my presentation on how to solve the skills shortage to the Cincinnati Chamber of Commerce. Many workers that have been laid off due to transferring manufacturing offshore or plant closures have no idea where to go to find a new job in manufacturing. They take lower-paying jobs outside of manufacturing because they can’t uproot their family on the chance they could find a job at a manufacturer in another city.

The ToolingU-SME report urges manufacturing to establish training programs for both incoming workers and incumbent workers to upgrade their skills. The report identifies the following six steps for companies to take to get started immediately:

  1. “Build a business case for learning with senior management. Involve the right stakeholders in discussions and tie learning to performance so you can measure the results later. It is important to set expectations, get buy in and gather support for the program early on.
  2. Define and update your job roles with the required knowledge, skills and abilities needed to build strong performance on the job. This competency-based learning approach will lead to the positive return on investment (ROI) your stakeholders expect.
  3. Build career progressive models, showing growth from entry level to more senior levels. This modeling effort will improve employee engagement and retention, and allow the alignment of skills to pay.
  4. Benchmark incumbent employee competencies through knowledge and skills-based assessments to determine gaps in performance and build a training strategy to address them.
  5. Design a custom competency-based training curriculum using blended learning that consists of online and on-the-job training as well as other performance support.
  6. Ensure performance standards are measurable and trackable. These standards will validate you ROI investment.”

What struck me is that all of these steps are integral to a company becoming a Lean Company. They are nearly identical to the requirements of “Talent Development” that are incorporated into the journey of transforming a company into a Lean company. It would appear that from this survey that the majority of manufacturers have not begun their journey to becoming even a Lean manufacturer, much less a Lean Company.

My recommendation is to start by using the free Assessment tool of ToolingU-SME. Then you can decide what steps to take next. If your workers need specific manufacturing skills certification, then check out the classes offered by ToolingU-SME, either online or on-site.

Another source for training is the Manufacturing Extension Partnership Program (MEP), which is “a national network with hundreds of specialists who understand the needs of America’s small manufacturers. The nationwide network consists of manufacturing extension partnership centers located in all 50 states and Puerto Rico. MEP provides companies with services and access to public and private resources to enhance growth, improve productivity, reduce costs, and expand capacity.” Locate your nearest MEP here. The MEPs have a variety of training programs that are available at reduced cost to manufacturers. The California Manufacturing Technology Consulting (CMTC) is the designated MEP for California, and they offer training in Lean manufacturing and many other subjects that would incorporate the above steps.

In California, companies can apply directly for a training grant from the Employment Training Panel (ETP) to help defray the cos of training or they can join an active ETP Multiple Employer Contract (MEC).

Many community college systems around the country offer training in specific manufacturing skills. California also has nine Centers for Applied Competitive Technology funded by the Chancellor’s Office of the Community College system, which provides training in specific manufacturing skills as well as Lean Manufacturing.

A number of community colleges actually use the ToolingU-SME courses instead of developing their own curriculum. I have discussed some of the training offered at community colleges in California and other states in previous articles I have written. You can peruse these articles under the Training and Workforce Development categories on my website:  www.savingusmanufacturing.com.

As more manufacturing is reshored to America, it will be even more critical to have the skilled workers we need to make American manufacturing great again. Do not procrastinate any longer on addressing this important problem.

CONNECT’S MIP Awards range from Pure Fun to Life-Saving

December 13th, 2016

On December 1st, the winners of the 2016 CONNECT Most Innovative New Product Awards were announced at the 29th annual dinner event held at the Hyatt Regency Aventine in La Jolla.

CONNECT is a premier innovation company accelerator in San Diego that helps start up entrepreneurial teams become great companies in the technology and life sciences sectors by providing access to the people, capital, and technology resources they need to succeed. CONNECT has assisted in the formation and development of more than 3,000 companies since 1985. Lead sponsors for the event were Cubic Corporation, and JP Morgan Chase & Company.  Tom West, San Diego Executive Director & Regional Manager of JP Morgan Chase, presented CEO Greg McKee with a check for $200,000 to support CONNECT.

CONNECT CEO Greg McKee said in part, “This event gives us an occasion to celebrate what we do best in San Diego ? innovate. From genomics to robotics, Bluetech to biotech, and data analytics to medical devices the breadth of our innovation economy is staggering. In fact, it’s a quarter of our GDP. You, as innovators, matter. And, I would bet, that many of the products we see here tonight will have an equally profound impact. For over thirty years CONNECT has been, and continues to be, an organization driven by discovery, innovation, economic empowerment, and the opportunity to change the world. But, changing the world isn’t always about a single sweeping gesture or one grand moment, it’s hard work, it’s a blend of small insights and little steps forward, it’s about sharing discoveries and thriving on others’ inspiration.”

There were a record 111 entrants this year across the ten categories listed below. To be eligible, the product must have been first introduced after January 1, 2014, never been selected as a MIP finalist, and generated revenue from sales (except for free mobile apps and companies submitting for the Life Science Products – Clinical Stage category). Each semi-finalist demonstrated their products in front of an expert judging panel in early October, from which 30 were selected as finalists. The winners and other finalists were:

Bluetech:  Water Pigeon – a fast, simple, secure way to deliver automated metering infrastructure (AMI) capability without replacing existing water meters or building wireless networks. Water Pigeon is a graduate of CONNECT’s Springboard program and a resident of EvoNexus.

After winning the award, CEO/CoFounder Clay Melugin said, “The MIP award from Connect is an outstanding honor to win. With so many great startup companies in San Diego in all categories, being recognized for Innovation delivers a boost to our team as we continue to push forward on goals that improve the world. Innovation is clearly not dead in the US and we want the world to see how innovation emboldens a supportive city like San Diego.

The outreach from others after the award has been amazing. It is very inspiring when people take time to understand our mission and offer to help us continue the journey both as investors and people who simple want to help. This only happens in a vibrant technology community like San Diego where startups encourage and help each other move forward towards success.”

Other Finalists:

Diver6a life-saving diver tracking system used to wireless supervise divers position and monitor their vital information provides services and technology for government and industry with extensive experience and capabilities supporting complex scientific and maritime operations.

Planck Aerosystemsits flagship drone brings high performance, autonomous unmanned aerial systems to moving vessels previously only possible from manned helicopters.

Cleantech, Sustainability, and Energy:  Camston Wrather LLC – recovers gold, precious metals, and polymers from electronic waste using proprietary patents and green chemistry.

Other Finalists:

  • Measurabl – an all-in-one commercial real estate energy and sustainability management software.
  • SDG&E – a regulated public utility that invented the Renewable Meter Adapter (RMA) as an alternative for private solar rooftop customers to avoid costly panel upgrades.

Defense, Transportation, and Cybersecurity:  Cubic Corporationdesigns, integrates and operates systems, products and services that increase situational awareness for customers in the transportation and defense industries.

Mike Twyman, President of Cubic Mission Solutions, said, “Cubic is honored to receive the Most Innovative Product (MIP) award from CONNECT in the Defense, Transportation and Cybersecurity category for our inflatable satellite communication system. Cubic GATR’s industry-leading inflatable satellite antenna is changing the satellite communications industry and receiving innovation awards, such as the MIP from CONNECT, validates the push for innovation at Cubic. We look forward to continuing our support of CONNECT and fostering innovation in San Diego region.

Other Finalists:

  • B&B Technologies LP – developer of the DAMPS advanced magnetic suspension/propulsion shock mitigation technology R&D for the military, medical and professional/commercial markets.
  • Space Microthe Micro-STAR-200M is a space qualified sensor observing start and delivering precision pointing information to its host spacecraft.

Information Communications Technologies: Aira develops remote assistive technology and services that bring greater mobility and independence to blind and low-vision people in daily living by connecting them to a network of certified remote agents via the blind user’s wearable smart device.

The impact of winning the CONNECT Most Innovative Product (MIP) Award certainly marks an important milestone at Aira, including our place as a recognized technological innovator in the San Diego region” said CEO Suman Kanuganti. “We believe that San Diego, because of its supportive and engaging technological environment, is truly the best community for startups like Aira, and we thank CONNECT for the work they do to grow the region, and of our peers who continue to inspire and challenge us to be more competitive, smarter, and committed to thrive and succeed here in San Diego. Equally important, Aira’s winning of the MIP Award allows further light to be shed on the often-forgotten challenges that people with vision loss face on a daily basis in functioning in a sighted world, and how the power of technology and innovation can play a major role in alleviating these challenges.”

Other Finalists:

  • Creative Electron – the TruView Cube is an innovative x-ray machine used to count the number of semiconductors without the need to open protective cases.
  • Qualcomm Technologies, Inc. – The SnapdragonTM 820 processor represents a rare feet in the engineering and design of semiconductors, in which every major IP block in the system is a new and custom design.

Life Science Diagnostics and Research Tools:  Echo Laboratories Inc. – developed the Revolve, a new hybrid microscope that easily transforms between upright and inverted configurations, merging the capabilities of two instruments into one. Echo Laboratories graduated from CONNECT’s Springboard program two years ago.

CEO/Founder Eugene Cho said, “Winning the event was a big achievement for us. Just two years ago we were at the same event, sitting in the audience as Springboard graduates. It was incredible validation to our team of how far we’ve come since then.”

Other Finalists:

  • DermTech – a non-invasive gene expression platform that works with samples collected using DermTech’s Adhesive Skin Biopsy Kit to facilitate the diagnosis and treatment of psoriasis and other inflammatory skin conditions.
  • NanoCellect Biomedical– the WOLF Cell Sorter is the new benchmark for access and performance to make flow cytometry and cell sorting technology more affordable and accessible for life science researchers to perform cellular analysis, develop molecular diagnostics, and improve personalized medicine.

Medical Devices:  Onciomed, Inc.the Gastric Vest System™ (GVS) is a revolutionary, minimally invasive implantable device to treat obesity and diabetes.

Other Finalists:

  • Innovative Trauma Care – created the ITClamp Hemorrhage Control System which is designed to address massive hemorrhage – a leading cause of death in traumatic injury – by controlling critical bleeding in seconds.
  • 11Health – a connected medical device company, where all patented devices use Bluetooth® wireless technology to send secure real-time data to mobile devices, including smart phones, tablets and watches.

Pharmaceutical Drugs and Biologic Therapies:  ACADIA Pharmaceuticals, Inc. – NUPLAZID is the first FDA-approved treatment for hallucinations and delusions associated with Parkinson’s disease psychosis.

Bob Mischler, Senior Vice President, Strategy and Business Development said, “We’re honored that NUPLAZID was chosen as the winner of the Pharmaceutical Drugs and Biologic Therapies category. Even more importantly, we are gratified that this innovative treatment offers renewed hope to patients with Parkinson’s disease psychosis, a debilitating condition that affects around 40 percent of people with Parkinson’s disease, and the loved ones who care for them.”

Other Finalists:

  • Ardea Biosciences– Zurampic is the first new oral medication for treatment of gout approved by the FDA in 60 years.
  • GlyConMedics LLC – Pre-biotic (OZ101) tables advance the treatment for type 2 diabetes by providing an affordable and effective long-term ADD-ON treatment to existing SU therapies to improve glucose control, educe hypoglycemia and weight gain.

Robotics and Unmanned Vehicles:  Clever Pet – a connected game console that intelligently trains and engages dogs using their normal daily food automatically, whether their humans are home or not. CleverPet is a resident of EvoNexus.

We were honored to receive CONNECT’s Most Innovative Product award in our category,” commented Co-founder Leo Trottier. “We could not have built CleverPet without the support of the San Diego community and organizations like Connect. We see this award as validating a business and idea that when we started felt at best a pipe dream.”

Other Finalists:

  • NXT Robotics – provides service robots to support increased security monitoring and alerting requirements.
  • Robolink – aims to make STEM education accessible, engaging and fun for children and hobbyists by producing robotics educations kits and providing educational lessons that teach core principles of engineering and programming.

Software, Digital Media, and Mobile Apps:  Guru – an app that features beacon-enabled technology that interacts with smartphones to create digital experiences for museums, aquariums and zoos. Guru is also a CONNECT Springboard graduate and a resident of EvoNexus.

Hilary Srole, Project Manager said, Entrepreneurship is hard, so receiving recognition like this from CONNECT is awesome. Winning gave us a great sense of validation. Not only for us, but for the San Diego Museum of Art for taking a chance with us. It really feels good to show that their faith in us wasn’t misplaced. This whole process has been rewarding. Springboard’s mentorship has helped us avoid some of the pitfalls commonly associated with start-ups and has helped us to move in the right direction faster.”

Other Finalists:

  • Nanome, Inc. – developed the world’s first immersive and scientifically accurate molecular modeling tool in Virtual Reality.
  • South Doctors, Inc. – the leading platform that connects patients from around the world with the best doctors and facilities in Mexico.

Sport and Active Lifestyle Technologies:  Bixpy LLCthe world’s first portable and modular personal water propulsion device that runs on lithium batteries for snorkelers and scuba divers, with attachments available to motorize kayaks and standup paddle boards.

Founder/CEO Houman Nikmanesh, said, “We were absolutely humbled by our selection as a finalist for the MIP Awards by Connect. We were among some brilliant people, amazing products, and innovative ideas. So when we won, we were absolutely beyond ourselves. It has taken us more than two years to develop the Bixpy Jets and we have worked tirelessly on a project that at times seemed like a pipe dream. Winning such a prestigious award validates our vision and paves the way forward for us. We’re proud and attribute much of our success in our product development to being in San Diego. Aside from being the perfect hub for an outdoor lifestyle company, the San Diego startup and innovation community has been instrumental to our drive and success.

Other Finalists:

  • ElliptiGO Inc.the world’s first elliptical bicycle, combining the best of running, cycling, and the Elliptical trainer for a fun and effective way to exercise outdoors.
  • FlyDivethe X-BOARD connects to a personal watercraft for hydro jet propulsion, empowering riders to hover and fly above the water. It is the most advanced hydro flight system designed and engineered to support both beginners and professional riders.

It was a very exciting night for me because I had been one of Bixpy’s mentors in the CONNECT Springboard program this year. Bixpy graduated in July, and in only four short months, they conducted a successful Indiegogo crowdfunding campaign, were selected as a finalist, and won this prestigious award.

CONNECT has a built an unbeatable roster of over 500 highly-qualified individuals to serve as Springboard Entrepreneurs-In-Residence and Mentors who volunteer their time as mentors to help entrepreneurs develop successful companies. I look forward to mentoring more companies in the future.

 

Cincinnati’s Cintrifuse Connects Entrepreneurs, Big Companies and Tech Funds

December 12th, 2016

During my visit to Cincinnati earlier this month, I had to pleasure of meeting key people from Cintrifuse and a few of the regional accelerators. The website says Cintrifuse is “Where Dreamers, Disruptors and Doers Connect” because “the world needs innovation. Entrepreneurs, BigCos and Tech Funds need each other. An active network ensures they can connect. And at the heart of that network is Cintrifuse.”

At Cintrifuse, I met with Wendy Lea, who has been CEO since 2014, and Eric Weissmann, Director of Marketing. Ms. Lea is “an accomplished Silicon Valley executive with deep experience in marketing, sales, and customer experience.” Ms. Lea serves on several boards, including Corporate Visions (San Francisco) and Xyleme (Boulder) as well as still being the executive chair of Get Satisfaction (San Francisco.)

Ms. Lea said, “Cintrifuse was born to answer this question: What will it take to create a thriving startup ecosystem in Cincinnati? Cintrifuse is a not-for-profit public/private partnership that exists to build a sustainable tech-based economy for the Greater Cincinnati region. Our purpose is to advocate for entrepreneurs leading high-growth tech startups– attracting, inspiring, and supporting them on their journey. The goal of Cintrifuse is to lower starting costs of business, especially businesses with the potential for high growth and that are disruptive technology. The Cincinnati Business Committee wanted to see how they could be relevant and formed Cintrifuse in partnership with the City of Cincinnati and EY. They wanted their kids to be able to come back to Cincinnati. The Cintrifuse Syndicate Fund is at $57 million and invests in VC firms outside of the region with the understanding they (VCs) create a regional engagement plan. There’s no stipulation that they invest in Cincinnati startups, but just be involved in the ecosystem. This includes reviewing deals, participating in events, and meeting our Limited Partners (LPs) most of whom they would love to meet with anyway – Procter & Gamble, Kroger, the University of Cincinnati, etc.”

She said, “We own and manage a 38,000 sq. ft. building in the economic area known as “Over the Rhine.” We got the building mortgage free, but put $17 million into improving the building. We opened in 2012. We provide services to 285 members companies – advisory services (such as mentoring and office hours), connections to talent, funding, and customers, as well as operating co-working space in downtown Cincinnati. We are part accelerator, part incubator, and part co-working space to move a company to the next ‘Lily pad’.

Ms. Lea added, ” The ‘headroom’ at Cintrifuse is wide. There is a strong appetite for new technology, new ideas, and disruption. Cintrifuse is a census taker – 300 startups are on our database across industries. We have brought is $160 million into the region for their startups, and we give them lots of exposure to VCs. One of our success stories is Everything But the House, which started in Cincinnati. They just raised $41 million, and Cintrifuse made the introduction to their investors.”

She explained, “Cincinnati has more Fortune 500 companies than anywhere else outside of San Francisco Bay area, so we created a Customer Connections program to share information between large companies and small companies. Our Customer connections program is taking 15 startups to Israel to present “innovation briefs.”

She would like to see Cintrifuse expand all over the world similar to TechStars in Boulder, CO with which she was involved when she lived in Boulder. She said, “Tech Star is the largest global network in the world with 28 centers, and their graduates have created 800 companies. Cintrifuse hosted their   reunion of graduates called FounderCon in the fall of 2016.”

The next day, I met Jordan Vogel, now V. P. of Talent Initiatives with the Cincinnati Chamber of Commerce, who worked for Cintrifuse for three years as director of the entrepreneurial ecosystem., He gave me more background information on Cintrifuse, saying, “It was created by Cincinnati Business Committee, composed of the top 30 CEOs in region and  the Cincinnati Regional Business Committee, composed of about 100 CEOs of somewhat smaller companies. When Chiquita left, the leaders became concerned and asked “What does the future look like? What should it be? They decided they needed to promote the next P&Gs of the world. Entrepreneurship was the key. They commissioned McKinsey & Company to conduct a comprehensive study on what would make the Greater Cincinnati region more attractive to startup entrepreneurs and outside investment. The study revealed the region’s strengths and gaps. Cintrifuse was formed to leverage the strengths and fill in the gaps. There are four universities in the region, but there was no path to commercializing technologies being developed”.

He added, “Funding was needed, so they created a fund of funds. They raised $78 of which $57 million went into a syndicate fund. To be part of the syndicate, Venture Capitalists had to commit to take a look at startups and be committed to engage with two to four trips per year to the region to meet with entrepreneurs. The purpose was to create a food chain.”

According to its StartupCincy Resources page, “Cincinnati lays claim to one of the most vibrant startup ecosystems between the coasts.” Home to The Brandery, one of the nation’s Top 10 accelerators; HCDC, the #1 incubator in the State of Ohio; CincyTech, one of the Midwest’s leading seed-stage investors; Queen City Angels, a private, seed-stage venture capital investor ranked #2 in the nation; four universities committed to innovation; and now the country’s only faith-based accelerator – there is a ton of innovation activity in this town!”

The Cintrifuse webpage lists the following accelerators as collaborative partners:

  • ArtWorks CO.STARTERS (formerly SpringBoard) “is a nine-week business development program that helps aspiring and seasoned entrepreneurs examine assumptions and turn business ideas into action.”
  • Bad Girl Ventures “is an educational and micro-finance organization dedicated to inspiring and supporting women entrepreneurs in all the key elements of their business.”
  • The Brandery “is a seed stage startup accelerator ranked as one of the top programs in the United States. It runs a 4-month program in Cincinnati, Ohio, focused on turning your great idea into a successful brand driven startup.”
  • First Batch ”It is a five-month accelerator that is the first business accelerator in the nation to focus on scaling physical product companies using local manufacturing. Cincinnati’s long history as a center for consumer products, branding, and manufacturing make it THE place for growing a business creating and selling tangible goods.”
  • MORTAR was started by three minority community members in the downtown area called “Over the Rhine.” “It is called ‘Mortar’ because people are the mortar between the bricks of the buildings and the founders believe that the neighborhood’s residents have the potential to create booming enterprises – just footsteps from their homes.”
  • Minority Business Accelerator – “its mission is to help accelerate the development of sizable minority business enterprises and to strengthen and expand the regional minority entrepreneurial community. It works with companies under $1 million in revenue to connect them with large companies who want to diversify their supply chain.”
  • Ocean is a faith-based “accelerator for startup growth by focusing on the purpose that drives founders…and their companies.”
  • UpTech “is designed to attract and accelerate entrepreneurs who have the next big idea to make the world a better place. Its mission is to create an informatics industry in Northern Kentucky. It is especially well suited to support entrepreneurs who benefit from our partnership with the NKU College of Informatics.”

It lists the following incubators in the Cincinnati region, which also collaborate with Cintrifuse:

  • bioLOGIC is a life sciences incubator.
  • Hamilton Mill “is a Southwestern Ohio small business incubator for green, clean, water, digital and advanced manufacturing technologies. Conveniently located between Cincinnati and Dayton in the original pioneer town of Hamilton, OH.”
  • Hamilton County Development Center (HCDC) “is a nationally recognized startup incubator in Southwest Ohio that helps entrepreneurs launch successful innovative businesses. It just spun off an accelerator called Pipeline for water product development.”
  • The Northern Kentucky ezone (NKY ezone) – “It works collaboratively with several organizations that provide funding assistance to fast-growth, high-tech companies. Its team will work with you in assembling the necessary information, plans, and presentations to apply for these opportunities.”

Over dinner at Cintrifuse, I met with the heads of three of the accelerators, Matt Anthony and John Spencer with First Batch and JB Woodruff with Uptech. Two entrepreneurs also joined us for dinner, Konrad Billetz, CEO of Frameri, and Paul Powers, CEO of Zoozler LLC and Physna LLC. Frameri makes the world’s first interchangeable prescription frame and lens system. Mr. Billetz was previously part of the Brandery four month accelerator program in 2013. He said, “We got $20,000 as part of the program, and then we did an Indiegogo crowdfunding and got about $100K to get into full production. We were on Shark Tank in 2015, but we turned down the deal we were offered. We found a lens manufacturer in Dallas, TX, but still do some production in-house.

Mr. Powers said, “Physna is a member of Cintrifuse. I started Physna in December 2015, and we are developing software that will lead the revolution in 3D printing. I am also the CEO of Zoozler LLC that is about two years old. Zoozler is a tech development company (including websites, apps, digital marketing and media) and has an initiative for local startups requiring help in tech development.”

I connected with Matt Anthony by phone after I returned from my trip to find out more about First Batch. Mr. Anthony said, “I founded the accelerator in 2013 to overcome the gap between a well made early prototype and being able to make the first batch of product at manufacturing scale. Over the next four years we grew the program to educate and connect entrepreneurs to overcome the additional hurdles to scale, including legal, marketing, distribution, and more. We’re unique nationally in that we’ve focused on utilizing the strength of our local manufacturers, which tied with the heritage in physical consumer products and branding make for a perfect set of resources to grow new physical product companies. We operate out of a 10,000 sq. ft. maker space on the 4th floor of a former brewery, located in the “Over the Rhine” area. The program itself is five months of rigorous learning from regional experts, product testing, development, one-on-one mentorship, and $10,000 in funding to get into actual production. Companies must all come in with a working prototype and an understanding of their business to really get the most of the five short months. Some of our companies have been making their product for years and are looking to expand their production beyond themselves. The goal of the program is to get the companies into the first stage of production and actually selling products in order to set them up for future growth and funding.”

For example, one of their companies, Textile House, used the funding to make a couple hundred garments for their fall fashion line. They already raised an additional round of funding through a Kiva micro loan to bring their spring line to market in early 2017.

 

He added, “We started out with two companies in 2013, four in 2014, five in 2015, and six this year. We started this year in June and our 2016 class just culminated in a Demo Day on November 9th. We try to check in with graduates to continue to ensure growth, and about half of the companies each year choose to stay on as members of the maker space.”

When I asked him to describe how their program works, he said, “After an open application, our companies are selected through a series of interviews that end in a final juried selection. Once the program starts our cohort meets as a group twice a week, and one-on-one at least once, often with speakers, manufacturer visits, branding support, and other individual consultation sprinkled in between. We start the week on Monday mornings reviewing business concepts and readings, ranging from learning more about the types of entrepreneurial personalities via E-Myth, and later how to start prototyping and quickly testing product ideas via Lean Startup and marketing channels via Traction. We are primarily funded through grants and donations of time and materials, and don’t currently take an equity position in our companies. We look to help grow companies by connecting to resources down the line from ECDI, Queen City Angels, Cintrifuse, even other accelerators.”

With so many accelerators and incubator programs to nurture startup companies, Cincinnati is off to a good start to achieve its goal of re-industrializing the Cincinnati region. Other cities in the United States that were formerly major industrial centers would do well to follow the example of Cincinnati in setting a goal of re-industrializing their city to create more higher paying jobs and restore prosperity.

 

Cutting Edge Technologies Power Cincinnati Industries – Part 2

December 11th, 2016

T, sensDuring the second day of my visit to Cincinnati, Ohio November 1st – 4th, I had the pleasure of meeting with Tony Canonaco, CEO, and Tom Rosenberg, Director of Marketing, at Balluff’s North American headquarters based in Florence, Kentucky.

Mr. Canonaco said, “With over 50 years of sensor experience, Balluff is a leading global sensor specialist with its own line of connectivity products for every area of factory automation. Our global headquarters is based in Germany, and our North American headquarters was established in Florence, KY in the early 1980s. Our products include  a wide variety of sensors, mechanical limit switches, rotary and linear measurement transducers, machine vision and RFID systems, and distributed modular I/O network solutions.  Our products are involved in making the Industrial Internet of Things (IIoT) work.”

As we toured the plant, I saw their sensors being used right on their own production and packaging lines, as well as for inventory control of finished goods. With IIoT’s promise of total visibility, we saw a great example right on their plant floor. IO-Link technology, an advanced point-to-point connection technology, was integrated into all their automated systems providing operators and management a continuous view of the process. With faster response to workload variations, Balluff now has a much leaner operation. Lean examples were also evident in their single-piece flow work cells. Products were produced in a surprisingly small footprint with high efficiency.

Mr. Canonaco said, “Many of our internal transitions towards Lean began during the recession in 2009. It was during this time, we realized that in order to better compete in the future, we needed to eliminate all types of waste and raise the level of productivity of the company. In addition to the change in their own mindset, we accelerated our New Product releases that focused on Automation and Sensing Solutions to help our customers shrink the size of their control panels, reduce their engineering time, and speed up troubleshooting on their machines. We started our journey to become “Leaner” and our customers were provided with new products to help them realize performance and productivity machine enhancements as a result of the recession. Nearly a decade later, this path has proven to be a win-win for us and our customers.”

An additional customer-focused effect of their Lean journey is with one of their most watched metrics inside of Balluff ? On Time and In-Full Delivery to the customer promise date. They consistently plan to achieve greater than 97%.

When I asked if they had a problem of finding people to hire with the right skills, he responded, “Finding people with the right skills and the right mindset is always a challenge and makes all of the difference. We require production associates for manufacturing as well as engineers who work in technical sales, marketing, support, and operations. We are involved with local work force development efforts to help ourselves as well as surrounding manufacturing neighbors. Balluff is an active supporter of National Manufacturing Day to highlight the attractiveness of manufacturing as a career choice. This has proven to be very popular with local middle and high schools. We utilize co-op students from select universities and have started our own Technical Sales Training program for recent college graduates that focus on how to best help manufacturers apply automation in innovative ways.”

We have our own accredited laboratory and a quality management system certified according to ISO 9001:2015 to form a secure foundation for optimized added value for its customers.

Our products increase performance, quality and productivity around the world every day. They satisfy prerequisites for meeting demands for greater performance and cost reductions on the global market. We deliver state-of-the-art solutions no matter how stringent the requirements may be.”

Our last plant visit was to TSS Technologies, located in West Chester, Ohio where we met with CEO, Marc Drapp, followed by a tour of the facility. TSS Technologies provides complex electro-mechanical assemblies and turnkey contract manufacturing solutions to the aerospace, life sciences, energy, semiconductor, solar, sports, consumer, automotive, as well as food and beverage sectors. TSS also builds automation equipment for themselves and other companies.

Mr. Drapp said, “TSS Technologies has been in business for over 65 years and is family owned and operated. We have a machining facility totaling 110,000 square feet and an assembly facility totaling 210,000 square feet. We have approximately 225 employees. We are ISO 9001:2008 and 13485:2003 Certified, as well as AS9100C Certified and won the GE Healthcare Excellence award.”

As we toured the plant, we saw examples of many of the above products being assembled or being staged for assembly for a couple new products coming online. Contrary to most contract manufacturers, Mr. Drapp likes to get involved with early stage companies to help them get into batch production and ramp up to full production. We saw a complete “bakery” producing shelf-stable pretzels that is an example of working with a start-up company to ramp up into full production within his facility. We each gratefully accepted two packaged pretzels and shared one when we returned to the conference room.

When I asked Mr. Drapp how the Great Recession had affected them and what they did to recover, he said, “The recession was tough on our company, especially our machine shop. We lost a lot of contract machining work to our customers that brought the work back inside their plants. On the other hand, it really allowed for us to right size our operation and allow for us to be more nimble in the coming years.

We capitalized on the tough times by reorganizing our structure and tightening our manufacturing processes. This allowed us to become more lean and efficient. Ultimately allowing us to come out of the recession quicker and better able to respond to customer needs.

The recession really allowed for us to take a look at TSS and what we wanted to be. It allowed us to focus on the right customers for our business. It also allowed us to focus on the right areas for growth. From a lean perspective, we have always practiced lean manufacturing. The recession didn’t really change that.”

From these stories, we can see that cutting-edge technologies and unique capabilities have been the key to these three companies surviving the Great Recession and now thriving. The rebuilding of manufacturing in the Cincinnati region is being  helped by the innovative technologies being developed at the University of Cincinnati and the other three regional universities and colleges. The collaboration of public and private entities and far-sighted leaders will enable Cincinnati to achieve their vision of re-industrialzing Cincinnati to create jobs and prosperity.