Los Angeles NTMA Training Centers to Celebrate 50 Year Anniversary in early 2018

January 24th, 2018

Last month, I had the opportunity to take a tour of the NTMA Training Centers in Santa Fe Springs, which was founded “to address the ever-increasing need for machinists to replace their retiring workforce.”

I met with J.R. Ragaisis, Exec. Director of Education and Training, and Carey Knutson, Exec. Director of Accounting and H.R. Carey emailed me info on the historical background of the Training Centers.  From the written history, I learned that Seymour Lehrer and Del Molinari led the charge to develop the Center in 1968 with the backing of the National Association organization. Members of the Southern California Tool & Die Association (later known as the Los Angeles NTMA) generously donated machining equipment and made a donation of $4,800 to get the Training Center started. This means that on February 1, 2018, the Center will celebrate its 50th anniversary!

I really liked that the goal of the Training Centers was “to transition tax-takers into tax-payers, by training them for a career in machining.”  J.R. Ragaisis, said, “The Training Centers was a step toward creating something unheard of at the time: to develop specialized training by industry for industry.”

It was amazing to me that the training program and school survived several recessions in the last 50 years and that no other centers were ever established in other parts of the country. J.R. said, “We have been contacted by others to set up other training centers in their areas, but nothing ever materialized.”

As he gave our group the tour, JR said, “In 1999, we set up a second training center in Ontario, (also in Southern California.); currently, the NTMA Training Centers have two state-of- the-art campuses with fully equipped machine shops, modern computer labs, and all the supplies and materials needed to train for machining. Both campuses are designed to emulate actual machine shops; we have machine tools and equipment leading industry employers use while accommodating students with spacious work stations and ample break areas indoors and outdoors.”

The Santa Fe Springs facility is a two-story building with classrooms, offices, and a large meeting room upstairs, and all of the machining equipment downstairs.  J. R. said that both training centers have many training programs available to service individuals and the manufacturing community ranging from entry level training to advanced programs for existing employees. Some of the training can be funded by what manufacturers have already paid into the Employment Training Fund through their employment taxes.  The NTMA Centers are currently on their 35th contract from the Employment Training Panel of California. For a nominal $250 in-kind contribution from employers for books, and tapping into their paid tax assessments, we will train your workforce to enhance and enrich your productivity.”

He explained that in the basic Machinist Training program, students learn the set up and operation of conventional machining equipment such as grinders, mills, lathes, drill presses, and saws. Instruction time is divided between classroom, computer lab, and shop, providing a unique blend of practical theory and hands-on experience. Instruction includes; quality control and inspection procedures, shop theory, precision measuring instruments, mathematics, blueprint reading, and basic CNC operations. Upon graduation, students may find entry-level machinist employment as an operator of a lathe, mill, grinder, drill press, etc. in the machining and tooling industry. In addition, our machinist classes are usually about 15 students per session, of which we run 3 sessions per day.”

I told him that for more than 70 years, the only place to get machinist training was in San Diego at San Diego City College, where most of the students were grabbed up as fast as they graduated by companies like Solar Turbines. Now, we also have the MiraCosta Technical Career Center in Carlsbad.  Since I have always represented machine shops as a manufacturer’s sales rep., I know there has been a shortage of CNC lathe operators for more than 20 years in the San Diego area.

I asked if the classes incorporate any training in Lean Manufacturing, and he said, “We emphasize 5S + 1 of Lean, in which the +1 stands for “Safety.” We teach safety first, and all the students are trained on the safety protocol for each piece of equipment from a hack saw to a CNC machine. Meaning, students have to sign off on what they learned before they can use any of the equipment.”

J.R. provided me information on what kinds of advanced training they provide for existing manufacturing employees:

Coordinate Measuring Machine (CMM) – This course is designed to provide students with the principles and practices in the operation of a CMM.

Computer Aided Manufacturing (CAM) software package called MastercamThis course bundles theoretical knowledge that the students bring into the course applying a computer-generated graphic of manufactured components for machining. The course is designed for machinists who have no computer aided manufacturing background.

Computerized Numerical Control (CNC)This course develops the skills to perform fundamental operations of CNC Mills/CNC Lathes, emphasizing on the basic operation of the machinery, process, and shop safety. The course is designed for machinists who have no CNC machining background.

Inspection This course develops the skills to perform fundamental inspection techniques, emphasizing on third angle projection of blueprints and applying basic concepts of inspection techniques through the use of indicators, micrometers, optical comparator, and the CMM. The course is designed for individuals who have no inspection experience

I asked J.R. if they provide any training for veterans, and he said, “We provide training in the machining, tooling and manufacturing industry for all veterans, who have or are serving in any branch of the U.S Military.  We recognize the unique situation that veterans may face transitioning and readjusting into their life out of the military. We do everything possible to assist them in the transition while enrolled in our programs.” The website states: “There are Veteran Education Benefits available to you if:

  • You have served in the military
  •  Currently serving in the military
  •  You are an eligible dependent of a veteran
  •  You are a spouse of a veteran receiving benefits”

J.R. said, “We start new classes every few weeks, and a class just started on December 6th, and another class will start January 29th.  We have a modular program of five modules, and each module is six weeks in length. It takes students seven months to complete all of the modules, and they graduate with certification as an entry level machinist with an 86% job placement rate for graduates. We are currently in a transition mode; for the first time in years, we need more students to keep up with the demand.  Manufacturers are calling us to find out when we will have new graduates, instead of us calling them to fill job openings.

After visiting this training center, I recommend that other NTMA chapters around the country reconsider establishing a training center in their region.  They could partner with their local community college on training programs as well as apprenticeship programs. They could also partner with their local SME chapter (formerly the Society of Manufacturing Engineers) because SME is heavily involved in partnering with high schools for training in manufacturing skills.  NTMA wouldn’t have to start from scratch because SME’s ToolingU has modular curriculum available for use in the training programs.

We need more collaboration between industry associations and educational institutions at the high school and college level if we are going to solve the skills gap and attract the next generation of manufacturing workers.

How Trade Policies Led to the Decline of American Manufacturing

January 24th, 2018

Many people think that the decline in American manufacturing started with American manufacturers sourcing manufacturing offshore in order to achieve lower labor costs, avoid regulations, and pay lower taxes. While the decline accelerated after China was granted the status of Permanent Normal Trade Relations (PNTR) and was allowed to join the World Trade Organization, it actually began decades earlier.

PNTR is a legal designation in the U. S. for free trade with a foreign nation and was called Most-Favored-Nation (MFN) until the name was changed in 1998. Thefreedictionary.com defines it as “A method of establishing equality of trading opportunity among states by guaranteeing that if one country is given better trade terms by another, then all other states must get the same terms.

Thus, it is a method to prevent discriminatory treatment among members of an international trading organization. It provides trade equality among trading partners by ensuring that an importing country will not discriminate against another country’s goods in favor of those from a third. Once a country grants any type of concession to a third-party country, this concession must be given to all other countries.

At the end of World War II, the United States was the dominant manufacturing country of the world.  The American manufacturing base had enabled the U. S. to win the war with Germany and Japan by outproducing these two countries in implements of war from ships to tanks to weapons.

Over the next 20 years, American manufacturing became synonymous with quality and inventiveness.  Companies like Ford, General Motors, General Electric, Hewlett Packard, and Levi Straus became household names.

One of the main reasons why the United States became the dominant manufacturing country in the world was that for over 150 years, our government protected and fostered the growth of American industry through tariffs. The first tariff law passed by the Congress, was the Tariff of 1789.  The purpose was to generate revenue to fund the federal government, pay down the debt of the government, and also act as a protective barrier for domestic industries from imports from England and France in particular.

Tariffs played a key role in our country’s foreign trade policy and were the main source of revenue for the federal government from 1789 to 1914, the year after income taxes went into effect in 1913.  During this long period of time, tariffs averaged about 20% on foreign imports, and at times, tariff revenue approached 95% of federal revenue.

During the Truman Administration (1945-52), foreign trade policies began to focus on liberalizing trade through moving from protective tariffs to free trade. The instructions given from Congress to the U. S. Trade Representative were:  Remove barriers to trade. A key concept of the liberalization of trade was reciprocal tariffs and low tariff rates. Two of the main reasons for this change in trade policy were to help Europe and Japan rebuild after the war and engender closer relations with the U. S. as a deterrent to the spread of communism. This ended the use of tariffs as a significant source of Federal revenue and began the increase of corporate and personal income taxes.

In 1948, the General Agreement on Tariffs and Trade (GATT) treaty “was signed by 23 nations in Geneva on October 30, 1947, and took effect on January 1, 1948. It remained in effect until the signature by 123 nations in Marrakesh on April 14, 1994, of the Uruguay Round Agreements, which established the World Trade Organization (WTO) on January 1, 1995. The WTO is in some ways a successor to GATT, and the original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994. GATT, and its successor WTO, have successfully reduced tariffs. The average tariff levels for the major GATT participants were about 22% in 1947, but were 5% after the Uruguay Round in 1999.”

GATT requires that exports of all countries that are party to the treaty should be treated alike by other countries that are party to the treaty, and each member is granted Most Favored Nation status. Since GATT was first signed, MFN (now PNTR) status has been granted to about 180 countries. Only a handful of communist countries have been denied MFN status.

For over 20 years, American manufacturers experienced little competition from foreign exports, but in the 1970’s Japanese and German products began to significantly penetrate the U. S. market. Due to the focus on demilitarization and decentralization in the U. S.- directed rebuilding of the Japanese and German economies, producing consumers goods was the focus.

Japan focused on audio/stereo products, cameras, pianos/keyboards, and TVs, as well as low cost automobiles and motorcycles. Companies such as Panasonic, Sony, Sanyo, Yamaha, Toyota, Mitsubishi, and Datsun (now Nissan) became the new household names in America. Mitsubishi had produced aircraft in Japan before and during WWII, including the infamous fighter plane, the Zero. Nakajima was another aircraft manufacturer that was reformed as Fuji Heavy Industries after the war and began to produce the Subaru vehicles.

Germany started focusing on automobiles such as the Volkswagen “Bug” and bus, BMWs, and then Mercedes vehicles.  They expanded into manufacturing equipment, machine tools, and scientific and laboratory instruments and equipment. Volkswagen was instrumental in Germany’s industrial recovery as their plants have escaped damage from bombing. The Volkswagen plant had been offered to England after the war as reparations, but England turned it down. Without Volkswagen being able to start manufacturing autos in 1946 after the war, the reindustrialization of Germany would have been delayed considerably.

It didn’t take long for the increased imports from Japan and Germanys to take their toll on the U. S. trade balance.  As the below chart shows, the last year we had a positive trade balance in goods was 1975:

Source:  Coalition for a Prosperous America

As a developing country, imports from China didn’t become a significant factor until the beginning of the 21st Century. The development and growth of China’s manufacturing industry was essentially funded through American companies setting up manufacturing plants in China starting in the 1990s and transferring manufacturing to Chinese contract manufacturers. Foxconn, Apple’s contract manufacturer for the iPhone and iPad, is the only Chinese manufacturer to become well known in the U.S. While Foxconn has plants in mainland China, it is actually owned by Hon Hai Precision Industry Co., Ltd., a Taiwanese multinational electronics contract manufacturing company headquartered in Tucheng, New Taipei, Taiwan.

“In article titled “The Death of American Manufacturing,” published in the February 2006 Trumpet Print Edition, Robert Morley wrote: “Manufacturing loss is occurring because of globalization and outsourcing. Globalization is the increased mobility of goods, services, labor, technology and capital throughout the world; outsourcing is the performance of a production activity in another country that was previously done by a domestic firm or plant.

At the dawn of globalization, the elimination of trade barriers opened up access to foreign markets for American manufacturers in return for building factories abroad. In due course, more and more manufacturers set up shop overseas, producing goods to be sold to Americans.”

According to Yashen Huang author of Capitalism with Chinese Characteristics, China’s “indigenous private sector is conspicuously small.” The majority of urban companies are still State-Owned Enterprises (SOE’s). Other companies are privately owned, but the owner(s) are government employees, so they are still essentially government controlled.

China had lost its status as MFN through suspension in 1951 after the Communists took over control of the government in 1949. It was “restored in 1980 and was continued in effect through subsequent annual Presidential extensions. Following the massacre of pro-democracy demonstrators in Tiananmen Square in 1989, the annual renewal of China’s MFN status became a source of considerable debate in the Congress…Congress agreed to permanent normal trade relations (PNTR) status in P.L. 106-286, President Clinton signed into law on October 10, 2000.  PNTR paved the way for China’s accession to the WTO in December 2000…;”

  1. S. trade with China began to be measured in 1985 by the U. S. Census Bureau, and we had only a small deficit of $6 million. The trade deficit grew to $83.8 billion by the year 2000. However, after China was granted PNTR and became a member of the WTO, the trade deficit started to escalate. It doubled to $162.3 in 2002 and doubled again by 2014 to $344.8 billion. The 2016 trade deficit was $347 billion, down from $367 billion in 2015.  In 2016, China represented 38% of our overall trade deficit of $654.5 billion.

As a result of the escalated trade deficits from 2001 to 2010, the U.S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed. Where do all the jobs go?  Well, the U.S. Department of Commerce shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.” So, we lost about half to offshoring of manufacturing to China and other parts of Asia.

The real story is even worse than this data. In an article by Terence P. Jeffrey published on www.CBSNews.com on May 12, 2015, “The number of jobs in manufacturing has declined by 7,231,000–or 37 percent–since employment in manufacturing peaked in the United States in 1979, according to data published by the Bureau of Labor Statistics.

As a result of more and more American manufacturers setting up plants in China, our domestic supply chain was weakened. From 2001 to 2010:  The U. S. textile industry lost 63% of jobs since 2001. Communication equipment industry lost 47% of its jobs. Motor vehicles and parts industry lost 43% of its jobs. U. S. machine tool industry consumption fell 78% in 2008 and another 60% in 2009. U. S. printed circuit board industry has shrunk by 74% since 2000.  We even lost whole industries, such as:  fabless chips, compact fluorescent lighting, LCDs for monitors, TVs and handheld devices like mobile phones displays, Lithium ion, lithium polymer and NiMH batteries, low-end servers, hard-disk drives, and many others.

After over 40 years of trade policies that foster offshoring, it’s time to have a new goal for trade policies.  Instead of “remove barriers to trade,” we need to have a goal of “eliminating the trade deficit.”  The Coalition for a Prosperous America has recommended this goal for years, and on March, Representatives Brooks and Lipinski introduced House Congressional Resolution 37 for Congress to set a national goal to eliminate the trade deficit.  It is only one sentence long:  “Expressing the sense of Congress that Congress and the President should prioritize the reduction and elimination, over a reasonable period of time, of the overall trade deficit of the United States.”

As soon as the tax reform bill is signed by President Trump, Congress needs to pass this Resolution before the end of the year, so we can start 2018 on a new track.

Restoring the “Maker spirit” to Thomasville that lost an Industry and Jobs to China

January 24th, 2018

After my article that featured The Forge in Greensboro was published, I was contacted by Joel Leonard, who informed me that he worked with the original founders of The Forge as the community developer to help uncover equipment and talent and set up initial programs “to convert Greensboring to Greensciting.”

He said, “We hosted numerous large events to get the community aware of our efforts, such as a Silo Busting Roundtable to connect various groups in our society together to have meaning conversation together about manufacturing challenges. Then, some of the area employers shipped numerous tractor trailer loads of equipment, and we were able to sell what we couldn’t use and generate capital to pay for our lease, insurance, and other operational costs.  In the first year of The Forge, we launched 16 new companies, had 9 patents filed, and helped over 50 get connected to new jobs.”

I asked how he became involved with the Makerspace movement, and he responded, “Fifteen years ago, I decided to make it my life’s mission to build the next generation of skilled technicians (i.e. makers). I realized to reach the masses, a book or magazine may not make the cut, but more may listen to a song.

I wrote the lyrics to the ‘Maintenance Crisis Song,’ which has been played at dozens of engineering conferences all over the globe, on NPR and CNBC, at the Rock and Roll Hall of Fame, and during the U.S. Congressional Forum on how to revitalize the U.S. economy. To reach a larger audience, it has been recorded in 15 different genres, that include rock, opera, hip hop, bluegrass, reggae, blues, funk, gospel, pop rock, and two Greek versions.” After our conversation, he emailed me links to a couple of the versions.

He added, “Once I learned about the Maker Movement, and how it connects directly to all that I had already been doing, I quickly joined in and have been helping connect manufacturing leaders to makerspaces. Organizations around the world come to me to tell them what to do to advance their workforce development strategies, and, even better, sometimes I get paid for it.”

After leaving The Forge in the good hands of Joe Rotondi, he was freed up to consult and support makerspaces around the country like Newton Conover Middle School, Makerspace CT, Make Nashville, NASA Langley, St. Louis, and numerous others.  He is currently involved with developing a makerspace in Thomasville, NC.

When I asked how he became involved with Thomasville, he said, “Last June, Thomasville City Councilwoman Wendy Sellars of Thomasville, NC, asked me to build a makerspace in her community that had been devastated by Thomasville Furniture’s departure to China. I realized that I could not say no to helping revitalize Thomasville’s manufacturing economy because I worked at Thomasville Furniture to pay for college during the third shift starting in June of 1986. It was a great summer job because I was paid $8 per hour, which was much better than other jobs at that time.”

He commented, “If you have any pieces of Thomasville furniture made during the late 1980s, chances are the veneer on the furniture was put there by me and my team. I worked behind a veneer press. The veneer press was an old furnace that was acquired via a WWII military auction from Germany, and it heated the thinly sliced sections of wood veneer to particle board that had been slathered with glue for 10 minutes at close to 1,000 degrees. I worked on the crew that took the 4-feet by 8-feet aluminum sheets out of the oven. The veneers were used for tables, chair seats, armoires, and entertainment centers for televisions.

There was no air conditioning, and the fans didn’t help much, so I had to drink gallons each shift to keep hydrated. But, I had to keep my wits about me and keep up with my assigned partner to synchronize our movements, or one of us would get 2nd degree burns on our wrists.  Although it was hard work, it was great pay for the time and gave me a sense of accomplishment seeing the stacks of veneer we made each shift and then later see the finished goods on display in galleries and sent to the High Point Furniture Market to be sold in retail outlets all over the world.”

Leonard explained, “At that time, Thomasville Furniture offered those with just a little education the opportunity to earn a steady income. Skilled labor was getting paid $15/hour, which would be around $30/hour at today’s rates.  Now, Thomasville is without a middle-class because of loss of job opportunities and is struggling to keep crime under control.  The whole community of 27,000 is at risk of living in poverty.

Continuing, he said, “I was hesitant to agree to commit to building a makerspace immediately because I know that just building a makerspace isn’t always the solution. I visited a mall, and the idea emerged of building chairs like the successful Build a Bear franchise. I went home and put that idea on Facebook and, boom, Andrew Clement, a licensed general contractor and shop teacher at Thomasville High School, committed to making the raw material for Farmhouse Chairs from Bolivian Poplar with his students.

Andrew and I formed a partnership, established a nonprofit corporation, developed a plan, and three months later, on September 9th, the CHAIR CITY MAKERspace  hosted our first BUILD A CHAIR event to get the community familiar with makerspace concepts. Numerous area chambers sent out flyers, posted announcements, shared calendars, and several news outlets joined in spreading the news about chair making returning to Thomasville. More than 40 people gathered in the bandstand behind the famous Giant Thomasville Chair to build a chair.  Peter Hirshberg, co-author of The Maker City: A Practical Guide to the Reinvention of our Cities, even featured our event in MAKE: Magazine.”

Our second event was held on September 23rd. Tom Conley, the CEO of High Point Market Authority, led the lumber guard ceremony by carrying the first chair. This time, a group of about 45 people emerged to build chairs and offered encouragement and support for the Chair City MAKERspace quest to grow skills, jobs, and community unity.”

When I asked what the Big Chair Monument was, Leonard told me that Thomasville is often referred to as the “Chair Town” or “Chair City” because of a 30-foot landmark chair that sits in the middle of the city. Later, I looked it up on Wikipedia and learned that it is a replica of a Duncan Phyfe armchair that “was constructed in 1922 by the Thomasville Chair Company (now Thomasville Furniture Industries) out of lumber and Swiss steer hide to reflect the city’s prominent furniture industry. However, this chair was scrapped in 1936 after 15 years of exposure to the weather. In 1951, a larger concrete version of the chair was erected with the collaboration of local businesses and civic organizations and still remains today.”

The third BUILD A CHAIR event was held at the Big Chair Monument on October 7th in celebration of National Manufacturing Day on October 5th.  Thomasville Mayor Raleigh York even issued a proclamation during the event.

Leonard added, “Three retired employees of Thomasville Furniture, who had over 100 years of experience between them, joined our BUILD A CHAIR event on October 7th.  Brad Myers had been responsible for the production of over 100 chairs per hour, 800 each shift, and when the Boy Scouts and Cub Scouts weren’t listening to him, I told them he was responsible for more chairs being made in one hour than they will ever make in their lifetime. The Scouts had the opportunity to learn important skill sets from making their own chair, and each one had to be carry their own chair back to their car.”

Leonard said, “Because of our efforts over the last five months, we went from just having an idea to getting a city proclamation at the Build a Chair Event to getting a future building under contract.  Andrew purchased a house on 1 ½ acres of land for the facility.  We now have a GoFundMe page to seek donations of money and equipment for our Chairmaker Space”. Contact Joel@skilltv.net if you have any questions.

To put what they had accomplished in perspective, I asked why the makerspace is important to the region. Leonard said, “Thomasville Furniture started as Thomasville Chair in 1904 making chairs and soon became the town’s leading furniture manufacturer and largest employer. The company expanded into making other furniture in the 1960s. With over 5000 employees at the peak out of a community of 27,000, Thomasville Furniture earned an international reputation for producing quality furniture. However, that did not last. Thomasville Furniture fell apart when the manufacturing companies moved manufacturing to China in the 2000s. After the last two plants closed in 2014, all chair and furniture production ceased, eliminating the income of most of the middle class in Thomasville. The only part of the company still located in Thomasville is the Thomasville Furniture Industries Showroom. The entire city’s future became at risk, and the city has had difficulty rebounding. Many city officials have abandoned the heritage of the town and have considered new pathways and identities.”

He said, “A successful Chair City MAKERspace will prove that small communities can participate in the Maker movement and have more of a dire need to do so. That is why the Chair City MAKERspace is not only going to have a community workshop, but I am going to host a series of career development programs, job fairs, apprenticeship programs, and internships to help the local community locate opportunities in Thomasville and throughout the Piedmont Triad region.

We are still going to host regular BUILD A CHAIR events, and may expand to Adirondack Chair designs and then perhaps onto other projects, but we will always work to build on the furniture legacy that made this city world famous.”

I share Mr. Leonard’s opinion about the importance of makerspaces to a city’s efforts to develop new manufacturing companies to re-industrialize their community. In my new book, Rebuild Manufacturing – the key American Prosperity, I equate developing makerspaces as important as developing incubators or accelerators, and inventor forums into regional economic development.  However, I recommend that makerspaces partner with either public or charter skills to provide manufacturing skills training for high school students as part of their career technical training programs. There are still not enough high schools nationwide that have introduced manufacturing skills training (formerly called “shop” classes) into their curriculum. I also encourage manufacturers to find out if their city or region has a local makerspace, and if they do, then get involved to develop relationships with the makerspace to grow more talent for their company and region.

 

California Economic Summit Sets Goals to Elevate California

January 24th, 2018

The sixth annual California Economic Summit was held on November 2nd – 3rd in San Diego.  The Summit was convened by CA Fwd and the California Stewardship Network, with a long-list of sponsors and partners. More than 500 civic, business, attended the event held at the Hilton San Diego Bayfront.  The theme of the Summit was Elevate California with the goal of achieving:

  • One million more skilled workers
  • One million more homes
  • One million more acre-feet of water

The statewide gathering highlighted higher education as an important component to a new initiative to restore upward mobility in the state. I was only able to attend day two, which began with a welcome by Mark Cafferty, President of the San Diego Regional Economic Development Corporation, and San Diego County Supervisor Greg Cox. Mr. Cafferty said, “California’s brand around the world is remarkable.  We need to prepare and support our most important assets – people. We need to help Californians live in sustainable communities, and we need to create one million more middle class jobs to ‘future proof’ California for Californians.”

Supervisor Cox said, “We now have 1,400 “Blue tech” companies representing 46,000 employees and making a $14 billion contribution to our economic, creating blue collar and white-collar jobs.” He mentioned that according to the recent report, the impact of the military represents 22% of the region’s jobs.

The day started with a panel of millennial and Next Gen leaders discussing their perspective on how California’s economy and the high cost of living are affecting them and their peers. Christine Werstler was the panel leader, and the panelists were:  Assemblywomen Autumn Burke, Sean Bhardwaj, founder and CEO of Aspire 3, and Laura Clark of YIMBY Action. They shared that the major challenges are:  affordable housing, access to fundamental services like health care and education, rapid change, and an unknown future.

Assemblywoman Burke said, “You can only do so much with legislation. We need to provide resources. It’s important to know that we have a college system that doesn’t have room for everybody, even if they qualify, Access to education should be a high priority.” Burke added that many of those are students from disenfranchised communities. Burke said, “We have the data, and now we need to put it into action and work with private industry to provide the opportunities and resources. It is our job as legislators to provide all of the things they need. “

Panelist Sean Bhardwaj said, “We need to teach entrepreneurism as a skill across disciplines in colleges and universities so they are prepared to find and create their career opportunities for the future. Only 19% of millennials see other people as trustworthy, 10% lower than other generations. They need to build personal relationships or they will not engage.

Bhardwaj added, “Each and every one of us has a talent and a skill that we can bring to the world. We need to break out of the thinking of what we link learning is and think what it could be. Technology is a tool to make resources more accessible.  We need to look at what are the tools we can provide so we can use the tools quickly We need to figure out what are the skills needed today and quickly provide the opportunities to learn them.”

Clark said, “Millennials are angry – 20% are living in poverty, and we need to bring them up. It is important to have clustering of industries in regions to provide career advancement.” She urged institutions to make sure college students are registered to vote so they have a voice on issues including funding.

The next panel featured leaders from all three of the state’s public higher education systems: University of California President Janet Napolitano, California State University Chancellor Timothy White and California Community Colleges Chancellor Eloy Ortiz Oakley. Ryan Smith was the panel leader.

“When we think about income inequality in our country and California, the single tried and true tactic that has worked over time has been access to higher education in terms of increasing social mobility,” said Napolitano. “When I remind people that 45 percent of the entering class at University of California are first-generation college students, that’s real opportunity that public higher education presents in California. In the UC system, we have increased enrollment by 10% in the last two years.”

When asked about affordability, the leaders emphasized the widespread use of financial aid to cut tuition and fees, but reminded the audience that the total cost of education also includes California’s high housing costs and other expenses.

Chancellor White said, “There is a capacity problem. We turn away about 30,000 students every year. We need to build more capacity.  If we don’t make this investment, it will be a higher cost in the future if we don’t succeed.”

Ortiz Oakley said, “We are in 114 communities and we need to design for the future jobs, so we looking at what are the job needs of different regions to create upward mobility and train more skilled workers needed across the state. We’ve spent a lot of time and fortunately we’ve had the investment over the last several years through the Strong Workforce to take a hard look at the regions of California to begin preparing ourselves to develop curricula for the jobs of today and the future, not the jobs of yesterday.”

All three of the Democrat gubernatorial candidates appeared at the Summit.  I missed the appearance of Lt. Governor Gavin Newsom the first day, but day two, former Los Angeles Mayor Antonio Villaraigosa and State Treasurer John Chiang were interviewed. Villagorosa said, “If it were a country, California would rank sixth in the world economies, but we rank down with Romania in the level of poverty.”  He agreed with Assemblywoman Burke. “If we’re going to survive and thrive, we’re going to have to do a better job at growing middle class jobs,” adding that 60 percent of high school kids are Latino and African American, but only 13 percent go on to a four-year college. He said, “We’ve got to address that. We’ll be a million and half down in college graduates by 2025 and a million down in people with specialized skills.”

Chiang said, “We have to understand that we ought to celebrate the diversity of our resources. It’s all about the people and I believe we have an area that is the magnet that draws people. It’s the idea of what California is, so we can flourish uniquely because of the extraordinary diversity that we have.”

“The 2017 Summit sought to advance these ambitious themes during the event and in the coming year:

  • Create a unifying triple-bottom-line vision for increasing economic security and upward mobility
  • Expand the strength and diversity of the Summit network to increase its influence on state and local policy decisions
  • Mature the Summit as a formal civic partner with government to advance triple-bottom-line policies:

While I applaud the goals of the Summit co-conveners and partners, I wonder why no one seemed to connect the fact that our losing 33% (618,000) of our higher-paying manufacturing jobs from the year 2000 -2010 might be a major cause of our increased rate of poverty.

According to data from the California Manufacturing Technology Association, we have only regained about 50,000 manufacturing jobs since then.  As shown by the following chart from CMTA Champions of Manufacturing blog by V.P. Gino diCaro, California is lagging behind the rest of the country in regaining manufacturing jobs, and California only attracted 1.6% of reshored jobs from 2013 – 2016.

I also fail to see how we can achieve the goal one million more skilled workers without addressing California’s adverse business climate that is driving manufacturing companies to leave California. Not one speaker even mentioned the topic of California’s business climate.

For 20 years, the Small Business & Entrepreneurship Council has published a report, titled the Small Business Policy Index, by their Chief Economist, Raymond J. Keating, which ranks the states on policy measures and costs impacting entrepreneurship and small business growth. According to the 2016 report, California ranks dead last, and has been dead last for several years. The report “ties together 50 major government-imposed or government-related costs impacting small businesses and entrepreneurs across a broad spectrum of industries and types of businesses, which include: corporate and personal income tax rates, individual and corporate capital gains taxes, property taxes, sales, growth receipts, and excise taxes, death taxes, unemployment tax rates, gas and diesel tax rates, Workers’ Compensation premium costs, energy regulation, State minimum wage, paid family leave, etc.  It even ranks states by the number of government employees, Per Capita State and Local Government Spending, Per Capita State and Local Government Debt, and various categories of lawsuit reform.

A brief look at how California ranks reveals:

  • California has the highest personal income tax rate and individual capital gains tax at 13.3%
  • California ranks 50th in Workers Compensation premiums cost at 3.48
  • California ranks 49th in energy regulatory costs
  • California ranks 43rd in corporate income taxes and 44th in corporate capital gains tax at 8.84%

On the plus side, California ranks first in the lowest unemployment taxes at the low rate of 0.81. Thanks to Proposition 13 still being in effect, California only ranks 22nd in property taxes at 2.835%. In 2016, California only ranked 46th in gas taxes at 0.409 cents per gallon, but would rank 49th now after raising its gas taxes by 12 cents per gallon the week after the Summit.

As long as California’s legislators and other leaders have their “head in the sand,” nothing will be done about improving the business climate of California. I challenge the State legislature to do their job as legislators to provide all of the things business needs to grow and expand employment.

At the conclusion of the Summit, Oscar Chavez, assistant director at the Sonoma County Department of Human Services, announced that Sonoma County will be the site of the 2018 California Economic Summit. He said, “You cannot sit on the sidelines. This state needs you.” I would say, “This state needs leaders who address the issues affecting manufacturing if we want to achieve the lofty goals of the Summit.

Lean Leadership Summit Focuses on Essentials to Becoming a Lean Company

December 12th, 2017

After being delayed for a few weeks because of Hurricane Irma, Lean Frontiers held its annual Lean Accounting Summit in Savannah, GA on October 24th and 25th.  This was my fourth year to be invited as a speaker at the conference. This year’s summit was different in that the Lean Accounting Summit was combined with Lean Management and Lean People Development into Lean Leadership to include the people development aspect of being a lean enterprise. Co-founder Dwayne Butcher, said, “It’s about time that the whole enterprise be involved in becoming a Lean company. Lean is a business model and must therefore include every part of the business, including those in Executive Leadership, Accounting, HR, Sales, Product Development, Supply Chain. We need to breakdown the silos between these departments.”

Between the keynote speakers, there were three tracks related to Lean Management, Lean Accounting, and Lean People Development.  Besides giving my own presentation, “Rebuild Manufacturing – the key to American Prosperity,” based on my new book of the same name, I attended all of the keynotes and some of the sessions in the Lean Management and Lean Accounting tracks.

Lean Frontiers is not a consulting firm. Its sole focus is to provide learning opportunities to address:  Enterprise?wide adoption of Lean and the foundational skills needed by Lean companies. Dwayne announced a new program, the Lean Learning Pod, that will be taught by Jean Cunningham on Lean accounting. Participating companies will meet in a virtual manner on a regular basis, and Jean will be a mentor to the companies.

Jim Huntzinger, said, “The first Lean Accounting Summit was held in 2005, and out of that summit, Lean Frontiers was born.  Lean is still perceived as a program with short term results by too many, and we need to make the transition to Lean as a business model.  We need to traverse unclear territory — trust the process to go from current condition to the target position. We can use XYZ Thinking:  If we do X, then we will get Y, but if we get Z instead, then we will learn.”

He introduced the first keynote speaker, Art Byrne, former Wiremold CEO, author of Lean Turnaround and now a consultant. He has been practicing Lean since 1982 when he was a General Manager at a General Electric facility. He wrote his book and then wrote the Lean Turnaround Action Plan to show what would happen if a company becomes Lean. The reader is supposed to be management of fictitious company – United Gear & Housing.  He asked, “What is Lean?” His answer was, “It is strategy to run any business to remove waste to deliver more value to customers.”

He described United Gear as a traditional batch company with long set ups of 2-3 hour, a six-week lead time, and a strong management team.  The company is purchased, and the new owner make it clear that everything has to change to with Lean as the strategy.  They will have to:  lead from the top, transform people, increase gross by 5 – 7. Puts, reduce inventory by $70 M increase value, and reduce set up by 90%.  He said, “The present capacity = work + waste., and waste is typically 60%.  I particularly liked his comment. “Think about the stupidity of putting all the same machines in the same department as if the machines liked to be near each other. Instead, we should be putting the machines in the sequence of operations to be performed to go from batch to continuous flow. You could rearrange the machines into cells to go from raw material to finished product. Fewer people would be doing the work, and lead time could drop dramatically from 6 weeks to 2 days.”

He said the Wiremold strategy was to: “Constantly strengthen our base operations, achieve 100% on-time delivery, 50% reduction in defects every year, do 20 inventory turns/year, double in size every 3 to 5 years, use visual control and 5S, do one piece flow and standard work, do Kaizen, use a Pull system, and stretch targets.”

In his concluding comments, he said, “Standard cost accounting and lean don’t go together. The key is for senior management to function as one team.”

In her presentation on “Overcoming Barriers to WOW Results,” Cheryl Jekiel, CEO of the Lean Leadership Resource Center, said that the International Labour Organization for the United Nations asked her to develop and teach a class on Lean HR to be taught in 46 countries.  She had to develop the course for others to use to teach. In developing the course, she used the following working definition of Lean:

  • 7 common practices to improve
  • It’s about the customer
  • Measurable improvement
  • Problem Solving
  • Repeatable processes
  • Overall involvement
  • Visual management
  • Engaging leadership

She said, “HR can make the difference in the results. HR owns the things that are the obstacles. HR has a role in the culture of the company and can weave improvement into activities. HR owns talent strategies: hiring, training & Development, performance management, and reword systems. HR can build lean competencies into job design. The greatest is the waste of human development. Most companies don’t tsp into the power of their people. We define people by the tasks they do and not their capability. People are endlessly creative. The power of the ideas to solve problems is in people. Lean is about building a muscle — the more you do it the better you are at doing it. Lean is a way of expanding capability.  HR tends to engagement, and engagement goes with Lean. Studies show that companies are 7-11% more profitable when employees are engaged. Convert categories into dollars to make the connection of engagement into money.”

One of my favorite presenters is Jerry Solomon, who gave the presentation, “Bridging the Gap Between Accounting & Operations.” He spent 40 years in the manufacturing industry and is now retired in Naples, FL.  His last 14 years were at Barry-Wehmiller in St. Louis as CFO.

He said, “Lean is two pillars to eliminate waste in pursuit of perfection in safety, quality, delivery, and cost.  The two pillars are:  respect for people and continuous improvement. Inspirational leadership and a profound cultural and organizational change are required to become a Lean company. Elimination of waste is driven by Kaizen events, which need to be narrow and deep. The respect for people means no layoffs and requires strong C-level support.”

He explained, “Lean Accounting is using Lean tools in accounting and “plain English” P & Ls. Accounting is one of biggest roadblocks to successful Lean journey. Lean is about being a cash and capacity generator.  We need to change the metrics we use. In the traditional cost accounting pie, overhead is 10-20%, Direct labor is 60-70%, and materials are 20-30%. Today in Lean accounting, overhead is still 10-20%, direct labor is 10-20%, and materials are 60%.  Standard cost accounting is replaced by actual costs and can be understood by everyone. The benefit of Lean accounting is relevant information when you need it that is understandable to the 99% of people and not just the 1% who are accountants. It provides real-time information to run the business.”

On Wednesday, the keynote presentation was “The Continuous Improvement Engine” by David Veech, The Ohio State University, author of Leadersights and The C4 Process.

He said, “The foundation of the continuous improvement engine is trust. Two key things are required: clear expectations with standardized work and leader vulnerability and mastery. Challenges lead us to acquire knowledge and skills. It’s how we lead that sets our stretch goals. It’s a process that occurs with repetition. No one is in this alone, so we have accountability. Learning and coaching is required for mastery. The goal is to have a team of experts.”

He explained, “You need a system for problem solving to find out if ideas work – you can use PDCA, DMAIC, or my C4 system.”  He said, “C4 is short for Concern, Cause, Countermeasure, and Confirm. C4 offers straightforward, easy-to-remember techniques for identifying and solving workplace problems. These four steps-clearly identify the concern, find the true root cause, correct the cause with an effective countermeasure, and confirm that the solution worked.”

He added, “Problem solving builds mastery. Mastery results in self-efficacy, and people that have self-efficacy are willing to try new things and keep trying until they succeed. They need to have intrinsic motivation, which comes from the heart. This intrinsic motivation turns into ideas and generates initiative. The “exhaust” of this continuous improvement engine is:  satisfaction, meaning, awareness, and responsibility. Building relationships in teams is critical to the process.”

In the first breakout session, I attended “Eliminate Standard Cost Step by Step” by Nick Katco, author of the Lean CFO series. He told us that there is nothing in Generally Accepted Accounting Principles (GAAP) that would prevent using Lean Accounting methods. He said, “In GAAP, you need to calculate inventory valuation and Cost of Goods Sold. Using Standard Cost Accounting, you often have to make assumptions whereas in Lean Accounting, you use “Actual expenses incurred to get goods in condition for sale. A major objective of accounting for inventories is the proper determination of income through the process of matching appropriate costs against revenues.  In the continuous nature of manufacturing, there are difficulties in matching specific costs to revenue because products not sold in same period as produced, prices change over time, and production costs change over time.”

He explained how to do a Lean Inventory Valuation for material and production cost capitalization using three different methods:  days of inventory, units of inventory, and days of conversion cost.  He said, “Lean transformation is designed reduce inventory levels in manufacturing companies — 30-60 days is good target. There is no GAAP requirement to value every single product. Average costs replace standard costs. Capitalize total costs, not individual products by a journal entry.”  In conclusion, he advised:  “Design a lean inventory valuation methodology which works for your company and partner with your auditor to create a methodology they will be able to test.”

I had to leave early on Wednesday to catch my plane, so the last presentation I attended was “Lean Transformation from the CFO’s Seat” by CFO  Pete Gingerich of Aluminum Trailer Company. Last year I attended a presentation by the President and CEO, Steve Brenneman, so I was interested in what Mr. Gingerich had to share about their Lean transformation. He said, “In 2007, we did $27 Million and went down to $10 Million in 2009. We had to lay off half of our employees. Steve Brenneman started in 2009, and our first steps were office procedures for handling work folders and then we did 5S on the shop floor. We had lots of problems with material shortages, so we went to a Kanban system. We split into three value streams in 2012 and now have six.”

He explained, “Our big change was in how we pay our workers; we switched from piece rate to hourly and started at a rate of 10% higher than previous year’s rate. We also instituted a profit sharing plan. We didn’t use standard cost accounting, but we did have assumptions for material, labor, and overheads. Now, we know the actual costs for each value stream. Value stream planning is clearer and easier.”

He added, “We thought that our custom trailer was the most profitable, but it is actually our midline model trailer because too many engineers are involved in our custom trailer.

We have an annual meeting for top management, quarterly meetings for managers, and weekly meetings for team leaders. We have switched to rolling forecasts from budgeting, and we do weekly production planning forecasts and weekly P & Ls. Each value stream has its own weekly P& L with more detail. Lean accounting is based on shop floor metrics. We avoid allocations because if you can’t control them, why do you want to see them. We can close a quarter in one day. We clarified the definition of sales and revenue so employees would understand. We have had to work with suppliers on our Kanban system to cut inventory, such as having tires on a rack that is replenished daily. In 2009, we only did five turns of inventory, but in 2016, we did 19 turns.”

It’s always a pleasure to hear about a successful transformation into a Lean company rather than just a Lean manufacturer. I am a big proponent of Lean accounting because standard cost accounting is the biggest obstacle to more companies returning manufacturing to America using Total Cost Analysis.  When costs are divided into separate accounts, the purchasing agents and buyers do not have access to all of actual and hidden costs to be able to do a true TCO analysis. More CFOs need to take the time to attend the Lean Accounting Summit or get training from one of the qualified consultants and learn how to convert to Lean accounting.

Innovation Spurs Growth in Piedmont Triad Region of North Carolina

December 5th, 2017

My last day in North Carolina began with a visit to The Forge Greensboro, a Makerspace that also functions as an accelerator for startup businesses. My hosts, Brent Christiansen, President and CEO of the Greensboro Chamber of Commerce, Loren Hill, President of the neighboring High Point Economic Development Corporation, Mary Wilson from the Economic Development Partnership of North Carolina, and I with Joe Rotondi, Executive Director, and he gave us a tour. He said, “The Forge was started in 2014 by Andy Zimmerman as an entirely volunteer-run organization in a 3,400-square-foot space building down the street. It was only open three nights a week and was completely volunteer run. As membership quickly grew beyond the capacity of the building, we moved to this 8,000-square-foot space in the fall 2016, and I was hired as the full-time executive director. We are the largest and most comprehensive of the community-type makerspaces in North Carolina. Other larger makerspaces are affiliated with universities”

He explained, “We are a non-profit and have about 190 members. We have about a dozen people who teach classes and help maintain the equipment. Our space is split up into office space, a conference room, and manufacturing space. Most of the equipment has been donated, and all members are given affordable access to machinery for woodworking, machining, welding, sewing, 3D printing, laser engraving, electronics and ceramics.”

We met two members of The Forge during the tour: Marc Pinckney and Sam Rouse. Marc is using the equipment to build custom entertainment centers, and Sam is building custom furniture. Sam said that he moved to Greensboro to start Sam Rouse Furniture specifically because of the woodworking equipment available at The Forge. He has been able to launch his company faster and get new clients. I was pleased to learn that he is even making some wood furniture for BuzziSpace that I visited on my first day.

When I checked out the website to write this article, I learned that The Forge Greensboro launched a “Forge Ahead” fundraising campaign last week on October 11th. “The Forge is an amazing outlet for creative people, as well as a resource for employers looking to hire skilled workers,” said Executive Director Joe Rotondi. “The “Forge Ahead” campaign will equip our makers with the tools they need to actualize their ideas, as well as expand our mentor and career development programs.”

Our next stop was Winston-Salem, one of the three major cities in the Piedmont Triad region. We met Robert Leak, Jr., President of Winston-Salem Business Inc., at Whitaker Park to tour of one of the buildings on the 125-acre, 1.7 million sq. ft. campus that was donated by the R. J. Reynolds Tobacco Company in April 2017. The recipient was the Whitaker Park Development Authority Inc., a nonprofit corporation created in 2011 by Winston-Salem Business Inc., the Winston-Salem Alliance and Wake Forest University.

Bob Leak and Loren Hill commented that the building we toured was the tobacco plant that hosted tours for elementary school children when they were young. Although the building has been closed for a few years, it had been maintained R.J. Reynolds, and the utilities were now being paid for by Winston-Salem Business Inc.  It was mind boggling to walk through this enormous 850,000 sq. ft. building and imagine the millions of cigarettes that had been produced in this plant. Fortunately, the layout will facilitate the building being redeveloped into space for seven to eight different companies as there are several entrances/exits and roll-up doors for deliveries around the perimeter of the building.  They already have five companies interested in the space already.

This set the stage for our drive into the heart of Winston-Salem where we drove by several much older buildings that were previously owned by R.J. Reynolds when tobacco production was in the heart of the city. The largest building was sold to the Wake Forest Baptist Medical Center in 1986, and the rest of the downtown plants’ land and buildings were donated at the same time to the City of Winston-Salem because R.J. Reynolds was moving to a modern manufacturing center 15 miles north of the city.

We had a brief tour and lunch at one of these former tobacco plant buildings that has been re-purposed as the Wake Forest Innovation Quarter by “a partnership between the city and state, Wake Forest Baptist Medical Center, Wake Forest University and Wexford Science and Technology, a Baltimore-based primary developer.

At lunch, we met Allen Joines, Mayor of Winston-Salem and Eric Tomlinson, PhD, who wears three “hats”— President of Wake Forest Innovation Center, Chief Innovation Officer of the Wake Forest Baptist Medical Center, and Professor of Physiology and Pharmacology at the Wake Forest School of Medicine.

Mayor Jones said, “Winston-Salem began the course to become a knowledge-based economy in 1995. We started to focus on innovation, and there was strong collaboration in the city. The Wake Forest Innovation Quarter is becoming an economic engine for the state. A lot of the companies in the center were the relocation of companies already in Winston-Salem, but we are starting to see businesses forming around the research center. The Innovation Quarter has become a great place to Work, Live, Learn and Play because of the repurposing of some buildings as residential apartments.”

Dr. Tomlinson said, “We are the fastest growing innovation center in the U.S. by size and number of people employed. We are the new hub for innovation in biomedical science, information technology, digital media, clinical services and advanced materials. We have 1.9 Million sq. ft. of space covering 337 total acres, and currently, we have 3,453 people working here, 152 companies, five academic institutions with 1,395 students enrolled this fall. We have 619 research units, and the 78 service companies generate $4.8 million in revenue. Every high-tech job creates several support jobs. People like working at the center, and they have access to about 270 different events monthly. We celebrate Juneteenth, a yoga event, and a bicycle race.”

According to the website, the five academic institutions are:  Wake Forest University, Winston-Salem State University, Salem College, the University of North Carolina School of the Arts and Forsyth Technical Community College. It also features the following highlights of the center:

  • ” Patented university technologies available for licensing
  • Cost-effective scientific services
  • An advanced telecommunications structure, with a fiber optic ring running throughout
  • Venture capital opportunities, with many top venture capital firms in North Carolina within a 75-mile radius
  • Business incubation, capacity planning, entrepreneurial counseling and training”

Dr. Tomlinson said, “We have weekly meeting of entrepreneurs in our center every Tuesday evening. We have program topics that benefit entrepreneurs.  Flywheel co-working innovation space located at the Center for Design Innovation was our first incubator, where people can come together to work on the fly, learn and share knowledge.  In January, we will add a Maker Space and “Tinker” shop with manufacturing equipment.”

Our last stop of day before going to the airport to return home was Thomas Built Buses, Inc. in High Point, where we met with Caley Edgerly, President/CEO.  Mr. Edgerly said, “Thomas Built buses is the largest bus manufacturer in North America.  “We built our Saf-T-Liner C2 plant in 2004, which was a state of the art $100MM investment by our parent company, Daimler. We produce thousands of vehicles each year across our two main manufacturing facilities in High Point, and we have approximately 1,900 employees at these locations.”

He explained, “The company was founded in 1916 by Perley A. Thomas to build streetcars. In just a few years after the company’s founding, Thomas streetcars were carrying passengers in many of North America’s largest cities —notably in New Orleans on the line that was the inspiration for “A Streetcar Named Desire,” the famous play written by American playwright Tennessee Williams. The company switched to building school buses in 1936. In 1998, Thomas Built Buses became a wholly-owned subsidiary of Freightliner LLC, and Daimler purchased Freightliner in 2000. Freightliner is now known as Daimler Trucks North America LLC, the largest heavy-duty truck manufacturer in North America. The chasses they use come from the Daimler Trucks plant in South Carolina.”

Then, Mr. Edgerly gave me a tour of the plant where I first watched six robots weld the front end of the bus and one robot stack the assembly.  The paint booth is large enough to fit their 30-ft. bus, and three robots do all of the painting. I got to watch a bus being matched and attached to a chassis.

I asked when they had transformed into a lean company, and he said that the plant was set up in a lean way, so this plant gave birth to the Lean Way for the company.   Now they operate under the Daimler TOS (Truck Operating System).

I asked what are the advantages of being in High Point, and he said, “Continuation of the heritage of the company, ability to have long-term employees, and good supply of new workers in the region.  When we had to hire 50 new workers, we had 1,000 applicants. We are also close to the center of our manufacturing suppliers, and we are located in the middle of the population centers on the East Coast. The traditions of manufacturing are passed down from generation to generation.”

As I ended my trip to North Carolina, I felt good about the potential for future growth of the more diverse manufacturing sectors that are now in the region.  With low tax rates, a favorable business climate, programs for apprenticeships and employee training, Maker Spaces, incubators, and innovation hubs such as the Wake Forest Innovation Quarter, North Carolina is poised for a manufacturing boom in the future.

North Carolina Prepares for the Future through Training and Redevelopment

November 14th, 2017

At the TEDx San Diego event on Saturday, October 14th, Dr. Mary Walshok, Associate Vice Chancellor for Public Programs and Dean of Extension at the University of California, San Diego, gave a short talk in which she said we need to add HEART to STEM.  She coined the acronym HEART meaning Hands-on, Engaged, Applied, Relevant Training whereas STEM means Science, Technology, Engineering & Math.

She said too many educators don’t realize the need for the hands-on workers, such as machinists, welders, plumbers, electricians, etc. Too many parents are focused on their children getting a college education, which is why we have millions of unfilled jobs requiring hands-on training. She recommended combining HEART and STEM to be more competitive as a country in the global economy.

Fortunately, there are more and more cities, regions, and states that have awakened to this problem and are doing something about it.  Charleston, South Carolina and the Piedmont Triad region of North Carolina are among the problem-solving regions.

After visiting the Guilford Technical Community College aviation training center that I wrote about in my last article, my hosts took me to visit one of the companies involved in the apprenticeship program, Machine Specialties Inc., where we met with Rob and Tammy Simmons, President and Executive Vice President of the company.

Rob said, “The company was founded by Carlos Black in 1969 after he moved to the U.S. from Argentina where he had apprenticed as a machinist. I started in 1980, and we were primarily a small machine shop supporting the textile industry. In 1990, we expanded into screw machine parts. We got our first government contract in 1995. I became part owner in 1998, and we moved into a new building in 2003. We expanded into doing large parts like aircraft landing gear and added in-house anodizing and chem film. We bought this building in 2009 with all of office equipment. We added a large laser cutting machine in 2009, and now have two lasers. Then, we bought two large multi axis WFL machines to be able to machine Titanium. We are open 24/7, but our weekend shift works three days. We are AS9100 Certified for aerospace, ISO 9001 for commercial, and ISO 13485 for medical parts.

I bought the company in 2005, and today, we are a leading contract machining and metal finishing specialist that designs and manufactures parts for many different industries including the aerospace, military, and medical industry. We plan to grow to be a $50 million-dollar company by 2020.”

He added, “We realized that we had a problem because about 15% of our employees will be old enough to retire within the next five years. So, we need to train new workers to take their place.”

Tammy said, “We were one of the first six companies to work with Guilford County Schools in starting a new apprenticeship program in the fall of 2016 for those interested in the advanced manufacturing field. Students will undergo a three to four-year program where they can receive an associate’s degree in Manufacturing Technology, a journeymen certificate as a machinist or welder, have their school paid for, and then end up with a manufacturing job.

About 50 students, juniors and seniors, applied for the program, and 27 students were selected to start the program initially.  This year we are up to 20 companies participating in the apprenticeship program.  During the summer, the students took classes for six weeks and then worked full-time for six weeks.

The students who are seniors when they start the program, spend half the day at school and then the other half working at our company. The students who applied as seniors and then graduate, go to school one day a week at GTCC to pursue their associate’s degree in manufacturing technology and then spend four days working.  GAP pays students hourly wage while on the job and when they sit in class at community college. I think it’s important to note that apprentices are paid while they are in class earning their degree because I don’t know of any other programs that do this. We also pay the students for their tuition and books while at GTCC.”

Afterward, Vice President Bob Schumacher gave us a tour of the plant, where we met three of their apprentices, two young men and one young woman.  One of the young men had graduated from high school before starting the program in the summer, and two are seniors this year. The young woman knew she wanted to be a welder when she started the program because her family have been employed in the manufacturing industry.

Then, we drove to Browns Summit, near Greensboro, to visit ABCO Automation, where we met with Brad Kemmerer, President   and CEO, and Jack Walsh, EVP Sales and Marketing.  Mr. Kemmerer said, “We build custom automation equipment and are a FANUC and KUKA robot integrator. Our company was started in 1977 by Graham Ricks, but we converted to an ESOP (Employee Stock Ownership Plan) in 1998. We started working with Coca Cola in the beginning to build electrical control systems and custom packaging equipment.  We designed the system that McDonalds uses to pump the syrup into their restaurants.

He explained, “In the late 1980s, we began to diversify our customer base by building custom equipment for a broader range of manufacturers. We began to go beyond packaging projects into manufacturing assembly, material handling, and inspection equipment. Now, our customer base is very diversified — all of the typical industries represented in North Carolina — Aerospace, Automotive, Chemical, Food & Beverage, Electronics, Healthcare, Pharmaceutical, Tobacco. Most of our customers have 25-30 plants around the world, and the average price of a system is $1 million.”

He added, “We have 150 employees, but added 23 employees in the last six months and 40 in the last 18 months.  We need to build a supply of future workers if we want to continue to grow. We have supported the robotics competition, For Inspiration & Recognition of Science & Technology (FIRST). For two weekends in January, we host more than 60 students from six local high school robotics teams to help them kick-start their FIRST Robotics Competition. After learning the theme of the competition, each team has just six weeks to design, build, and ship the robot to the FIRST national competition. We provide guidance from our mechanical engineers, electrical engineers, and project managers to assist students, their mentors, and coaches.

When we heard about the Guilford Apprenticeship Partners (GAP) program, we hosted the meetings and helped with the high schools. We currently have four apprentice students learning the skills of an electrician, mechanic, fabricator, and machinist. Two are first year apprentices and two are second year apprentices. We believe this a win-win for all—we supplement our current manufacturing team, and the students gain paid on the job experience while earning a college education.”

By this time, it was late afternoon, so we headed back to Greensboro to enjoy dinner at Natty Green’s Kitchen + Market, which is a combination micro-brewery, farm-to-market restaurant, and store located in a redeveloped textile mill.  Natty Green’s is in one of the buildings of Revolution Mill, a 45-acre historic textile campus that brings apartments, restaurants, events, history, and innovation together as the “Place of Choice to Live, Work and Create in Greensboro.”

Nick Piornack, Business Development Manager, gave us a tour of two of the former textile mill buildings — one that has been re-purposed for offices and studio space, and the other as an apartment building.  Between two of the apartment building is an outside event space where one of the finalists of The Voice was performing.  There is one classic building yet to be redeveloped on the property.

From the website, I learned that Revolution Mill is “a historic textile mill campus encompassing the Revolution Mill and Olympic Mill sites, with adjacent land connected by North Buffalo Creek. Located just north of downtown Greensboro, Revolution began operations as the South’s first large flannel mill in 1899 and for decades anchored a thriving community of workers and craftspeople. The facility included over 640,000 feet of working space before the textile industry decline led to its closure in 1982. For the next few decades, limited sections of Revolution were renovated into office space, while other parts of the property fell into disuse and disrepair. In 2012 Self-Help assumed ownership of Revolution Mill and is completing the property’s transformation into a mixed-use development…Self-Help is a development credit union and lender headquartered in Durham, NC.”

After the tour, we met with co-founder, Kayne Fisher, of Natty Green’s Kitchen + Market, who gave us a behind the scene tour of the restaurant. Mr. Fisher told us that he had dreamed of owning his own chop house and neighborhood market since childhood. So, when the opportunity to open a restaurant in the Carpenter’s Shop at Revolution Mill came around, his brain-child came to life. The market included a butcher’s counter where you could buy cuts of meat the restaurant used in its menu. As a non-beer drinker, I actually enjoyed tasting a beer that had chocolate in it. Besides the usual steak, chicken, hamburgers, and salads, the menu offered pork chops, lamb chops, and braised brisket, the latter being my choice. All of our diners were delicious.

At the end of a very fully day, it felt good to have seen the results of the redevelopment of an important industrial region with new industries, the re-purposing of old textile plants, and the creation of an apprenticeship program to foster the development of the next generation of manufacturing workers.

North Carolina Rebounds from Effects of Offshoring and Recession

November 11th, 2017

After spending two jam-packed days in Charleston, I drove to Greensboro, North Carolina as I didn’t want to fly there through Miami, FL and spend six hours sitting in an airport or on a plane. Since I had never been to either North or South Carolina, it gave me the opportunity to see some beautiful country. I drove by cattle ranches, tobacco farms, and tree farms of Curly Pines, which I learned are the best pines to use for furniture.

I had written about the devastation of the textile and furniture industry in my book published in 2009. I wrote, “North Carolina has been the most impacted state in the nation by layoffs due to trade.  Between 2004 and 206, almost 39,000 North Carolina workers have been certified by the Trade Adjustment Assistance program as having lost jobs to trade, more than 10 percent of the U.S. total of 386,755. Thus, I was very interested in visiting North Carolina to see what had happened to the textile mills and furniture factories and what new manufacturing sectors had developed.

My host for the trip was the Greensboro Chamber of Commerce, which is actually a combined Chamber and economic development agency, and Brent Christensen, President and CEO, was my main tour guide. The Piedmont-Triad consists of the area within and surrounding the three major cities of Greensboro, Winston-Salem, and High Point. The metropolitan area is connected by Interstates 40, 85, 73, and 74 and is served by the Piedmont Triad International Airport. Long known as one of the primary manufacturing and transportation hubs of the southeastern United States, the Triad is also an important educational and cultural region.

These cities closely collaborate, so Loren Hill, President of the High Point Economic Development Corporation and Robert Leak, Jr. President of Winston-Salem Business Inc. shared the tour guide task. Mary Wilson, Communications & Public Relations Manager for the Economic Development Partnership of North Carolina drove over from Cary, NC to join us on the plant tours.

On Thursday, I was delighted that our first visit was to a company occupying a 100-year old former textile mill in High Point.  We met with Tom Van Dessel, CEO of BuzziSpace., who said they moved into the building in the summer of 2014. BuzziSpace is a Belgium company that has a manufacturing plant in the Netherlands.  The company makes acoustical furnishings that absorb sound to reduce noise and provide privacy in imaginative designs.

Mr. Van Dessel said, “We have about 40 employees now and will be up to about 115 soon. We are already producing about 30-35% of our products in this plant. We were originally looking for about a 30,000 – 35,000 sq. ft. building, but wound up selecting this 120,000-sq. ft., three-story, red brick building because of the potential. We funded a local printing/silk screen company (Splash Works) to be a tenant on the first floor of our building to be our vendor for digital printing on their fabric and felt furnishings. Our felt is made from recycled PET (soda bottles) mixed with 5% virgin industrial felt. We started with five colors of felt and now we have 12 colors.  We have a sole-source contract with the company that makes the felt. Some of our products are acoustical panels, furniture, honeycomb screens, lighting, filing cabinet covers, room partitions and various configuration of privacy spaces. Everyone wants open office space for collaboration, but you need to have private spaces for private conversations. Our panels absorb noise in certain wavelengths.”

The various configurations of privacy spaces have names like BuzziBooth, BuzziHood, BuzziHive, and BuzziHub.  Three of us sat in a BuzziHub (two couches facing each other with panels behind the couches), and the other two couldn’t hear what any of us were saying from a few feet away.

He explained, “We wanted to engage the community we are in, so we planted a community garden in the large “front yard” of our building. Our employees planted fruit trees, vegetables, berry bushes, and Muscadine grapes. At first, the vegetables and berries will be shared by our employees, but when the crops are larger, they will be shared with the surrounding community.  We want what we are doing to be an example to others to do similar things. We are surrounded by small “mill” houses that may still be occupied by former workers of the textile mill. Now, we are hiring some as workers.”

As we drove through High Point on the way to our next stop, Mr. Hill explained that while the city is no longer the hub of furniture manufacturing, it is still the hub for corporate offices, design centers, distribution centers, and furniture show rooms.

He said, “When I was growing up, it was an ordinary downtown of shops, offices, and restaurants, but now nearly every building downtown, including the former post office and library, have been converted to furniture show rooms. The city hosts the High Point Market, the largest furnishings industry trade show in the world in April and October, where furniture companies from all over the world display their products. About 75,000 attendees from more than 100 countries come to each market. It’s unbelievably busy during these two weeks of the year, but the rest of the year, the downtown little activity. The city government is now working hard on a public-private catalyst project to revitalize downtown next to the furniture market area.  That catalyst project will include building a multi-use stadium, a convention center, restaurants and shops, office space, a children’s museum, and urban housing.”

At our next stop, we visited the aviation training facility, located near the airport, and met with Kevin Baker, Director of the Piedmont Triad Airport (PTI), and Nick Yale, Director of the Guilford Tech Community College Aviation Training Facility.

Mr. Baker said, “The Piedmont Triad International Airport is at the center of an aerospace boom that has transformed the I-40 corridor into a job-rich center of aircraft manufacturing, aircraft parts supply, and aviation repair and maintenance. The Piedmont Triad region encompasses 12 counties and three major cities:  Greensboro, High Point, and Winston-Salem. The Airport Authority is the largest employer in the aerospace industry in the state and the 8th largest employer in the state. We have 1,000 acres of land available for development. We have been very active in bringing aviation companies to the area and are now home to more than 50 companies.”

He explained, “Honda Aircraft established its world headquarters, R&D, and manufacturing at the airport in 2006, and expanded in 2012 with a customer service facility. Honda Aircraft employs about 1,900 people with an average salary of $75,000, compared to an average salary of $45,000 for other jobs in the region.

HAECO Americas operates 600,000sq. ft. of space for repair and maintenance services for Boeing, McDonnell Douglas, Lockheed, and Airbus aircraft, and HAECO has about 1,600 employees. In July, HAECO announced it will be building a new $60 million hangar at PTI and will add about 500 jobs. Cessna, part of Textron, established their 46,000-sq. ft. maintenance and service center at the airport in 1993, which has grown to a 137,000 facility, employing about 150 people.”

He added, “FedEx chose PTI because of the exceptional highway connections of I-40, I-85 and I-74. Also, there are four state highway connections to these interstates under construction.  FedEx occupies a 500,000-sq. ft. facility at the airport and has about 4,200 employees.”

“What makes our airport unique is that we have land available for development, uncrowded airspace, and parallel runways,” Mr. Baker said. In addition, we have our aviation training facility.”

Mr. Yale, explained, “In 1969, GTCC started its first aviation program, Aviation Management Technology, followed by an Avionics and Airframe and Powerplant mechanics program in 1970.

We have three buildings, totaling more than 143,000 square feet, located close to each other. The T.H. Davis Aviation Center (Aviation I) is a 36,000 square-foot building owned by PTI that we lease. It has seven classrooms, two computer labs, five laboratory classrooms and a large aircraft hangar with several aircraft including a Boeing 737. It has classes in all of our aviation curriculum. It also houses our aviation department administration and several faculty. Our aviation university partner, Embry Riddle Aeronautical University (ERAU), is also housed in this building.

Our Aviation II is a 60,000 square-foot building, located adjacent to the airport and close to several aviation manufacturing and repair companies. While we lease this building from the Samet Corporation, we have upgraded it several times to address special needs for aviation education. It contains seven classrooms, fourteen specialty laboratories as well as faculty office space. It largely supports the aviation systems technology and aviation electronics technology programs, as well as non-credit (continuing education) programs in aviation.

Our new aviation building (Aviation III), was opened in the fall of 2014 next to the Aviation II building. It has 42,000 square-feet and contains general classrooms, computer labs, a flight simulator lab, library and various student services spaces. It supports the college’s Aviation Management/Career Pilot program.”

He gave me flyers describing their aviation training curriculum for the following:

  • Aviation Management & Career Pilot Technology
  • Aviation Systems Technology
  • Aviation Electronics “Avionics” Technology
  • Aerostructures Manufacturing & Repair

He said, “The Aerostructures Manufacturing & Repair Certificate is a 17-week program, and about 90% nine out of every ten people get hired upon completion. We have expanded and tailored our programs to train people exactly the way our aviation industry wants. We are getting ready to work with HAECO on three more programs next year. Delta Airlines came to us because 80% of their employees would be eligible to retire in the next five years. They needed a new generation of trained workers.

We are working with Andrews High School in High Point to train high school students in an aviation technology apprenticeship program funded by the State legislature. We had 23 students sign up to participate in the apprenticeship program last spring. The students go to school in the morning and work for companies in the afternoon. A consortium of local companies is responsible for initiating the program. HAECO just did an interview process for 50 students to be apprentices.

It was a pleasure seeing how industries outside of furnishings and textiles are expanding in North Carolina and how former textile mills are being re-purposed. My next article will feature more about the apprenticeship program with interviews with a couple of manufacturers that started the program and highlight more about the redevelopment of former textile mills.

From Boats to Tires: Global Manufacturing is Thriving in Charleston, South Carolina

November 2nd, 2017

During day two of my visit to the Charleston, South Carolina metro area, we visited Scout Boats in Summerville, S.C., which as a boat builder, is a more traditional type manufacturer you expect to find in a deep-water port community.  A family-owned business, Scout builds luxury center console sort fishing and bay boats.

I had the pleasure of interviewing Steve Potts, who founded the company in 1989. Mr. Potts said, “I have been in the boat business since I was 14 years old, and my wife and I made a decision to start making 14-15 ft. fishing boats in a garage we rented after planning for years and saving $50,000.

We got off to a good start, and then Hurricane Hugo hit and leveled our building.  We salvaged what we could and started over. The next winter, we got 11 inches of snow and the roof partially collapsed while we were developing a 17-ft. sized boat. This boat put us on the map, and we sold this model for years. We displayed this boat in the local boat show and came out of the show with a list of 31 dealers that we developed into a dealer network.  We sell exclusively through dealers.

In 1990, I prepared my plan for 1991 and predicted that we would do $750,000 in sales, and we did.  The only year we lost money was 2009. In 1992, we moved down the road to a 12,000-sq. ft. custom-built building.  However, we couldn’t expand, so in in 1995, we bought 16 acres of land and built Plant A. We added another building (plant B) and then added Plant C. Plant A build boats in size from 17-25 ft. Plant B builds boats 27-35 ft. in size, and Plant C builds 38-42 ft. models. built. Plant D will be a 100,000-sq. ft. building to build boats up to 53 ft. in size. We also have a small plant for R & D. We are a debt-free company, so we build when we have the cash.

Today, we have 28-30 models, and our annual sales will be $100 million this year.  For many years, we focused on 25-30 ft. boats, but we are expanding to build up 53 ft. sized boats.  We export 17-18% of our boats. Canada and Mexico are our two top markets, but from 2003-2008, our largest dealer was in Athens, Greece.

We have 380 employees now, and our five-year plan is to grow to 680 employees by 2020. We strive to be as diverse as we can be.  We sell yacht tenders for the large luxury yachts that are towed behind the large yachts. Our three adult children are part of our business and are very involved. Consequently, we have had an ongoing succession plan in place for more than ten years. I want Scout Boats to be a dynasty for years and years to come.”

Mr. Potts is the epitome of the exemplary American entrepreneurial spirit that once made our country the dominant manufacturing center of the world. To think that his company survived three recessions in his 28 years in business without going into debt is extraordinary.

Our next meeting was with Mark Fetten, president and CEO of Cooper River Partners, LLC that manages the Charleston International Manufacturing Center (CIMC) at Bushy Park in Goose Creek, S.C.  CIMC is a wholly owned subsidiary of Pacolet Milliken Enterprises. CIMC is a 1,750-acre industrial complex in a heavy industrial zone, as well being a Foreign Trade Zone.  It has deep-water access to the Atlantic Ocean via the Cooper River with barge slip access and rail access via a rail spur. CIMC is located less than 10 minutes from two major highways in the region (I-26 and I-526) for trucking products.

In addition to the existing tenants, it has 300 acres of developable land.  The site is currently home to the following manufacturers:

AGFA Corporation – medical x-ray and technical imaging regional distribution center

Evonik – manufacturer of silica for tire production (under construction)

Kemira Chemicals – paper dyes, specialty chemicals for ink jet applications

Lanxess Rubber Chemicals – vulcanization for tires and peptizers used in rubber manufacturing

Nexans – high voltage underground and submarine cables

Philips Industrial Services – industrial and marine painting, fireproofing, hydroblasting, water jetting, epoxy floor systems, and industrial vacuuming

Sun Chemicals – organic pigments for paints, plastics, and cosmetics

Symrise – flavors and fragrances, menthol, sunscreens, and aroma esters (expansion project under construction)

Mr. Fetten discussed the biggest advantages CIMC offers are the utility services and other support functions that allow tenants to focus on their core business. “CIMC enables companies to get their products to the market faster with the existing infrastructure within CIMC, while minimizing CAPEX and risk,” he said.

Located only 1.5 miles from a major power station, CIMC has a one MW solar farm on the property that feeds back into the power grid. A second solar farm is in the final stages of planning. A wide variety of utility services are provided, including electrical, steam, compressed air, nitrogen, refrigeration, natural gas, and waste water treatment. Other services include on-site security, environmental management, and emergency responders.

CIMC was originally built up by Bayer Corporation over a period of 30 years, but in 1999, Bayer started divesting companies.  In 2009, Bayer sold the park to a privately held company of which Marc Fetten was a partner with two other gentlemen. Marc previously worked in M&A for Bayer, so he saw the opportunity.

The driving tour around CIMC showcased the advanced manufacturing legacy of the southeast. In addition to the $250 million in CAPEX I saw under construction, I got to see a gem of heavy industrial manufacturing.  The former General Dynamics and subsequent Jacobs Engineering plant was purchased by Cooper River Partners, LLC in the summer of 2016. This 94-acre facility located adjacent to CIMC, appropriately named CIMC North produced some amazing examples of advanced manufacturing, the nose cones to U.S. Navy Trident Class Submarines and later modular assembly and pipe fabrication.

CIMC North consists of 400,000 square feet of manufacturing and warehouse space, 800,000 square feet of open-air assembly, an array of welding, assembly, blasting, painting and handling equipment, as well as a barge slip and rail access.  Also of note, are the ten bridge cranes, eight of which are rated for a 40-ton load. The two 20-ton bridge cranes have infrastructure in place to support transloading to and from railcars. According to Marc, “CIMC North expands our footprint and facilitates bringing prime industrial, warehouse and distribution space to the market immediately, which is in high demand in the Charleston region. Providing a dock, rail access, large capacity cranes and a 200-ton shuttle lift is a big cost saver for companies looking to minimize CAPEX. This model aligns perfectly with our sustainable approach of minimizing environmental impacts.”

Afterward, we met with Robert Brown, Communications Manager, and Arthur Dube, Business Director, Precipitated Silica & Rubber Silanes. of Evonik Corporation, the U.S subsidiary of Evonik Industries AG, which is a German company that is one of the world’s leading specialty chemicals company. Evonik Industries produces chemicals for a variety of applications, including adhesives, cleaning products, construction materials and employs more than 33,500 people worldwide in more than one hundred countries.

Mr. Brown said, “Evonik Corporation was formed in 2007 in Chester, PA and has 33 plants in the U.S., Canada, and Mexico. We have about 5,000 employees in the U. S.  The new plant we are building in this Center will open in June 2018 and produce precipitated silica to supply the tire industry. We will hire about 50 people for this plant. This business park offers the existing infrastructure we need, and there is a high level of skilled workers in the region for the higher paying jobs we offer. There are also workers at other plants that may transfer to this plant. David Elliott will be the Manufacturing Director for the new plant.”

He explained, “Evonik helps improve consumer and industrial products, and this plant will make tires run better, longer, and be stronger. He said that South Carolina has become home to several major tire manufacturers, such as Michelin, Bridgestone, and Continental, so they are following their customers. Another reason for locating in South Carolina is that the Sumter area mines produce 99% pure silica sand that is used in producing our precipitated silica.

Wanli Tire Corporation, a Chinese tire manufacturer, is investing $1 billion to build a new plant in Orangeburg County, South Carolina.  Also, Giti Tire, based in Singapore, announced a new plant last year that is being built just south of Rock Hill, SC.”

These two additional tire plants will further boost the state’s status as America’s tire-producing capital and create over 3,000 new jobs for the region when they are at full employment.

I was given a brief explanation of how they make precipitated silica by mixing silica sand with sodium carbonate and melting them. Then, they dissolve the mixture in water and precipitate it. The resulting white precipitate is filtered, washed and dried in a proprietary manufacturing process. Any further detail exceeds my technical expertise to explain. I was shown samples, which looked like pieces of fluffy popcorn that were a great deal lighter than you would expect from what started as a piece of silica. As an additive to tires, the precipitated silica produces fuel-efficient tires with wet grip properties, which can save up to eight percent in fuel consumption compared to conventional car tires.

This two-day visit to the Charleston region confirmed what Harry Moser of the Reshoring Initiative has been telling me about the increase of manufacturing jobs from Foreign Direct Investment. The favorable business climate, low state taxes, developable land, and skilled workforce has made South Carolina an attractive location for European companies from Germany, France, Belgium, the U.K, and Denmark to expand their U. S. manufacturing presence. If the U.S. would lower the national corporate tax rate, we would not only attract more Foreign Direct Investment, but would attract more American corporations to return manufacturing to America.

Charleston Manufacturers Focus on Training Current and Future Workers

October 31st, 2017

After visiting the Charleston Port terminal and the Mercedes-Benz Vans Training Center, I had the pleasure of visiting several manufacturers during my two-day trip to the Charleston metro area. We first visited Ingevity in North Charleston, where I met Michael Wilson, President and CEO, Dan Gallagher, V.P., Investor Relations, Eric Walmet, Charleston Plant Manager, Jack Maurer, Director, Communications and Brand Management, and Laura Woodcock, Manager, P.R.

Ingevity is a leading global manufacturer of specialty chemicals and high-performance carbon materials that are used in a variety of demanding applications, including asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks, and automotive components that reduce gasoline vapor emissions. The company creates high value-added products from renewable raw materials. The name is “coined” from the meaning of four words:  genuine, ingenuity, innovation, and longevity.

Ingevity was spun off in May 2016 from WestRock, which has a long history and many name changes going all the way back to 1846 when it was founded as Ellis, Chaffin & Company. Ingevity is headquartered in North Charleston, and has manufacturing plants in South Carolina, Georgia, Kentucky, Louisiana, and Virginia, as well as two in China. Ingevity has four sites in the Charleston region: its headquarters with 205 employees, the manufacturing plant with 214 employees, the Ashley Center with 109 employees, and the Innovation Center with six employees for a total of 534 employees.

Michael Wilson said, “We recently announced an agreement to acquire Georgia-Pacific’s pine chemicals business for $315 million. This will give us a stronger more competitive pine chemicals business. We also signed a supply agreement with Georgia-Pacific which in combination with our agreement with WestRock, will put 70 percent of our crude tall oil requirements under long-term contract. There is little customer overlap between the two companies. And, because we do business in 65 countries, we believe we can accelerate global growth for the Georgia-Pacific products.”

When I asked him his impression of the manufacturing sector in the region, he responded, “The manufacturing base is very diversified. The business climate of South Carolina is world class. The mindset of the government has been beneficial. It is a right to work state and has low taxes.”

Eric Walmet gave us a tour of the Charleston plant and Innovation Center, where we saw some of the activated carbon end-products made by Ingevity. The products include carbon honeycombs, granular carbons, and shaped carbons used to reduce automotive gasoline emissions. The activated carbon is made by combining sawdust and acid through a proprietary process.

I could see that the plant was laid out on the basis of a Lean value stream mapping event, and there were the obvious signs of the application of Lean tools and principles on the shop floor.

Our next stop was IFA North America in nearby Ladson.  We met with Mauro Amarante, President and CEO, and Ryan Loveless, Training Coordinator.  IFA North America LLC, formerly known as MTU Drive Shafts LLC., was founded in 2002 and operates as a subsidiary of the German company IFA – Holding GmbH.

IFA is one of the world’s leading and largest suppliers of drive shafts and side shafts for the automotive industry. In North America, IFA produces more than two million drive shafts a year and employs more than 600 people.

Mr. Amarante said he has been in the U.S. 11 years, having previously lived in Germany, Brazil, and Verona, Italy where he was born and raised. IFA is currently building a new plant in Berkeley County (still in the Charleston metro area) that will be 234,000 sq. ft., where they will be manufacturing constant velocity joints. They plan to consolidate all their operations and expand to about 400,000 sq. ft. by 2023.

Mr. Amarante said, “South Carolina is very business oriented, and former Governor Nikki Haley was very business focused.  We have all the business conditions we need here to secure our workforce.  We were one of the partners with VTL and three other companies to start an apprenticeship program three years ago to teach basic manufacturing skills like math, statistics, gauging, and machine operations.”

Mr. Loveless gave us the plant tour where we watched their production team turn purchased metal tubes into several designs of drive shafts.  Mr. Loveless said, “In addition to our full-time employees, we utilize about 120 temporary workers from a private agency.  These people work for us for about three-six months, and then we select the best workers to add to our full-time employees base. We would like to reduce the number of temporary employees. This is why we are investing time and money into the apprenticeship program to grow our future employment pool.”

Again, I saw the application of Lean tools and principles throughout the shop floor.  We even had to watch a safety video before we got to take the plant tour, and I was glad I was wearing my own Sears Die Hard steel-toed shoes instead of having to wear their guest shoes. Of course, as an automotive Tier 1 and Tier 2 supplier, they are ISO 9001:2008 and TS 16949 Certified.

Next, we visited the VTL Group, also in Ladson, where we met with Jeff Teague, General Manager, and Brian Glasshof, Account Manager.  Mr. Teague said, “The company was started in 1919 and changed its name to Valeo Transmission Ltd. in 1997. The management team, Bruno Joan, Chris Elliott, and a third man who has since been bought out and retired, did a leveraged buyout in 2001.  Chris started at the company as an apprentice when he was a young man.

He said, “I started in November 2011 when the company was in a turn-around mode after the recession. I came from the Greenville/Spartanburg area.  We are now running in a very tight workforce market because of the low unemployment.

We specialize in the design, development, prototyping, and manufacture of high precision components and sub-assemblies for automotive powertrain applications. We have expanded by winning several new contracts.  This plant makes variable geometry turbo parts for Cummins and make engine components for Borg Warner.  Everything we do is built around CAFÉ standards for emissions. VTL Group employs 275 globally, and has 48 employees in this Charleston plant.”

He went on to tell me about the genesis of the region’s youth apprenticeship program. “We were one of the six companies that showed up at a meeting in 2013 to discuss starting an apprenticeship program, which launched in 2014. We had a signing day event for 11 students. Now, this fall we’ll have 100 in the program.  Apprentices can start when they are 16 years old in high school. There are now nine industry sectors and 122 companies in the apprenticeship program. Industrial mechanics is the most requested training.”

Two of their new apprentices were brought in to meet me:  John Cody Geiger and Ty’Celia Young.  Both are high school students.  Ty’Celia said, “My high school engineering teacher encouraged me to apply when I was a junior.” Cody said, “I got an email from my high school principal and applied as a senior, so I graduated before starting at VTL.”

They go to high school in the morning, and then take industry-specific college courses a couple afternoons, and go to work the other afternoons during the school year. In the summer, they work full-time. When they complete the apprenticeship program, they will be Certified as Journeymen by the Department of Labor. They will also have two years of paid work experience on their resume. VTL has hired two past apprentices as full-time employees.

There are 26 schools in the apprenticeship program, public high schools, as well as charter schools and private schools. The Charleston Metro Chamber of Commerce pays for the tuition, tools and supplies for all of the students, so the students are getting their training free of charge. The Charleston Metro Chamber focuses on in-demand occupations. Besides advanced manufacturing, Charleston is also becoming an IT hub.

When I asked about the curriculum, I was told that the community colleges already had curriculum, which the companies helped modify to meet their needs. The program has two main goals:

  • Fill the critical workforce needs.
  • Monitor the next generation of students to keep them in the region.

Apprenticeship training is not all the training provided at VTL. Every employee is allowed one hour a week for training, but it is up to them to take advantage of the opportunity. VTL uses ToolingU training modules for their in-house training program.

Mr. Teague gave us the plant tour, and I was amazed at how many robots they had doing various manufacturing processes and moving parts from one operation to another. No wonder that only 48 employees at this plant are able to maintain the work flow required of a Tier 1 and Tier 2 automotive supplier. The parts I saw in process were Variable Cam Timing engine components and turbo-charger components. Mr. Teague showed me their Lean scoreboard section where there are visual displays of all the metrics required for a Lean company.  Naturally, VTL is also ISO 9001:2008 and TS 16949 Certified.

From these tours, I could see why world class companies are choosing to locate or expand in the Charleston, South Carolina region. A very favorable business climate, excellent transportation options by truck, rail, and ship for both national and international destinations, a highly skilled, trained workforce, and apprenticeship programs make the region a desirable location for many manufacturing sectors, especially those that export their products.