Mixed Messages at San Diego’s Economic Outlook Events

February 9th, 2016

Economists and industry experts presented conflicting outlooks at the three of the Economic Outlook events held in San Diego this month. I attended two of the three ? the 32nd Annual San Diego County Economic Roundtable and the San Diego 2016 Economic Outlook by the National University Institute for Policy Research ? and read about the third, the San Diego Business Journal (SDBJ) Economic Trends event.

The SDBJ event focused on the areas of expertise of industry panelists in banking, health care, insurance, commercial real estate, tax, and employment, which is why I did not attend this event. If you are involved in these industries, then you were happy to hear that these experts forecast a healthy year for San Diego with the U. S. economy growing about 2.5%. Home prices have increased, consumer spending is growing, wages are increasing, and commercial real estate vacancy rates are below the 10-year average.

The other two events paid more attention to the manufacturing sector in which I am involved. Marney Cox, Chief Economist for the San Diego Association of Governments (SANDAG) participated in both events, and he and Kelly Cunningham, Chief Economist at the National University Institute of Policy Research (NUPR) were more cautious, forecasting a more modest 1.9% growth in the region, 2.1% in California as a whole and only 1.8% growth in the U. S.

Kelly Cunningham stated that it took us 74 months after the last recession to get back to the job level we had in 2007, which was two to three times as long as the recessions of 1980-81, 1990-91, and 2000-2001. The average GDP growth after these three previous recessions was 4-5% annual growth, but the U. S. GDP has grown an average of only 2% since the Great Recession. At the SDWP event, Marney Cox opined that the regional GDP growth should be >3%.

San Diego is adding jobs faster than the rest of California, and he forecast that the San Diego unemployment rate would remain at the low of 4.8% reached in December 2015 compared to 5.8% for California. He emphasized that this is the commonly used U3 rate of employment, not the U6 rate that includes part-time and discouraged workers. The U6 rate is about double the U3 rate, and was 9.8% in December 2015. However, the U3 rate doesn’t include people who have dropped out of the labor force. At the SDWP event, Marney Cox stated that 698,000 people had dropped out of the labor force in San Diego since 2005.

What concerns me is that manufacturing is only 9.5% of the regional GDP (based on 2014 data), up from the low of 7.6% of GDP in 2008. This is still considerably down from the high of 30.1% in 1980. It had slipped to 24.8% by the end of 1999, but that is less than a 6% loss in 19 years, whereas we have now dropped another 15.3% in 15 years. Also, San Diego’s GDP dropped from 7th in 1999 to 17th in ranking of the top 35 metropolitan areas in the U. S.

According to NUPR report, San Diego has “added 7,000 manufacturing jobs back as 2015 ended. Half of the new manufacturing jobs are in non-durable goods, one-quarter in aerospace, and the rest among other durable goods production, including shipbuilding and recreational goods…” However, this is about 5% or 6,000 fewer jobs than we had in 2007 (102,400) and more than 26,000 fewer jobs in manufacturing than we had in 1999 (128,300).

Since you have to make it, grow it, or mine it to generate tangible wealth, it is questionable whether or not San Diego can even maintain its level of prosperity in the future. Agriculture did not even show up on the pie chart of GDP for San Diego, and natural resources only represented .5% of the GDP. Thus, it is critical that San Diego maintain a strong manufacturing base. Manufacturing jobs create 3-4 other support jobs, while service jobs only create 1-2 other jobs.

Construction dropped from 3.8% of the region GDP in 2008 to only 3.3% at the end of 2014, but there has been very little recovery in the number of construction jobs as the number of jobs is still down by 12% from what the number was in December 2007. The NUPR report stated, “In 2016 we do not foresee a significant increase of this part of the economy, in part because of the

relatively small number of housing permits approved in the County. Absent a fundamental change of that figure, this part of the economy will continue to struggle.”

Since manufacturing and construction represent good paying jobs for the middle class, this explains why middle wage jobs are decreasing. The NUPR report released at their event defines “middle wage jobs as those paying between $35,000 and $77,000 per year in 2014 dollars” and states that “in 2001 middle wage jobs accounted for 56.6 percent of all payroll wage jobs…the ratio continued to shrink, standing at 49.5 percent as of 2014.”

Essentially in San Diego, we are creating six times more low paying jobs than high paying jobs and double the number of low paying jobs than middle wage jobs. Higher wage jobs “increased from 21.2 percent in 2001 to 26.2 percent by 2014,” and lower wage jobs “increased from 22.3 percent in 2001 to 24.3 percent as of 2014.”

This trend is nothing new. I remember Marney Cox expressing concern over the shrinking number of middle wage jobs at economic roundtables I attended in the mid 1990s.

Another trend Marney Cox mentioned is that the percentage of workers age 55+ has increased from 25% of the workforce to 35.1%, and there has not been a recovery in employment for those ages 25-54. Since these years are supposed to be the “golden years” of making money in a career, this does not bode well for the future for this age bracket. My own son and daughter are in this age bracket, and my son has had to work as an independent contractor since early 2010 without being able to find a permanent, full-time job in an occupation related to construction. Neither of my children has been able to afford to buy a house because with rents as high as they are, they can never save enough money for a down payment. Their dad and I were able to buy our first house in our mid 20s when houses cost about 3-4 times a median annual salary, but now they cost 9-10 times an annual median salary.

As I have mentioned in past articles, San Diego has been an innovation hub of advanced technology for the past 30 years, and we now have many startup companies at various stages of development in the more than 45 different accelerator/incubator programs in the region. This is why I was very concerned when Marney Cox stated that venture funding being invested in San Diego companies has greatly diminished. Last year, venture fund investment was <$One Billion and represented only 2% of national investment compared to 4-5% previously.

If this trend continues, it would have far-reaching effects. San Diego’s diverse industry clusters derived from technology-focused R & D have always helped the region perform slightly better than the rest of the country. However, if early stage companies cannot get venture funding beyond the Angel investor stage, it will be more difficult for them to ramp up into the full production stage where the majority of job expansion occurs. As a mentor for startup technology-based companies for the San Diego Inventors Forum and the CONNECT Springboard program, I am witnessing the increasing difficulty entrepreneurs are experiencing in getting investment funds. Crowdfunding is helping more companies get off the ground, but they will not be able to succeed in the long run and scale up to full production without significant Angel and venture funding.

San Diego’s economy cannot depend on military/defense spending and tourism for growth in regional GDP. Tightening defense/military budgets because of sequestration have been a drag on the San Diego regional GDP growth for the past three years, and the slight increase in defense spending in the current fiscal year budget will not make much of a difference.

These considerations are why I think that the conclusion reached in the NUPR report is valid: “World and national headwinds suggest battening down the hatches with a prognosis for tightening economic conditions…San Diego will be fortunate to achieve a seventh year of continuous positive economic momentum in 2016. These indicators of economic activity, however, do not portend an acceleration, but rather uneasy movement going forward.”

Based on the economic indicators I am seeing for the national manufacturing industry, I would say that these words of caution should also be applied nationally.

Is Reshoring Increasing or Declining?

January 21st, 2016

In December, two conflicting reports were released, one by A.T. Kearney and one by the Boston Consulting Group. The A. T. Kearney report states that reshoring may be “over before it began”, and the Boston Consulting Group report states that it is increasing. Why the difference in opinion and who is right?

This was the second report by A. T. Kearney, in which their “U.S. Reshoring Index shows that, for the fourth consecutive year, reshoring of manufacturing activities to the United States has once again failed to keep up with offshoring. This time the index has dropped to –115, down from –30 in 2014, and it represents the largest year-over-year decrease in the past 10 years.”

In fact they conclude that “the rate of reshoring actually lagged that of offshoring between 2009 and 2013, as the growth of overall domestic U.S. manufacturing activity failed to keep pace with the import of offshore manufactured goods over the five-year period. The one exception was 2011.”

The authors of the A. T. Kearney report identify the two main factors contributing to the drop in the reshoring index to be “lackluster domestic manufacturing growth and the resilience of the offshore manufacturing sector.”

With regard to the lackluster domestic manufacturing, the report states that data from the U. S. Bureau of Economic Analysis predicted that U. S. manufacturing gross output would shrink by 3.6% through the end of 2015 based on data through November [December data not available.]

On the other hand, the Boston Consulting Group survey results showed that “Thirty-one percent of respondents to BCG’s fourth annual survey of senior U.S.-based manufacturing executives at companies with at least $1 billion in annual revenues said that their companies are most likely to add production capacity in the U.S. within five years for goods sold in the U.S., while 20% said they are most likely to add capacity in China…The share of executives saying that their companies are actively reshoring production increased by 9% since 2014 and by about 250% since 2012. This suggests that companies that were considering reshoring in the past three years are now taking action. By a two-to-one margin, executives said they believe that reshoring will help create U.S. jobs at their companies rather than lead to a net loss of jobs.”

The difference of opinion is based on different data. A. T. Kearney notes that “The manufacturing import ratio is calculated by dividing manufactured goods imports from 14 Asian markets [list of countries] by U. S. domestic gross output of manufactured goods. The U. S. reshoring index is the year-over-year change in the manufacturing ratio.”

In contrast, the Boston Consulting Group data is based on “an annual online survey of senior-level, U.S.-based manufacturing executives. This year’s survey elicited 263 responses. The responses were limited to one per company…Respondents are decision makers in companies with more than $1 billion in annual revenues, across a wide range of industries.”

“These findings underscore how significantly U.S. attitudes toward manufacturing in America seem to have swung in just a few years,” said Harold L. Sirkin, a BCG senior partner and a coauthor of the research, which is part of BCG’s ongoing series on the shifting economics of global manufacturing, launched in 2011. “The results offer the latest evidence that a revival of American manufacturing is underway.”

The BCG survey identified such factors “as logistics, inventory costs, ease of doing business, and the risks of operating extended supply chains” are driving decisions to bring manufacturing back to the U.S. The primary reason for 76% of respondents reshoring production of goods to be sold in the U.S. was to “shorten our supply chain…while 70% cited reduced shipping costs and 64% said “to be closer to customers.”

The reasons cited by the BCG survey are consistent with the case studies that the Reshoring Initiative has captured, but the reshoring trend over the last few years has also been driven by a range of factors including rising offshore labor rates, especially in China, as well as the increased use of Total Cost of Ownership analysis to quantify the hidden costs of doing business offshore. The threat of Intellectual Property theft, cost of inventory (space to store and cost to buy larger size lots to get the “China price,) and quality/warranty/rework are also cited frequently. Longer delivery, cost and time of travel to visit offshore vendors, transportation costs, and communication problems also influence the decision to reshore.

About 60% of companies ignore these hidden costs and only look at wage rate, quoted piece price or at best, landed cost. Because of inaccurate data, many companies make the decision to offshore on the basis of faulty assumptions. The reality is that many companies are saving less than they expected, and in some cases, the hidden costs exceed the anticipated cost savings.

As an authorized speaker for Harry Moser’s Reshoring Initiative for the past five years, I have been conducting my own informal surveys of manufacturers that I meet at trade shows and conferences. Most of these companies are Tier 2 or 3 suppliers of assemblies, sub-assemblies and component parts. Each year, more and more companies have told me that they are benefitting from reshoring.

At the trade shows I attended last year and conducted my informal survey, I didn’t meet a single company that hadn’t gotten new business or recaptured an old customer because of reshoring. I believe that there is a great deal more reshoring going on than A. T. Kearney or even the Boston Consulting Group can quantify because it isn’t a whole product. It is an assembly, subassembly, or component part, such as metal stamped part, machined parts, sheet metal fabricated parts and assemblies, plastic and rubber molded parts, printed circuit boards, etc.

I now have slides for 300 case studies of companies that have reshored in the last six years provided to me by the Reshoring Initiative to use in my presentations. I can tailor my presentation to include slides for particular industries or geographical location. For example, when I spoke at the Lean Accounting Summit in Jacksonville, Florida in October, I shared case studies of companies that had reshored to the Southeast and when I spoke at the Design2Part show in Pasadena later that month, I shared case studies for companies that had reshored to California.

The Reshoring Initiative estimates that “if all companies used Total Cost of Ownership (TCO) analysis, 25% of the offshoring would come back.” Their data reveals that about 100,000 manufacturing jobs have already been reshored in the last six years. Harry Moser states, “Excess offshoring represents an economic inefficiency that can be corrected at low cost. It is less expensive to educate companies than to incentivize them.”

During a recent conversation with Harry Moser, he said, “The economic bleeding due to increasing offshoring has stopped. The rate of new reshoring is now equal to the rate of new offshoring. The challenge is now to reshore the 3 to 4 million manufacturing jobs that are still offshored.” He provided me with the following chart to use in the presentations I gave last fall:

  Manufacturing Jobs / Year
  2003 2013 % Change Feasible 2016
New offshoring * ~150,000* 30-50,000* – 70% 20,000
New reshoring    2,000* 30-40,000** + 1,500 % 70,000
Net reshoring -148,000 ~0 -100% +50,000

*Estimated / ** Calculated

In the past, corporate cultures, supply chain reward systems, and investment have been heavily focused on offshoring. Many companies followed each other offshore in what Harry and I call “herd behavior.” We are endeavoring to change the mindset from offshoring is cheaper to sourcing domestically may be the better choice.

Another way would be to change the way buyers/purchasing agents in supply chain groups are being evaluated and rewarded on the basis of their success in achieving purchase price variance; i.e., selecting sources on the basis of the cheapest price. Chief Financial Officers need to allow their company’s supply chain department to utilize expenses in the other accounting categories that need to be taken into consideration in doing a Total Cost of Ownership analysis, such as transportation costs, travel and communication costs related to the supply chain, and the cost of quality problems related to rejected parts and reworking of salvageable parts.

Transforming to the value stream method of Lean Accounting would also facilitate being able to do a Total Cost of Ownership analysis more than Standard Cost Accounting because all of the costs related to that value stream are put into the category of Conversion costs and not put in the separate accounting categories of standard cost accounting.

The reality is that companies will only bring back the majority of offshored work if the economics of producing in the U.S. improve. The actions needed for more reshoring are the same as needed for manufacturing in general. These include developing a national manufacturing strategy that encompasses skilled workforce training, corporate tax reform, regulatory reform, and Border Adjustable Taxes (aka VATs) while addressing the predatory mercantilist practices of other countries with regard to currency manipulation, product dumping, and government subsidies.

Let’s return to the question of the status of the reshoring trend. The government keeps no related data. ATK tries to measure reshoring indirectly by measuring imports. It would be better to measure the actual phenomenon. BCG uses surveys of reshoring plans, but companies’ actions often differ from plans. The Reshoring Initiative counts the actual reshoring cases and jobs reported in the media and privately by companies. Readers can help resolve the dispute by reporting their cases of successful or failed reshoring to Harry Moser or to me, so I can write about them in future articles.

Louisville Knocks Manufacturing out of the Park

December 31st, 2015

In mid-November, I had the pleasure of touring manufacturing plants in the Louisville, Kentucky region as the guest of the marketing consortium of the Greater Louisville Inc. Initiative. Well-known as the home of the Louisville Slugger baseball bat and the start of the “Bourbon Road” tours of bourbon and rye whiskey distilleries, Louisville has a much more diverse manufacturing base than I expected. My hostesses for the plant visits were Eileen Pickett and Ceci Conway, members of the marketing consortium.

Our first visit was FirstBuild, which is a partnership between GE Appliances and Local Motors. We met with Director Venkat (Natarajan Venkatatakrishman) and Randy Reeves of Operations. Venkat said that they are creating “a new model for the appliance industry, engaging a community of industrial designers, scientists, engineers, makers and early adopters to address some of the toughest engineering challenges and innovations.” He explained that “Firstbuild’s mission is to invent a new world of home appliances by creating a socially engaged community of home enthusiasts, designers, engineers, and makers who will share ideas, try them out, and build real products to improve your life.”

The Microfactory is divided into four sections: an interactive space for brainstorming, focus groups and product demonstration, a lab for prototyping, a fabrication shop, and assembly area. In the interactive space, there were some current projects on display: a smart chillhub refrigerator with two integrated USB hubs, an easy-load double oven with a sliding drawer, a wall-mounted pizza oven for home use, and a micro kitchen. Randy Reeves gave us a tour of the fab shop, and besides the expected 3D printers, they have a CMC mill and lathe, a small turret press, a press brake, a small stamping press, and a laser-cutting machine. The shop is capable of producing up to 2,000 units per year of a new product.

Venkat said, “We test the market for a new product using innovative techniques including Indigogo for crowd funding and preordering of the products. If there is sufficient interest in a new product, we can then manufacture those designs in our Microfactory for rapid product introduction and iteration. We are pioneering the future of work with a new model for inventing, building, and bringing the next generation of major appliances to the market. Since we opened on July 23rd, 2014, we have launched 10 products, and one has been scaled up to mass production.”

After lunch, we visited D. D. Williamson (DDW), the world leader in caramel color and a leading provider of natural colors for major food and beverage companies. DDW’s natural colorings are used in everything from beer, malt ale, soft drinks, sauces, baked goods, cheese, ice cream, and confectionery products.

I was frankly astonished when Chairman and CEO Ted Nixon told me that the company had been founded in 1865 by Dutch immigrant Douw Ditmars Williamson in New York to manufacture burnt sugars for the brewing industry. He said that the company was well positioned to provide caramel color when the cola soft drink industry started and then expanded into colors for other products in the latter part of the 1900s. The company set up a plant in Louisville in 1948, and then moved its headquarters to Louisville in 1970.

Nixon said, “We set up our first plant outside of the U. S. in Ireland in 1978 to produce caramel for the European cola industry. Then, we set up a plant in Shanghai to manufacture caramel color for customers in Asia. In 1999, we began producing in Swaziland to supply customers in Africa, the Middle East and South Asia. In 2001, we opened a plant in Manaus, Brazil to service the South American market and acquired a company in Manchester, England in UK in 2004. Now we have nine plants on five continents.”

He added, “About ten years ago, we launched the first certified organic caramel colors in North America and added annatto extract, turmeric, paprika, and red beet to our natural color portfolio. Our lab is continually working on new natural flavors to keep us as the leading producer of natural colors.”

Our last visit of the day was to Peerless Distillery in downtown Louisville. Chairman Corky Taylor gave us a brief history of the company. He said, “The company was originally founded in 1881 by Elijah Worsham and Capt. J. B. Johnston as Worsham Distillery Company in Henderson, Kentucky. My great grandfather, Henry Kramer, purchased the company in 1889 after Mr. Worsham died and reincorporated as Kentucky Peerless Distilling Company in 1907. My great grandfather invested in new equipment and built the company up from 300 barrels of bourbon a year to a peak of 23,000 barrels in 1917. He stopped production when America entered WWI that year to aid in the conservation of corn for the war. Production did not resume after the war because prohibition went into effect. The 63,000 barrels in the warehouse were sold for medicinal use during prohibition. My great grandfather invested in and became president of First National Bank of Henderson. My dad went to military school and went in an army. During WWII, he was one of the aides to General Patton.”

I asked him what his prior career had been and why he chose to recreate Peerless, and he said, “I owned successful financial services that focused on designing pension systems for government agencies. About five years ago, I sold my business and retired to Sarasota, Florida. Walking the beach one day, I realized that being retired and boring was depressing and boring, so I moved back to Louisville to resurrect my great grandfather’s business and leave a legacy. I needed something to make life worth living.”

Corky’s son Carson was a building contractor and they hired an associate of his, Michael Vaughn, to rehab the building they selected in the historic downtown area being redeveloped. It took over a year to rehab the building, and they began production last February. Michael Vaughn stayed on as Operations Mgr. and is working to become a Master Distiller. Michael gave us the tour of the distillery and told us that it takes four years to age bourbon and two years to age rye whiskey, so they are producing moonshine in the meantime. They have developed unique flavors, and we were each allowed to have a half ounce of two flavors. As a virtual non-drinker, I liked the Green Apple and Chocolate the best. The moonshine is only 44 proof, about the same as wine, and it was a nice way to end our busy day.

The next day, we visited Amatrol, located across the river from Louisville in a 120,000 sq ft. headquarters plant in Jeffersonville, Indiana. President Paul Perkins said that his parents, Don and Roberta Perkins, founded the original parent company, Dynafluid, Inc. in 1964. He said the company started as a manufacturer of industrial automation systems for many Fortune 500 companies including Coca Cola, General Electric, Alcoa, Ford, Chrysler, and others.

Perkins said, “Many of our customers wanted help in training their employees to use and maintain the automation systems and other equipment we built, so Amatrol was created as the educational division of Dynafluid in 1978 and was formally incorporated as a separate company in 1981.” Amatrol, short for Automated Machine Controls, first provided training equipment to industrial and educational clients for new technologies like those being implemented in Dynafluid’s systems.”

Perkins said, “Amatrol was in a unique position to effectively develop training programs for these technologies because its engineers and technicians were thoroughly familiar with the design, application and maintenance of them. Since that time, Amatrol has grown significantly, becoming the leading company in our primary market segments.”

Over the years, Amatrol focused its business model by providing training equipment and highly engaging interactive multimedia online training software in the following areas for high schools, colleges, and private industry: Advanced Manufacturing, Biotech, Certified Production Technician, CNC Machine Operator, Construction Technology, Engineering Technology, Green Energy Technology, HVAC, Industrial Maintenance, Iron and Steel, Mechanical Maintenance, Mechatronics, Mining, Oil and Gas, Packaging, Power and Energy, Solar Technology, and Wind turbine technology.

Perkins said, “A key factor to our success is that we have a group of people who have developed a very close connection and understanding of the needs of our customers and a realization that satisfying the needs of our customers to make them successful makes our company successful.”

Our next visit was to Rev-A-Shelf, back in Louisville. Rev-A-Shelf was originally a division of Ajax Hardware in California. In 1978, it was established as a division of Jones Plastics and Engineering, a family owned injection molder of appliances parts, and other custom polymer components that now has five manufacturing facilities in Kentucky, Tennessee, and Monterrey, Mexico.

General Manager David Noe said, “We began making metal and polymer Lazy Susan components for some of the largest U.S. cabinet manufacturers. We are a family owned business with a national scope and a passion for innovation. We have grown our product line from Lazy Susans to Kitchen Drawer Organizers, Base Cabinet and Pantry Pull-Outs, functional Waste Containers, LED lighting systems and Childproof Locking System to become a market-leading innovator of quality, functional residential cabinet storage and organizational products. We have factories, warehouses and satellite offices strategically located to serve our expanding customer base of kitchen dealers, architects, furniture manufactures, cabinet industry distributors and retail home centers worldwide.”

We toured the assembly plant and didn’t visit their plastic injection molding facility down the street. The two buildings total 315,000 sq. ft. of space, and the company has about 250 employees. When I asked about Lean, Noe said, “We are currently implementing a comprehensive “Lean Manufacturing” initiative throughout the company. Our goals are to add value to our customers with quality, service, and innovation in everything we do. We are committed to a more functional and organized life for our consumers. Our Marketing Slogan is “We Are Going to Change the Way You Think about Cabinet Organization!”

The last company I visited on my trip was Dant Clayton that manufacturers bleachers and stadium grandstand structures. Founded in 1979 by Bruce Merrick, the company started out making bleachers for Little League ball fields and has grown to providing everything needed for up to 60,000 seat stadiums.

We toured the two production plants built next to the corporate headquarters of the Dant Clayton campus, consisting of 350,000 sq. ft. of production space, spanning 25 acres. The company has a full range of material finish capabilities in-house, including powder coating of steel and aluminum and blasted slip-resistant deck. It was astonishing to see 3 ft. X 12 ft. steel beams attached to hooks moving down the 600 ft. robotic powder coating line before entering the oven to cure. I have never seen such a large supply of aluminum extrusions anywhere. I am sure that having these capabilities and equipment internally allows for greater quality control and continuous improvement.

Merrick said, “For the first few years, we experienced 20% growth before flattening for awhile. Thereafter, we would experience growth spurts for two or three years, and during the growth spurts, we doubled the seating capacity of our bleachers from 500 to 1,000, to 2,000, to 5,000, to 10,000, to 25,000 and then 50,000.” Merrick explained that they “are the most competitive when they get involved at the design stage and provide engineering, construction management, and installation services.”

When I asked what are the key factors are that have led to his company’s success, he said, “A culture of continuous improvement that goes beyond lean manufacturing to include product development, R&D efforts, and discovering latent customer needs, as well as rigorous hiring practices, and a culture of personal development and accountability by all employees.”

The examples of commitment to excellence and continuous improvement displayed by the companies I visited in Louisville are what make America great. And, yes I did get to visit the home of the Louisville slugger between appointments. The company was wooed back from Indiana to set up their manufacturing plant right on the main street of downtown Louisville, and you can watch the bats being made through windows on two sides of the building and visit the museum that houses the model bats for all of the famous baseball sluggers.


CONNECT’s Most Innovative New Product Awards Feature Cutting Edge Technology

December 31st, 2015

On December 1, 2015, CONNECT presented its Most Innovative New Product awards to winners in eight categories at its 28th annual event at the Hyatt Regency Aventine. CONNECT is a premier innovation company accelerator in San Diego that helps startup 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 Ardea Biosciences, Cubic Corporation, and JP Morgan Chase & Company.

Under the new leadership of CEO, Greg McKee, CONNECT has refocused its vision for the future. In his opening comments, McKee said, “We enable and empower scientists and entrepreneurs to transform their ideas into products and services that change lives. We create and activate a powerful network of the world’s leading researchers, entrepreneurs and investors that have an innate drive to be purposeful in making the world a better place. The CONNECT experience elevates the value of this network to make San Diego the center of extraordinary and highly convergent technology. The people of CONNECT are dedicated, authentic, and passionately committed to making a difference in our region and the world. CONNECT’s community ignites San Diego’s position as a leader in the global innovation economy.”
He announced a new big goal to “build the next ten ONE BILLION DOLLAR COMPANIES” by 2025 to help grow the San Diego 200 billion dollar ecosystem to 300 billion dollars.” While admitting the goal is ambitious, he said it is important “Because companies of this size are the life blood of our community – they bring jobs, tax revenues, international recognition, sophistication, and most importantly, they are a magnet to the next generation of leaders. The more successful companies we can create, the stronger the gravitational pull to San Diego becomes.”

Continuing, he said, “But, San Diego’s entrepreneurs are no strangers to creating billion dollar companies. Just off the top of my head, there’s Illumina, Dexcom, Cubic, Care Fusion, Amylin, Idec, Life Technologies, Nuvasive, Callaway, Auspex, Viasat, Resmed, Cymer, Ardea, and I almost forgot that little startup  Qualcomm, just to name a few.” He concluded by saying, “This is the next generation of CONNECT, and if you are with me, if you believe that San Diego’s future depends on being a leader in the global innovation economy, then JOIN US!”

Over 100 companies applied for the Most Innovative Product Award this year. To be eligible, a company must have developed the product in the San Diego or Baja California region, introduced the product and generated revenue from sales between March 2014 and August 2015, and not have been nominated previously. A more than 60 member selection committee pre-screened the applicants and narrowed them down to 24 finalists, three in each of the following eight categories.

Aerospace, Security and Cyber Technologies

Ocean Aero won for its Submaran, which is a wind and solar-powered surface and subsurface vessel, designed for extended autonomous ocean observation and data collection. This unmanned vessel is changing how we observe our oceans because of its survivable and undetected ability to perform long-term data-gathering missions without the need to refuel or recharge.

CEO and President, Eric Patten said, “Ocean Aero is incredibly honored to receive this award, especially considering the competitive field of finalists.” He added, “This award validates the massive potential of the Submaran for the Ocean Aero team.”

The other finalists were Cubic Global Defense for its Javelin missile simulator and Tortuga Logic for its security software suite.


Q Factory 33 won for its B3 Bypass Device that facilitates 625% increases in energy potential of solar, wind, stationary battery backup systems and electrical generators and enables 30% increases in conductivity, five?fold reductions in soft costs and elimination of expensive electrical upgrades.

President and CEO Randy Hughes said, “CONNECT’s recognition of the potential of the B3 Bypass to overcome one of the solar industry’s most perplexing challenges — the bus bar limitations imposed on energy backfeed potential of solar, storage and wind systems across the board — lends another valuable validation to the relevance of our work to drive widespread adoption of clean tech solutions.”

The other finalists were Flux Power for its lithium-ion battery pack and Yulex for its plant-based, natural rubber wetsuit.

Communications and IT

Mushroom Networks won for its VOIP Armor, which if a “Voice over IP” gateway device that automatically heals and works around any network problems that otherwise negatively impact phone calls. You set and forget it for crystal clean phone calls with unbreakable reliability for your business.

“MIP Awards are the Oscar’s of the IT industry and is very important for our company as it confirms our innovative approach to bringing solutions to the market”, said Cahit Akin, Mushroom Networks CEO.

The other finalists were Field Logix for its innovative dispatching solution and the Lytx DriveCamTMVideo-based safety solution for commercial fleets.

Life Science Diagnostics and Research Tools

CureMetrix won for its CureMetrix image analysis platform that quantifies the qualities of anomalies in images. As a first target, CureMetrix is focused on doing early and accurate detection of breast cancer in mammograms along with reducing unnecessary biopsies.

CEO Kevin Harris said, “Winning the CONNECT Most Innovative Product Award in Life Sciences was no small feat since the companies in this category all have amazing teams and products. For us, this is one more bit of validation and recognition that were are working on something that is incredibly important and has the opportunity to change lives.”

The other two finalists were DermTech for its non-invasive adhesive skin biopsy kit and Gattaco for its CENTREPON Centrifuge Replacement Tool.

Mobile Apps

Chalk Digital won for its Instant Mobile Ad Platform that is a Do-it-Yourself advertising solution (portal and app) that builds locally target, affordable campaigns with mobile optimized landing pages within minutes. It offers businesses and consumers the ability to build, target, and launch their own personal advertisement in minutes that is displayed in thousands of mobile apps based on your location.

The other two finalists were Boost Academy for its one-on-one math tutoring and Cubic Transportation Systems’ mobile payment app for trains and buses.

Pharmaceutical Drugs and Medical Devices

PureWick won for its PureWick device that empowers women with safe and simple incontinence management in hospitals, nursing facilities and at home. A non-invasive, disposable wick comfortably moves urine away from the body providing a new standard of care without the need for catheters or specialized nurses.

PureWick President, Camille Newton, M.D. thanked the judges for “recognizing the disruptive elegance in something so simple and intuitive.” She also said that she hoped that the “award will help them get their product to market faster to help women to be dry, comfortable, and safe.”

The other two finalists were RxSafe’s robotic production of strip packaged medications and Tandem Diabetes Care for its t-flex® Insulin Pump.

Software and Digital Media

Comhear‘s MyBeam won for its MyBeam single, portable, wireless 12-18″ sound bar device that produces spatialized, localized, and binaural virtual surround sound. MyBeam delivers a fully immersive audio experience through a portable personal device that replaces headphones. The device commercializes a patent-pending algorithm that sends sound directly to your ears precisely the way your body was designed to receive it.

CEO Perry Teevens said, “CONNECT is an excellent organization and a great platform for innovative companies to gain recognition for their products. We are looking forward continuing our relationship with SD CONNECT and associated members of the organization. Making it to the finals and eventually winning this category has been a thrilling experience. I’m grateful to our employees and partners who made winning this award possible.”

The other two finalists were AristaMD’s Referral intelligence Platform and the SOCI for scoring the social web.

Sport and Active Lifestyle Technologies

Hush won for its Hush Smart Earplugs, which are the world’s first smart earplugs that help people sleep better in noisy environments. Combining a sound machine, earplug, and Smartphone connectivity, Hush allows you to drown out noises that keep you up at night, while simultaneously allowing you to hear the alerts and notifications you need.

Co-founder/CEO, Daniel Lee said, “Winning the MIP award has been a pretty incredible milestone for Hush. As we gear up to finally launch and ship out our long-awaited Hush product, winning such a prestigious award couldn’t have been more timely. As each week passes by, we become less of the college students with lofty dreams and more of a legitimate company with a legitimate product. The MIP award was a landmark milestone defining this maturation.”

The other finalists were the FORECAST new film system by Ride100% and the hookit scoring engine for athletes.

The final award of the evening was the William W. Otterson Award, CONNECT’s highest honor given to technology or a product that has demonstrated a significant impact on society and our quality of life. This year the award was given to the RQ-4 Global Hawk, developed by Northrop Grumman. “The RQ-4 Global Hawk is a high-altitude, long-endurance (HALE) unmanned aircraft system (UAS) designed to provide military field commanders with comprehensive, near-real-time intelligence, surveillance, and reconnaissance (ISR), plus detection of moving targets over a large geographical area for battle management, targeting, and situation awareness of enemy actions. The superior performance of the Global Hawk’s system significantly enhances the U. S. military’s ability to prevail in all types of operations from sensitive peacekeeping missions to full-scale combat.”

The event concluded after “Brennon Crist, Managing Director at JP Morgan Chase & Company, presented a $230,000 check to CEO Greg McKee to support CONNECT in the development of small business clusters in San Diego…Crist stated, We understand that many entrepreneurs are tackling some of the world’s biggest problems, which is why we support start-up accelerators like CONNECT who are making a dramatic difference in the way small businesses work and how they succeed.”

CONNECT is the oldest of the over 40 different accelerators or incubators in the San Diego region, which is one reason why San Diego ranks #2 in the world for the most patents issued. After 30 years leading San Diego’s innovation economy, 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 am honored to be a new member of the Mentor group after working with inventors for the last six years as part of the San Diego Inventors Forum, which is a “feeder” organization for CONNECT’s Springboard program for entrepreneurs.

Vogt Awards Make Entrepreneurs’ Dreams Come True

December 13th, 2015

I had the pleasure of witnessing the dreams of entrepreneurs come true when I attended the Vogt Invention and Innovation Awards Demo Day in Louisville, Kentucky on November 17thand watched Inscope Medical Solutions LLC, a Louisville-based startup, win $100,000 in grant funding.

Inscope Medical has developed an innovative laryngoscope, the OneScope, which integrates controllable suction and wireless video to provide a clear view of the vocal cords, improving the efficiency, speed, and safety of airway intubation.

The entrepreneurial team consists of CEO Maggie Galloway, chief scientific officer Dr. Mary Nan Mallory, and Chief Operating Officer Adam Casson, all of which are graduates of the Forcht Center for Entrepreneurship in University of Louisville’s College of Business.

Four other companies competed for the $100,000 grant during the Vogt Awards Demo Day. Each company had been awarded $20,000 in seed funding in August, which is non-dilutive, meaning no equity was taken. The $20,000 is designed to help the selected companies gothrough the program and maximize the value of the connections they are provided.It enables them to be able to create their first working prototypes via access to world-class resources.

Each company also received ten weeks of intense entrepreneurial training by the EnterpriseCorp staff and mentors, participated in a 10-week Lean Start-Up course by Nucleus and prototype development resources through the University of Louisville’s Rapid Prototyping, GE’s FirstBuild and LVL1 Hackerspace.

Winners also participated in Louisville Mini Maker Faire and were encouraged to network within the entrepreneurial community through Venture Connectors.

Upon completion of the program, companies then pitch their products at Vogt Demo Day. To have a chance to win an additional award up to $100,000 and meet with interested investors who can help take their business to the next level.

Lisa Bajorinas, Director of the Kentucky Innovation Network told me that the Vogt Awards are made possible by the Community Foundation’s Vogt Invention and Innovation Fund. During the 16 years of the program, nearly $2.5 million has been awarded to 50 companies. The program is administered by the entrepreneurial arm of Greater Louisville Inc., EnterpriseCorp, which is focused on assistance for entrepreneurs.

Lisa said, “The late Henry V. Heuser Sr., a native Louisvillian and founder of the Henry Vogt Machine Company, created a $5 million endowment at the Community Foundation to support local entrepreneurship shortly before his death in 1999. Henry had been able to use the equipment on his shop floor to assess the viability and commercial potential when he had an idea about how to make something better, quicker, or easier. He wanted to establish an award that would allow engineers and entrepreneurs access to the same kinds of resources.”

The four runners-up included:

Hue Innovations LLC – developed MiColor, a machine that includes a scanner, polish shaker, and ink that customizes creation of any non-toxic regular or gel nail polish color on demand for nail salons to reduce wasted polish, lower toxicity levels for salon workers, and enhance customer satisfaction by providing more color choices.

Stinger Equipment – created a concrete saw with its own engine and dust collection that safely cuts large blocks in a single pass eliminating fatigue, dangerous cuts, and exposure to lung cancer caused from silica dust inhalation.

Sunstrand – supplier and processor of value-added bio-material for domestic polymer composites using a proprietary line of bamboo and applied to hemp, kenaf, flax and jute offering increased potential to decrease weight and green-up plastics.

TriBlue Engineering Corporation – created a gas sweetening unit that allows natural gas processing plants to remove unwanted CO2 and H2S from their lines to make processing sour gas more economical and allows additional revenue streams to be made available because of the improved quality of the by-products.

The day after the Vogt Demo Day, I had lunch with Maggie Galloway and Adam Casson of Inscope Medical. Maggie explained that she and Adam had been MBA students at the University of Louisville and met Dr. Mary Nan Mallory, also studying for her MBA. They were assigned to form a team to find a problem and solve it. Dr. Mallory and her colleague, Dr. Thomas Cunningham, had experienced a failed intubation in the past and wanted to develop a better laryngoscope.

Maggie said, “Dr. Mallory and Dr. Thomas Cunningham, who was a resident physician in the Department of Emergency Medicine at University of Louisville, had the idea for the technology, so the University of Louisville filed the first patent on the device which they are licensing to Inscope Medical.” She said, “The OneScope streamlines the intubation process for physicians and emergency medical practitioners by combining the laryngoscope and the suction catheter so that physicians don’t have to juggle multiple tools.”

Maggie said, “The FDA just issued a recall of some of the equipment used to clean reusable scopes in hospitals, so there will be a big incentive to use disposable devices. Our OneScope is disposable. Maggie added, “About 25 million intubations occur in the U.S. each year and 50 million globally.”

Adam Casson said, “We’ve done more than 650 customer discovery interviews and more than 300 interviews with clinicians, including design feedback from more than 50 paramedics and Emergency Physicians. Our second generation device will also integrate a wireless video camera which will allow physicians to view the placement on a nearby screen.”

After returning home, I found out that the Vogt Award wasn’t the first award that Inscope Medical won. In February 2015, they won the Brown-Forman Cardinal Challenge and “received a ‘launch in Louisville’ package that is valued at $100,000. The package, provided by EnterpriseCorp includes services from various Louisville businesses as well as $15,000.”

“The Brown-Forman Cardinal Challenge brings top teams of graduate students to Louisville, where they compete for the prize and an invitation to the Global Venture Labs Investment Competition in Austin, Texas, in May,” said Van Clouse, the Cobb Family professor of entrepreneurship at U of L.

According to an article in the Louisville Business Journal, Inscope Medical participated in the Global Venture Labs Investment Competition and won another competition, on Saturday, May 9, 2015. “Among the prizes, Inscope Medical won $75,000, an invitation to close the NASDAQ OMX Stock Market, and a $25,000 incubator package….” The same article mentioned that Inscope Medical’s entrepreneurial “team had a second-place victory at the Rice Business Plan Competition in Houstonin April 2015, where it won $133,000. Prior to that, Inscope Medical took home third place and $4,000 at the Oregon New Venture Championshipin Portland, Ore.”

The number of awards won by Inscope Medical’s entrepreneurial team is impressive. As a director of the San Diego Inventors Forum (SDIF), I know of many startup companies in San Diego that would be very envious of Inscope Medical’s success in obtaining this amount of funding without having to dilute their ownership. Our 2015 SDIF Invention contest awarded cash prizes of $1,000, $500, and $250 to the top three winners in August. How nice it would be to have a multi-million dollar endowment to award ten times the amount we awarded!

As an alumnus of San Diego State University, I have attended the annual Venture Challenge Competition conducted by the Lavin Entrepreneurship Center at SDSU, which is the only other formal entrepreneurial contest of which I am aware in the San Diego region. The SDSU competition has showcased next generation companies for more than 20 years and provided students from around the world an opportunity to seek investment for their business ideas. Four years ago, the Venture Challenge transformed into the LeanModel™ Competition. “This new “business model” based competition focuses much more attention to testing a company’s assumptions and getting customer feedback in the early days of the startup.”

The 2016 LeanModel™ Competition will be on Friday, March 4th, and Saturday, March 5th, 2016 on the SDSU campus.” The LeanModel™ Competition is not a traditional business plan competition, it is designed to assist and reward student based start-ups that utilize both a solid business model and customer testing mentality.

“Teams will be competing for prizes totaling $20,000 in cash and inkind services. The top three teams in the competition will be awarded prize money. In addition, the small pitch event winners will also be awarded prize money. In the 2015 Competition, the top three teams won $7500, $4500, and $2500 in cash prizes respectively. The top three small pitch event winners took home cash prizes ranging from $500 to $1500.”

The companies competing in the Demo Day are examples of American inventiveness, but the most difficult challenge for any startup company is to raise enough money to get their product to market. The Vogt Invention and Innovation Awards set a standard that should be emulated by other regions of our country to enable more companies to succeed, grow, and create more manufacturing jobs in the United States.


CPA Releases Competitiveness Strategy for the United StatesCPA Releases Competitiveness Strategy for the United States

November 20th, 2015

For several years, organizations and elected representatives in Congress have proposed developing a national manufacturing strategy. For example, the Information Technology& Innovation Foundation (ITIF) released a report, “The Case for a National Manufacturing Strategy,” in April 2011 and the Alliance for American Manufacturing has repeatedly put forward a “Plan to Save Manufacturing,” calling for a national manufacturing strategy to reverse the decline in U.S. manufacturing and the good jobs that come with it. Bills sponsored by Illinois Rep. Dan Lipinski (D) have even passed the House of Representatives, but have died in the Senate.

On November 11th, the Coalition for a Prosperous America (CPA) released “A Competitiveness Strategy for the United States – America at a Crossroads,” which addresses other sectors of our economy in addition to manufacturing.

“America needs to start winning again,” said Michael Stumo, CEO of CPA. “That is why the mission of the Competitiveness Strategy is to:

‘Win the international competition for good jobs, sustained real economic growth and prosperity with a national strategy to counter foreign mercantilism, balance trade and grow strong domestic supply chains.’”

“Across the USA, localities and states employ plans to attract jobs,” said Brian O’Shaughnessy, CPA Chief Co-Chair and Chairman of Revere Copper Products. “Other countries have sophisticated national strategies to acquire industries and bring good paying jobs to their countries. The USA has no comprehensive national strategy for domestic production and good paying jobs to guide trade negotiators and administration officials.”

CPA’s Competitiveness Strategy argues that:

The United States is losing an economic competition against other nations whose mercantilist strategies are destroying our manufacturing jobs, critical industries, our standard of living, our national security, the security of our food supply, and our children’s futures.

The threat to the U. S. economy and national security is grave. Other trading nations are using comprehensive strategies to import jobs across all economic sectors, but are particularly focused on strategically significant technologies and industries. American companies in these sectors face not only wide-ranging mercantilist practices and non-tariff trade barriers such as currency manipulation, tariffs and subsidies, but also much more sophisticated and specific strategies aimed at identifying, acquiring, or otherwise controlling critical technologies.

CPA’s strategy holds out the promise that the U. S. is in control of its own destiny and can re-assert itself as a great manufacturing and producing nation with a rising standard of living for all. We can develop and implement a comprehensive strategy that retains and reinforces our leadership in innovation, locates investment and production in the United States, and raises employment by creating good paying jobs.

The ultimate mission of the strategy is to win the international competition for good jobs and sustained economic growth. The mission recognizes we are in competition with other countries. The Competitiveness Strategy includes nineteen action steps focused upon three interrelated goals:

  1. Identifying and countering foreign mercantilist strategies that grow their economies at the expense of other countries through achieving a persistent trade surplus
  2. Balancing the national trade deficit
  3. Growing domestic supply chains

“All three goals are interrelated and must be pursued together,” continued Stumo. “The President rightfully created the National Network for Manufacturing Innovation to grow domestic supply chains, but the effort cannot succeed unless we combat powerful foreign tactics to take those industries away. Further, a new effort to counter foreign mercantilism and trade cheating is essential, but must have the goal of balancing trade to be fully effective.”
“Additionally, balancing trade is essential, but merely exporting raw materials is insufficient. American must grow and retain a diverse array of industries that add value to our products and create good jobs, with special attention paid to advanced and critical industry supply chains,” Stumo concluded.

CPA’s competitiveness strategy shown below is succinct, yet comprehensive:

“Identify and counter foreign mercantilist strategies that grow their economies at the expense of other countries through achieving a persistent trade surplus

  1. End both currency exchange rate imbalances and the accumulation of excessive US dollar holdings by non-US public and private entities.
  2. Impose offsetting tariffs to neutralize foreign government subsidies to industries and supply chains that compete with ours.
  3. Counter foreign government policies that force offshoring by conditioning access to their markets on transfers of technology, research facilities and/or production to their countries, as well as compliance with export performance and domestic content requirements, while their exporters have access to US markets without these conditions.
  4. Ensure that foreign greenfield investments in the US and acquisitions of existing US companies provide a clear “net benefit” to the US with special scrutiny in cases of state influenced foreign entities.
  5. Protect US food security from foreign government tactics to seize markets.

Balance trade

  1. Offset cumulative trade deficits of recent decades and excessive accumulations of dollar reserves through sustained trade surplus to ultimately achieve a long term overall trade balance.
  2. Insure that the composition of trade includes a substantial trade surplus in high value added and advanced manufactured goods.
  3. Make the US workforce more cost competitive by promoting fair pay, rising living standards and safe working conditions for workers everywhere.
  4. Reduce US producers’ trade disadvantage through tax reform which finances the reduction of payroll taxes and health insurance costs with a border adjustable consumption tax in a revenue and distribution neutral manner.
  5. Lower corporate tax rates and end corporate inversion and profit shifting tax avoidance by taxing the income of unitary business groups, whether domestic or foreign, based upon proportion of global sales in the US.

Grow Domestic Supply Chains

  1. Preserve and develop domestic manufacturing and agricultural supply chains to maximize value added production in the US.
  2. Develop, build and maintain a world-class land, water, air, communications and energy infrastructure.
  3. Safeguard our military strength and national security by insuring that critical technologies, weapons & IT components are developed and manufactured in America by American controlled companies.
  4. Develop, commercialize and retain strategic and economically significant advanced technology and grow their manufacturing supply chains in the US.
  5. Increase public support for, and incentives for private investment in, basic and applied research, infra-technologies and new product and process technologies.
  6. Continually raise the competitiveness of American workers by improving Science, Technology, Engineering and Math (STEM) education available at all levels, systematically enhance lifelong learning for existing workers, and fostering a national system of apprenticeship and paid internships through collaborative public-private endeavors that are connected to actual opportunities in the labor market.
  7. Raise the competitiveness of small and medium sized domestic enterprises by increasing long-term private sector financing, the sharing of research on common issues and the diffusion of new technologies and production methods.
  8. Preserve our right to adopt and enforce domestic policies that insure the quality of our food and goods, and protect the health, safety and general welfare of our citizens without restrictions from international trade agreements.
  9. Ensure that domestic manufacturing and agriculture benefit fully from an expanded supply of low cost US produced energy”

Anyone involved in efforts to revitalize American manufacturing already has a bookshelf full of books, studies, and reports containing recommendations on a national manufacturing strategy. My book, Can American Manufacturing Be Saved? Why we should and how we can has a chapter on “How Can We Save American Manufacturing?” that contains a summary of the recommendations of many organizations as well as my own recommendations, which I incorporate into articles and presentations whenever possible. As chair of the California chapter of CPA, I plan to incorporate this competitiveness strategy into future articles and presentations whenever possible.

The brilliance of CPA’s strategy is that it is not limited to manufacturing and is not a “to do list” of actions to take. The Competitiveness Strategy will work best when pursued as a whole. The three objectives are interrelated because, for example, we cannot balance trade without growing domestic supply chains to produce more, and add more value in the U. S. We cannot grow domestic supply chains unless we neutralize foreign mercantilism (trade cheating) that offshores otherwise competitive industries that we started and developed in the U. S. We cannot address foreign mercantilism without the guidance of a balanced trade objective.

Businesses must have a strategic plan to start and grow. This strategic plan guides the business with regard to product development, finance, marketing, production, procurement, etc. Many other countries have an economic strategy to grow their economy. A country’s strategy guides their economic, fiscal, trade, innovation, finance and monetary policy, so that they all work together to enhance their competitiveness as a nation.

The United States has no comprehensive strategy ? just a hodgepodge of laws and rules. Trade negotiators have had no strategic plan to guide them, and neither do the administrative agencies relevant to manufacturing, agricultural, and use of natural resources. The United States needs a comprehensive competitiveness strategy that clearly expresses exactly what we want to achieve for our country… not for an industry or special interest… but our country as a whole.

We do not have to “keep reinventing the wheel.” It is time for our leaders to “stop fiddling while Rome burns” and show some real leadership. Action, not lip service is what we need now!

Leadership is Key to Becoming a Lean Enterprise

November 9th, 2015

I finished off my week in Florida by attending the 2015 Lean Accounting Summit on October 8-9th Jacksonville, Florida, produced by Lean Frontiers, headed up by founder and President, Jim Huntzinger. It was two days of information-packed presentations and workshops that included case studies showing Lean principles in action. I was honored to be invited back to give a presentation on “How to Return Manufacturing to American Using Total Cost of Analysis.” I attended all five of the keynote presentations during the two-day summit and as many of the different breakout sessions as I could between the keynotes.

The First keynote, “Lead with Respect, was given by Michael Bole?, author, speaker and associate research at Telecom Aristech. He first challenged the audience with questions, such as “What is the meaning of leadership? How do you get people to follow you? What do they know how to do? “He stated, “Lean has a focus ? reduce waste and do more with less. The world is moved by ideas and words. To lead people, you need to take into account their experience, skills, and opinions to help them develop their autonomy. You need to create experiences for them so you can see at what level they are. Then, he asked, “How do you teach? You show them by means of problem based learning: Express the problem, look for the cause, and confirm the corrective measure.” He then outlined his seven-step model of Lean leadership.

The first breakout session I attended was “The Lean Management System: an Engine for Continuous Improvement” by Dean Locher, a four-time author and faculty member of the Lean Enterprise Institute. Dean said, “Lean creates a culture of continuous improvement you can actually see a culture.” He asked, “What is it to be a Lean enterprise? It is an organization where all members continually strive to do better and to develop a culture of continuous improvement. What is needed? Purpose, direction, CI methodologies and tools, processes, and engagement.”

He briefly described the methodologies and tools: Hoshin Kanri (policy deployment process), value steam mapping, Gemba walks, daily management process, 5S, Kaizen events, 7-step DMAIC, Andon (visual management), Kata, Leader Standard Work, and Voice of the Customer.

The next breakout I attended was “First Steps to Lean Accounting Statement” by Jean Cunningham, President of Cunningham Consulting, co-author of Real Numbers, and one of the original through leaders for the Lean Accounting summit. She showed how to restructure financial statements to provide a Lean accounting statement presentation in addition to the traditional presentation of standard cost when a company hasn’t gotten rid of their standards cost system yet. She said the key characteristics are: “(1) separate variable from non variable costs, (2) separate direct from shared between value streams, (3) separate accounting transactions for labor and overhead, (4) use easy to understand language, and (5) organize by groupings meaningful to the business.” She emphasized that “money is language of business so it is really important to have an understandable language. Operations and finance have to come together.”

After lunch, there were three mini-keynotes. Bill Waddell was the first mini keynote speaker of the day discussing “People Process and Prosperity.” Bill is the author of Simple Excellence, co-author of Rebirth of American Industry, and most recently “The Heart and Soul of Manufacturing.” His three main points were: (1) You can’t manage people by the numbers, (2) There is an inherent right to life, and (3) Lean can enable you to be far-sighted as managers.”

Sam McPherson was the second mini-keynote speaker discussing “Leadership as Special Forces.” Sam is an internationally recognized Lean Transformation Leader and co-founder of the Lean Leadership Academy with Art Smalley. He was recalled to military service after 9/11 and became the Director of Special Operations Plans for the Elite U. S. Army Special Forces (the Green Berets) during Operation Enduring Freedom in Afghanistan. He said, “A Green Beret is a symbol of excellence, and badge of courage, and act if distinction in the fight for freedom. Why would Lean leadership take a look at a Green Beret? Because every Green Beret is a leader. Special Forces are adaptable, capable, courageous, persistent, responsible, professional, integrated team player, and willing to lead.” He encouraged Lean leaders to develop the same qualities.

The third mini-keynote was Dean Locher discussing “Behavior Driving Culture.” He said that what leaders do is to develop culture. “Leaders need to help people understand that change isn’t like driving off a cliff. Teaching is not about you; it is about what your students learned. Leaders need to provide a target destination; there can be many different paths to the target. Leaders can teach PDCA and show how problem solving can be fun. When you use the Socratic method of teaching, you don’t provide the answer. Your students find the answer for themselves.”

In the afternoon, I attended the breakout session in which Eldad Coppens, CFO, and Anna Berkner, Director of Finance/Controller of QFix their company’s story about converting to Lean Accounting. QFix is a world leader in radiotherapy patient positioning and immobilization products. They are vertically integrated as an innovator, manufacturer, distributor, and marketer and have 100 employees. They have an extensive product portfolio with over 6,000 SKUs. They aim to be a one-stop solution so they distribute what they don’t make.

Eldad said, “You can’t do Lean accounting without doing Lean operations. We did Value Stream Mapping and a spaghetti diagram, and then reorganized by value streams: composites and devices, thermoplastics, resale of other people’s products. The value streams are supported by marketing, sales, and customer service, and technical support. The challenges were: high SKU/BOM, Box Score Analysis, new product development, profitability by profit, target costing, and tracking and reducing inventory. The benefits of Lean accounting have been: financial x-ray of company, timely reporting, consistency with GAAP, insight into economics, insight into traditional accounting, internal diffusion of financial results, and a baseline for incentive programs and the QFix Performance Bonus for employees.

At the concluding session of the day, the 2015 Lean Enterprise Institute Excellence in Lean Accounting Student and Professor Awards were announced. The student winner was Amy Shaw (Puckett), Western Washington University, and the professor award went to Patti Hart Timm, Walden University. The students and professors receiving LEAF scholarships to attend the summit were: Amal Said, Professor, University of Toledo, Jessica Jakubowski, Student, University of Toledo, Hassan HassabElnaby, Professor – Editor, University of Toledo, Joel Tuoriniemi, Professor, Michigan Technological University, Jeffrey Hines, Student, Michigan Technological University, Joanne Pencak, Professor, University of Vermont, and John Mangione, Student, University of Vermont.

On day two, the morning keynote speaker was Jamie Flinchbaugh, co-founder of the Lean Leaning Center, and co-author of The Hitchhiker’s Guide to Lean, who spoke on “Leading Lean.” He said, “Leading is a verb whereas leadership is a noun…What is the adoption rate of Lean? Good intentions are not a good solution to the problem…An operating system is how everything fits together: (1) process, (2) skills and tools, (3) evaluation, and (4) behaviors. All four need to work together and be consistent. An operating system may be good but doesn’t work because of behaviors. You need to be relentless on the path, but need to be patient with others who just got on the path. Evaluation starts with a hypothesis of if I do ____, I expect to see____. It includes Total Shareholder Return (TSR), strategy, culture, and behaviors.” He gave suggestions of how to hook a CFO into adopting Lean accounting: “Start with why you are doing it. What is your purpose? Define your own personal reason for the Lean journey.” He also recommended that CFOs talk to other CFOs.

I then attended the first of two sessions put on by executives of Nicholson Manufacturing Ltd., which was formed after Nicholson Debarker acquired Madill Forestry Equipment. Nicholson is family-owned, 67-year old British Columbia based manufacturer of machines and parts for the logging and forest products industries. The first was “Value Stream Accounting at Nicholson” presented by Ian Scott Kerr, Director of Finance, and James Bowden and Gaetan Desmairis, Value Stream Managers. The second was the “Lean Management Journey at Nicholson,” presented by Doug Jeffrey, President, and Rhonda Morrison, Continuous Improvement Manager.

They began their Lean journey in 2004 starting with 5S and Green Belt training to change the culture to continuous improvement. After acquiring a new ERP system in 2006 and evaluating suppliers, they had additional Lean training by Bill Waddell in 2009. They implemented more Lean methodologies and tools and trained small teams of employees using the PDCA cycle for teaching.

They brought Bill back in 2013 to begin their transformation to Lean accounting and produced their first value stream statements in January 2014. They learned to break down the silos and organized by value streams. They have three value streams: Nicholson products, McGill products, and aftermarket products, and each value stream has a manager. Their production employees are unionized ? fabricators, welders, and machinists. Every employee received education in value stream leadership and has been cross-trained in the value streams. They use a new Lean Employee Development Tool by Bill Waddell instead of performance reviews.

Rhonda said, “The challenges were: bad data, complex ERP system, down turn during recession for their product lines, staff losses by people who didn’t want to do Lean, building common goals with the unions, and the fact that many people had new responsibilities. The gains will come faster than expected, so need to have a plan to handle the extra capacity. You will get slower before you get faster. You will have to make tough decisions. Accept that some people may not want to change.” She added, “Dividing into value streams was easier than expected, and our on-time deliveries have improved from 65% to over 90%.”

The final keynote session featured Bill Waddell and Jim Huntzinger discussing “The Lean Economy: The Importance of Tying Micro and Macro.” One of the most important truths Bill said was, “Individual people are the source of all productivity.” He described how companies following the Lean business model are the micro part of the economy, and in turn, they are part of the macro economy of a city, state, or country. He said, “Reducing waste equals increased capital (both human and capital.) He commented that “retail stores are going b the wayside to Amazon to direct buying from manufacturers…you need to eliminate the non value added. If you don’t know where you are adding value and your customer doesn’t know where they are adding value, then you are doomed.” In the closing Q & A, I asked why more companies on the Lean journey don’t realize that offshoring is the opposite of Lean, creating waste, and Jim Huntzinger said that presenting that truth is one of the objectives of the Lean Accounting Summit.

This is why it is important to me to be invited to speak at the Lean Accounting Summit. As I wrote in my book, I am certain that becoming a Lean Enterprise is one of the most important actions American manufacturers can take to “save themselves” and one of the keys to rebuilding American manufacturing to make America great again.



Traditional Industries Generate High-tech Spinoffs in Southwest Florida

November 3rd, 2015

My last article featured the stories of two companies that I visited, so this article will feature the four other companies I toured during my brief visit to Lee County earlier this month as the guest of the Lee County Economic Development Office.

Shaw Development is a family-owned company with the third generation now involved and specializes in the design, development and manufacturing of custom fluid management solutions, including Diesel Emissions Fluid (DEF) systems (headers, reservoirs, caps, adapters, strainers, etc.) for heavy-duty vehicles and machinery, such as trucks, buses, construction, mining, military vehicles, as well as agriculture and forestry equipment, power generation, and locomotive equipment.

Stephen Schock, Director of Manufacturing, gave us a plant tour first, and then we met with Lane Morlock, Chief Operations Officer. Lane told me that Frank Shaw founded the first Shaw company, Shaw Metal Products, in 1944 Buffalo, New York as a machine shop to support the military and developing aerospace market.

Shaw Aero Devices, Inc. was founded in 1954 to add engineering to their core capability and develop products with proprietary intellectual property. Frank’s son, Jim Shaw, headed up this company, and it became the industry standard for a variety of fuel, oil, water, and waste components and systems. Shaw Aero Devices moved Naples, Florida (Collier County) in the early 1980s and moved to Fort Myers in Lee County 1993. The company relocated back to Naples in 2001 after it outgrew its Lee County location.

Lane, said, “Shaw Development, LLC was formed in 1959 to transfer Shaw Aero Devices technology to ground vehicle markets particularly the lift and turn technology for fuel caps. We moved into our current 50,000 sq. ft. plant in Bonita Springs in 2008. Shaw entered into the DEF system business early on, and business has grown dramatically in the last 6 to 7 years.”

When I asked how much they outsource, he said, “We have a fair amount of capability in-house ? machining, stamping, forming, welding, paint, assembly and test capabilities. In 2009, we vertically integrated plastic injection molding by acquiring Gulf Coast Mold to bring back our molding from China. We bought a robot for welding that saves us a great deal of time. We buy some machining and sensors outside. In 2014, we added 17,000 sq. ft. to our production space in the plant and expanded our injection molding operation by 6,500 sq. ft. We added 75 employees over the past 3 years and our revenue has been increasing +25% YOY in this time period. We are now up to about 200 employees, so we are the second largest manufacturer in the region.”

In response to my question about their challenges, Lane said, “Our biggest challenge is to get the right talent. We work with Florida Gulf Coast University (FGCU) and more recently, we have engaged with the University of Miami to find the right talent. We work with local schools and the Southwest Regional Manufacturers Association to develop curriculum and manufacturing industry awareness to the local area. We are heavily involved with STEM and bring in students as interns and offer them the opportunity to work on private projects. One of our welders took a job with the local technical college to train welders, and this has provided us with an opportunity to work with this program and provide them with industry experience.”

With regard to my inquiry about being a lean company, he said that he had spent two years at NUMMI (Toyota Joint Venture) gaining an in-depth understanding of the Toyota Production System prior to spending seven years in a leadership role at General Motor’s corporate Lean Office. He added, “We have a full time Lean black belt to train our employees. We have gone from 43-day material turnaround to an average of 27 days in the past two years. Our model for business planning is Hoshin Kanri, and we have a five-year business plan and an annual business plan tied into it. Our on-time delivery is 98.8% year to date, and our quality PPM has improved by 60% in the past two years. We use a two-bin Kan Ban system and one-piece flow for our assembly line operations. Our employees are cross trained, and we review our manufacturing cell metrics at weekly meetings.”

With this emphasis on lean and the fact Shaw Development is both ISO 9000 and 14000 Certified, I could see why the company has been recognized as the Manufacturer of the Year for the State of Florida and Southwest Regional Manufacturer of the year.

My next visit was to American Traction Systems (ATS), a privately owned company formed in 2008 by Bonne Posma, as an affiliate of his other company, Saminco, Inc. ATS specializes in the design and manufacturing of electric propulsion systems for on and off road electric vehicles such the Ford Fusion, fuel cell buses, Hybrid trucks and buses, streetcars, trolleys, trams, GenSet Locomotives, Hybrid Diesel-Electric marine vessels, airline ground support vehicles. ATS has manufactured electric traction drives for Fuel Cell Buses designed by Ballard and Georgetown University, Hybrid-Electric systems for Allison Electric Drive division of General Motors as well as over 3,500 AC/DC and DC/DC controllers for underground mining vehicles. All design and manufacturing is performed in the Fort Myers, Florida facility with the capacity to deliver production of several hundred units per month.

General Manager Lem Vongpathoum led the plant tour at ATS and then we met with Mr. Bonne Posma and his niece, Cari Posma Wilcox, Vice President of Saminco, Inc. In a phone interview with Cari after returning home to clarify some details, she told me that Bonne was born in Indonesia of Dutch parents just as WWII erupted in Asia and spent the war years in a prison camp with his parents. His family returned to the Netherlands after the war and then immigrated to Canada. Mr. Posma founded Saftronics in 1968 in Johannesburg, South Africa and then opened a second facility in Ontario, Canada in 1976, which is still in operation as Saft Drives. He opened a Saftronics plant in Buffalo, New York in 1986, which he moved to Ft. Myers, Florida a year later. He left Saftronics and founded Saminco in 1992. Saftronics was sold to Emerson in 2005. After founding American Traction Systems in 2008, he opened a Saminco service office in China in 2009 and a service office in South Africa in 2011. He also opened an ATS facility in South Africa in 2013. Bonne’s energy and excitement about his companies was that of someone half his age when he showed us around Saminco and gave us a demonstration of some of the mining equipment at their testing yard.

Bonne clarified the difference between the three companies he has founded, saying “Saftronics made variable speed drives. Saminco makes solid-state electric vehicle traction controllers powered by batteries, diesel-hybrid, fuel cells and power systems, mainly for underground mining equipment. American Traction Systems makes electric and hybrid-electric propulsion systems for a variety of vehicles and equipment. I am the sole owner of both Saminco and ATS, and we have about 120 employees at the Ft. Myers Saminco and ATS plants. We also have a repair facility in Huntington, West Virginia that has 35-40 employees.”

Bonne explained, “We are competing with major corporations like Siemens, ABB and GE. We have to be more nimble to compete successfully. We competed against these companies for a Navy contract for a propulsion system for the USNS Waters operated by the Military Sealift Command and won the contract. We are getting into solar and working on a new diesel electric propulsion system for a Load Haul Dump (LHD) vehicle that is like a large Bobcat. We are also working on a new induction motor for ‘Mag lev’ trains.”

When I asked him about his suppliers, he said, “We use all American suppliers for what we can’t do in-house. We buy machining and sheet metal fabrication and use a contract manufacturer for our PCBs. We do full power testing in our lab.”

He added, “American workers are some of the highest paid workers in the world. There are three things that have destroyed American manufacturing: litigation, regulation, and taxes. If we want to level the playing field, we need to get rid of these three things.”

On my last morning in southwest Florida, we visited JRL Ventures, Inc. dba Marine Concepts headquartered in Cape Coral, Florida. The facility contains 42,000 sq. ft. of manufacturing and office space, equipped with state of the art CNC robotic machining centers and other technologies. Marine Concepts opened its doors in 1976 under the leadership of Augusto “Kiko” Villalon to be able to go from design to production of boats. Marine industry veterans, J. Robert and Karen Long, purchased Marine Concepts in 1994. As a leading manufacturer for nearly 40 years, Marine Concepts is now the largest manufacturer of tooling and molds for the marine industry in the United States. They make CNC plugs, composite molds (open and closed silicone/LRTM), CNC molds, CNC parts, limited production composite parts, scale models, and CNC cold mold kits. In 2012 Marine Concepts opened a facility in Sarasota, Florida with over 260,000 sq. ft. of manufacturing and office space. The two plants provide 300,000 sq. ft. of manufacturing space and seven 3 – 5-axis CNC milling machines.

Mac Spencer, CFO, gave us the plant tour where we watched a boat mold being machined by their very large machining robot. We met with Dan Locke, Design Manager and Senior Designer, who has been designing boats since the 1980s, using Unigraphix software that provides more free style for designing surfaces than Solid Works. Mr. Spencer said that normally their business was 80% marine vs. 20% non-marine, but during the recession, it was reverse. They diversified into making composite figures and structures for resort parks, such as Disneyland, Universal Studios, and Six Flags. They also make composite parts for trams and electric buses. Design work for other marine companies is also a growing part of their business. We briefly met with President Matt Chambers before departing.

My last visit was to Nor-Tech Boats where we met with Cindy Trombley, Director of Administration. She said the company was founded in 1980 by Trond Schon, who had moved with his family from Norway to Cape Coral, Florida. Nor-Tech manufactures high performance powerboats using advanced technologies, unique manufacturing processes, and stylish designs. The main manufacturing facility in North Fort Myers encompasses over 45,000 sq. ft. complete with a 20’ x 60’ downdraft paint booth. Within the main building a state of the art rig shop and in house upholstery departments are climate controlled year round to insure a clean and work friendly environment. The in-house engine development and production division is housed in a secondary facility along with the service department and a rigging facility. We could see three boats in various stages of production in the main plant, but we did not have time to go visit the secondary facility.

Cindy said they currently have 107 employees, but survived the recession by dropping down to only 35 and going into debt. She said they can make boats up to 80 ft. long, and most of the larger sized boats go overseas or to Canada. They make every style of powerboats except for “T-tops.” Cindy said, “Our biggest challenge outside of heat and humidity in Florida is finding skilled labor. There are no vocational schools teaching how to build boats. We have low turnover, but an aging workforce. One of the advantages of Florida is that there are no corporate or personal income taxes.”

A common thread for most of these companies is the concern about finding the right workers now and in the future. As I have discussed in past articles, this is a nationwide problem, not just in southwest Florida. During discussions with the management of the Lee County Economic Development office and members of the Southwest Regional Manufacturers Association at breakfast, lunch, and dinner meetings during my visit, I shared what is being done to address this problem in other parts of the country and by organizations such as SME’s PRIME schools, ToolingU, and Project Lead the Way that I have written about in previous articles. The more manufacturers and trade associations that get involved in solving this problem, the more successful we will be in attracting and developing the next generation of manufacturing workers.

Southwest Florida Attracts Manufacturers, not just Retirees

November 3rd, 2015

During my recent trip to southwest Florida as the guest of the Lee County Economic Development agency, I learned that in recent years, there has been an increasing number of business owners that have been regularly vacationing in the area who have decided to either move their business or set up a business where they like to play.

Lee County is on the Gulf of Mexico side of Florida about 125 miles south of Tampa and about 50 miles north of the Everglades National Park. There are five incorporated cities in the country: Cape Coral, Ft. Myers, Bonita Springs, Ft. Myers Beach, and Sanibel. The county population grew 63% from 1994 to 2014, but 55% live in the unincorporated area.

My tour host, Shane Farnsworth, Manager of Business Development for the Lee County EDO, told me that Cape Coral was a planned “bedroom” community, but many people never built homes on the lots. So, Cape Coral offers the greatest area of growth for industrial development through the purchase and combining of these parcels into industrial sites. Ft. Myers is the oldest of the five cities, so there is very little undeveloped land and new industrial sites will occur through redevelopment. During my visit, I met with executives of several manufacturing companies in three of five and the city of Naples to the south in Collier County (most of Collier County is taken up by the Big Cypress National Park.).

My first interview was with Bill Daubmann, founder and Senior V. P. of KDD, Inc. dba My Shower Door and a member of D3 Glass LLC. Bill originally had  established a closet organization business in Springfield, MA in 1986 and obtained a license agreement with Mr. Shower Door in 1989. After visiting the Lee County region for several years on vacation, he decided to move to Naples in 2001 and opened a showroom in 2003. His son, Doug, moved also and joined the company. He took the Fast track entrepreneur course by the Kaufman Foundation with one son in 2007 to “hone” their management skills, and took it again in 2011 with his other son.

Bill said, “It was a tough struggle from 2008 – 2010 due to the Great Recession, as southwest Florida was “ground zero” for the decline in the new home building market. We survived by mostly doing home remodeling.”

In 2011, they were informed that their Mr. Shower Door license would not be renewed for 2012, so they explored setting up their own manufacturing plant to make the tempered and glazed needed for shower doors. After analyzing how much glass they were buying out of the state and the problems they had with breakage and defective glass, they set up D3 Glass LLC in 2012 when new home building started coming back in a building they had bought during the recession. Bill’s oldest son, Keith, became President of KDD, Inc. dba My Shower Door. Bill said that the ovens for tempering the glass cost one million and everything else cost another million. They had to buy two custom-outfitted trucks to deliver the glass to their showrooms and customers.

Since Florida requires a license for the glass and glazing business, Bill and his sons took the test and got their licenses. Bill said, “We hired a consultant to do a “SWOT” analysis for our shower door business to make sure that our business model worked in all parts of the country. We wrote a business plan and did a beta test site. We are now selling our business model to others and running an academy on how to run a shower door business. We have four affiliate stores: Oklahoma City, OK, Grand Rapids, MI, St. Paul, MN, and York, PA. We also sell the specialized hardware for shower doors to our affiliates and other shower door companies.”

In the last two years, they expanded from just doing shower doors into other markets for tempered glass and recently finished providing all of the tempered glass for the new Hertz headquarters building that will open next month. Bill said, “We went from 22 to 50 employees in 18 months and are now up to 64 employees. We just made the INC magazine list of 5,000 companies at #2,085 and will be going to the big event next month.”

After I told him that I am part of the Reshoring Initiative to promote bringing back manufacturing to America, he said, “We were buying aluminum extrusions from China, but just switched to a vendor in the United States.”

In answer to my question about the advantages of being located in the region, he responded, “It is easy to deal with the people in the local government agencies, there is good transportation available on I-75 and Rt. 41, the new airport has flights going to our markets, and there are good local colleges for preparing the future workers we will need.”

My second interview was with Brian Rist, President and CEO of Smart Companies, of which Storm Smart is the largest subsidiary. Storm Smart is Florida’s largest manufacturer & installer of hurricane protection products and is the ninth largest manufacturer across all industries in Lee County. Brian is the inventor of the innovative Storm Catcher Wind Abatement Screens. He also moved from the northeast to southwest Florida to run his business. Brian said, “I started out with a couple of partners in a general contracting business and wound up as the sole owner. The first three years were a struggle to find a niche. The building codes were changing and I became the expert in the new codes, even teaching architects. After Hurricane Ambrose came in 1994, I tried to find a fabric that would replace plywood for covering windows. We talked with people in energy management and got everyone’s opinion. I founded Storm Smart in 1996 to manufacture fabric window protection. We became known as who to talk to about window protection. If you fail to plan, then you plan to fail. We did a CD on what businesses could do for emergency planning because 83% of businesses that have a disaster never recover.”

Brian explained that the building codes changed in Florida for developing sites in 1997 requiring window protection to be part of building a home. In 2001 new codes came out and insurance regulations changed also. Everyone has to have separate hurricane insurance. Insurance companies offered special rates for homes that had protection, and the State of Florida offered a rebate program.

“We started making polypropylene window protection by hand cutting the material, but we needed to ramp up to higher production. Getting a sales tax credit helped us to be able to buy a laser cutting machine in 2013, and it eliminated the bottleneck in our business helping us develop new products.”

They work with the biggest companies in the world that use fabric for hurricane protection. While their products protect homes from hurricanes, they also reduce energy costs. Brian said, “You can build a business based on a known market of saving energy and not just protection from hurricanes. Impact-rated windows are a fast growing part of our business. Most new homes come with impact rated windows.”

He added, “The building codes changed again and they are much more about retaining heat rather than saving heat. International codes are also changing. We watch what percentage of our business is with builders. We went to Cancun and set up small operation during recession in Mexico. We are currently doing work in Los Cabos, Mexico also. We sell to Caribbean countries like Bermuda, Jamaica, and wherever else there are resorts.

We have experienced fast growth and have been picked by Inc. magazine four times as one of the 5,000 fastest growing companies. We went from 26 employees to 100 employees after Hurricane Charlie. We went from five to six jobs per month to about 100 jobs per month.

We looked at all of their jobs and decided to really go back into the customer service business to be a sustainable business. We started to invest in our people and getting to know who they were. We had to make sure they were doing things right. We have to ‘walk the talk.'”

After we discussed some of the articles I have written on developing and recruiting the next generation of manufacturing workers and my involvement with the Coalition for a Prosperous America, he added, “‘ Walking the talk” also involves working with students and getting involved with the Southwest Regional Manufacturers Association [for which he is in the current Vice-President.] He said, “We won the manufacturer of the year for the local region last year. We work with five different academies related to construction. Only about 20% of kids go to college and only about 20% of them graduate from college. We had a tour of our plant during Manufacturing Day and had about 13-14 students come on the tour. Florida is too reliant on tourism and construction. Manufacturing creates more different opportunities for good-paying jobs. Our Governor was at our plant three weeks ago, and he understands manufacturing. By partnering with government and education, we can be more effective in growing manufacturing in Florida. In order to grow, we have to develop the next generation of manufacturing workers. Team building, time management, and ethics are the same regardless of the industry.”

In answer to my inquiry about Lean training, he said, “We have been very involved with lean manufacturing and are working with the Florida Manufacturing Program. We are going through a program for an ERP system in order to continue to grow. We have a plan to develop the company over the next three years. Part of it will involve having licensed dealers.”

The outlook for business in Lee County is very good according to the Lee County Business Climate Survey Report, Third Quarter, 2015 prepared by The Regional Economic Research Institute, Lutgert College of Business, Florida Gulf Coast University, released on August 27th, 2015. The key findings were:

  • 74 percent of executives stated that the current economic conditions have improved over last year
  • 66 percent of the executives stated that the current economic conditions for their industry have improved over last year
  • 67 percent of executives expect economic conditions for their industry to improve over the next year
  • 68 percent of companies expect to increase investment next year and none expect to reduce investment levels
  • 61 percent of executives reported increasing employment over the last year, while four percent reported reducing employment
  • 57 percent of executives expect to increase employment at their companies during the next year

While manufacturing represents only 2% of the economy of Lee County today, the staff of the Lee County Development agency is working with the economic development offices of the five cities and members of the Southwest Regional Manufacturers Association to grow the manufacturing industry and expand that percentage. Their work will be aided by the fact that Florida ranks 5th in the 2015 State Business Tax Climate Index with a score of 6.91. The corporate income tax rate is only 5.5% for C corporations only. There is no inventory tax for businesses, and there is no personal income tax. There are nine universities and colleges, and the two largest, Florida South Western State College and Florida Gulf Coast University have a combined enrollment of over 30,000 students. There is good technical training at the two-year community college level as well as at the Fort Myers Institute of Technology, Cape Coral Institute of Technology, and at the ITT Technical Institute. The Ft. Myers airport (RSW) is served by 15 air carriers offering nonstop flights to 46 destinations, most of which are east of the Mississippi.

The stories of these two companies are good examples of innovation to develop new products, becoming a lean company, creating a new business model, and expanding into new markets. These are some of the recommendations I made in the chapter “What manufacturers can do to save themselves” in my book, Can American Manufacturing be Saved? Why we should and how we can.

Having no corporate and personal income taxes and providing a friendly business climate are ideas I discuss in the chapter on what government can do to save manufacturing in my book. My next article will tell the stories of other companies I visited in Florida.

SME Education Foundation Works to Grow Next Generation of Manufacturing Workers

September 30th, 2015

The 2015 ManpowerGroup annual Talent Shortage Survey reveals that 32% or 1 in 3 of “U.S. employers report difficulties filling job vacancies due to talent shortages,” down 8% from 40% in 2014. This 10th survey shows that “skilled trades remain the hardest to fill for six consecutive years.” Among U.S. employers, 48% acknowledge that talent shortages have a medium to high impact on their business, but few are putting talent strategies in place to address the problem…despite the negative impact on their business.”

One reason for the shortage is that public misperceptions of advanced manufacturing has led young people entering the workforce to choose other career paths. In an article titled, “What the shortage in skilled manufacturing workers means to a hungry industry” of the e-newsletter Smart Business, Kika Young, human resources director at Forest City Gear Co. Inc. of Rockford, IL, said “Most people in Gen Y out of high school don’t think of manufacturing as a career or as a good option. They don’t think of it as glamorous; they think of it as dark and dingy and dirty and aren’t interested in going into that.”

If we want to attract today’s youth to manufacturing careers, we need to change their perceptions about what the manufacturing industry is like and show them what great career opportunities exist in the industry. We need to expose them to the variety of career opportunities in manufacturing and help them realize that manufacturing careers pay 25-50 percent higher than non-manufacturing jobs, so they will choose to be part of modern manufacturing. The spotlight needs to be on the high-tech environment of modern manufacturing. New technologies such as 3D printing, robotics, and advanced analytics underscore the reality that a career in manufacturing does not entail working in a dirty, dangerous place that requires no skills.

SME Education Foundation is working to change the image of manufacturing and prepare youth for careers in advanced manufacturing through its Partnership Response In Manufacturing Education (PRIME®) initiative.

PRIME® is a collaborative model that engages regional manufacturers, local schools and other community representatives to establish a tailored advanced manufacturing / STEM education that provides high school students with relevant, hands-on knowledge and skills. PRIME® gives manufacturers a voice in education, builds student awareness of manufacturing career pathways, and provides youth with 21st century manufacturing skills, which can lead to industry credentials. Students graduating from the PRIME® program are often capable of successfully transitioning to the manufacturing workforce immediately upon high school graduation.

Established in 2011, PRIME® has grown to 36 schools in 21 states, impacting more than 6,500 students annually with 70 percent of graduating PRIME® seniors pursuing a post secondary education in manufacturing or engineering. SME Education Foundation has also supported 144 PRIME® students with nearly $400,000 in scholarship awards.

In my home state of California, there are six PRIME® schools: Esperanza High School, Hawthorne High School, John Glenn High School, Petaluma High School, Rocklin High School, and San Pasqual High School.

SME Education Foundation is working to expand its network by working with corporate partners to sponsor the development of new PRIME® sites at high schools throughout the country. “PRIME® is forging a path to revitalize manufacturing education and fostering the development of a highly skilled, STEM-capable workforce,” said Brian Glowiak, director of the SME Education Foundation. “Through the support of visionary corporate partners, like Alcoa and Honda, we are helping to create the next generation of manufacturing engineers and technologists and championing one of the most critical elements for innovation success.”

SME Education Foundation and PRIME® provide a winning solution for students by offering them opportunities to:

  • Collaborate with local SME Chapters and industry partners to co-host events
  • Engage with other students and educators in the PRIME® network to share their experiences and creative lesson plans as well as participate in student competitions
  • Participate in Advanced Manufacturing/STEM camps with younger students and other extracurricular activities
  • Receive post-secondary educational scholarships
  • Engage with SME members who can share their technical knowledge and experience by mentoring PRIME students, offering internships and providing job-shadowing opportunities.
  • Attend student summits at SME’s national manufacturing events. These summits allow students, parents and educators to interact face-to-face with representatives of companies that provide revolutionary technologies and business-changing innovations.
  • Implement training materials and curriculum from Tooling U-SME, the industry leader in manufacturing learning and development.
  • Receive SME’s Advanced Manufacturing Media, which produces digital and print publications that cover relevant manufacturing news, technology and advances.

PRIME® Success Story:

In 2014, Denbigh Aviation Academy in Newport News, Virginia was selected for PRIME® designation through the SME Education Foundation.Students at the Aviation Academy, are building a full-sized, 750-pound, two-seat aircraft. At the culmination of the project, they are planning to take this student-built aircraft to the skies! The Aviation Academy is a four-year, high school program in Newport News Public Schools, located behind the Newport News-Williamsburg International Airport. Learners focus on careers in aviation, electronics, engineering and technology. “We are able to get real world experience and it ties in with aerospace manufacturing /engineering. It’s a good thing because the fields are lucrative and growing,” says Laura Prox, a junior at the Denbigh Aviation Academy.

As one of the first sites on the East Coast to partner with Eagle’s Nest Projects (an organization that donates the plane kits to schools to build these aircrafts), students can immerse themselves into the manufacturing and aviation sector. An elite team of 30 students have completed the fuselage and tail sections. These students demonstrate an authentic example of manufacturing brought to life in the classroom. Students are assigned roles from management to labor based upon their coursework and experience. They are learning and employing fastening systems and procedures that can be found at any aviation assembly facility. Using the materials, reading the blueprints and drawings, and understanding principles in assembly outline some of the talents students gain. Throughout the process, some of the “soft skills” also emerge such as teamwork, communication and problem solving.”

Manufacturing Day 2015 will occur on Friday, Oct. 2, and throughout the month of October, SME will be supporting Manufacturing Day through chapter activities and events, the SME Education Foundation’s PRIME® school network and Tooling U-SME. Here’s what PRIME® schools are doing for Manufacturing Day!

PRIME® exposes our youth to the modern manufacturing environment and changes the image of manufacturing to one that is “cool” and full of exciting career opportunities for our youth. This will enable us to recruit the next generation of manufacturing workers to fill the skilled worker positions now going unfilled.

The question is: Will you be the corporate executive who joins the PRIME® program to sponsor more schools to expand the program to hundreds of schools in all 50 states? If so, go to this link. Or, will you be the corporate executive that will have to admit to his children or grandchildren that you are partly responsible for reducing their career opportunities for good paying jobs in manufacturing because you offshored manufacturing and/or imported foreign workers to replace American workers at your U. S. plant?