Is there a Relationship Between our Trade Deficits and our National Debt?

January 27th, 2015

In his State of the Union address, President Obama asked Congress for Fast Track trade authority to move forward on the two trade agreements that have been in negotiations behind closed doors for the past four years: The Trans-Pacific Partnership Agreement and the Trans-Atlantic Trade Agreement. I have already written several articles about why Fast Track Authority should not be granted and the dangers of the TPP. The purpose of this article is to show that there is a relationship between our trade deficits and our national debt. As shown by the chart below, we now have a more than $18 trillion national debt.


Notice how it sharply ramps up starting in 2001. The recessions of 2001-2002 and 2008-2009 obviously played a significant factor in the increase in the national debt from $5.8 trillion in 2001 to its present level, because during recessions, there is a decrease in tax revenues and an increase in spending for unemployment benefits, food stamps, and other assistance, as well as spending on programs to attempt to stimulate the economy.

However, 2001 also coincides with the first full year of trade with China under the rules of World Trade Organization after “Congress agreed to permanent normal trade relations (PNTR) status,” which “President Clinton signed into law on October 10, 2000,” paving “the way for China’s accession to the WTO in December 2000.”

According to Alan Uke’s book, Buying Back America, the United States now has a trade deficit with 88 countries. Of course, some deficits are small, but some are enormous, such as China. According to the Census Bureau, our top seven trading partners are: Canada, China, Mexico, Japan, Germany, South Korea, and the United Kingdom. These seven countries represent 50.9% of our total trade deficit $ -461.3 billion for January – November 2014. At an average deficit of $40 billion per month, the 2014 trade deficit will exceed $500 billion. Our 2014 trade deficit with China alone was $-$314.3 billion for January – November, representing 68% of the total.

Some may claim that we are still the leader in advanced technology products, but this is no longer true. The U. S. has been running a trade deficit in these products since 2002, which has grown to an astonishing average of nearly $90 billion per year since 2010.

Even our most recent trade agreement, the Korea U. S. Free Trade Agreement (KORUS FTA), which went into effect on March 2012 has had negative impact. The Office of the   Last March, the U. S. Trade Representative for the Obama Administration touted, “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos, exports are up for a wide range of our agricultural products, and exports are up for our services.” However, the reality is that our imports continued to exceed our exports, and the U. S. trade deficit with Korea jumped from -$13.62 billion in 2011 to -$22,838.3 billion through November 2014, which is a 60% increase in two and a half years.

china trade deficitSource:

Notice that there is a similar upward slope on the above graph to the upward slope of our national debt chart. Anyone can see that our trade deficits have a significant impact on our national debt.

The only thing that kept our trade deficits from being higher than they have been is that fact that we have increased the exports of services to balance our imports of goods as shown by the following chart:


Year Total Goods Services
1999 -$258,617 billion -$337,068 billion $78,450 billion
2000 -$372,517 billion -$446,783 billion $74,266 billion
2002 -$418,955 billion -$475,245 billion $56,290 billion
2004 -$609,883 billion -$782,804 billion $68,558 billion
2006 -$761,716 billion -$837,289 billion $75,573 billion
2008 -$708,726 billion -$832,492 billion $123,765 billion
2010 -$494,658 billion -$648,678 billion $154,020 billion
2012 -$537,605 billion -$742,095 billion $204,490 billion
2014 -$461,336 billion -$673,612 billion $212,277 billion


As you can see, our trade deficit in goods more than doubled from 1999 to 2004 and reached astronomical heights just before the worldwide recession.

So how do our trade deficits add to the national debt? One way is that many products, especially consumer products, which were previously made in the U. S., are now made in China or other Asian countries, so we are importing these products instead of exporting them to other countries. The offshoring of manufacturing of so many products has resulted in the loss 5.8 million American manufacturing jobs and the closure of over 57,000 of manufacturing firms. These American workers and companies paid taxes that provided revenue to our government, so now we have less tax revenue and pay to pay for the benefits and public assistance for the unemployed and underemployed.

Our balance of payments indebtedness for trade and the additional cost to the government paid by taxpayers for these benefits has resulted in our escalating national debt. The cheaper China price of goods that we import instead of producing here in the U. S. results in a cost to society as a whole. We need to ask ourselves: Is the China price worth the cost to society?

I say a resounding NO! We need to stop shooting ourselves in the feet. We need to stop benefiting the one percent of large multinational corporations to the detriment of the 99% percent of smaller American companies.

Beyond stopping Fast Track Authority and the Trans-Pacific Partnership from being approved, we need to focus on achieving “balanced trade” in any future trade agreement. Until we change the goal of trade agreements, we should refrain from negotiating any trade agreement. The last thing we need is to increase our trade deficit more than it already is.

In addition, we need to facilitate returning more manufacturing to America by changing our tax policies and making regulations less onerous to manufacturers, without compromising our commitment to protect our environment. This is the only way that we will simultaneously reduce our trade deficit and the national debt.


Looking Back at 2014 and Ahead to 2015

January 20th, 2015

Most economists are predicting a rosy forecast of more than 3 percent expansion for the U.S. economy in 2015, up from 2.3% in 2014. If it does, this “would mark the first time in a decade that growth has reached that level for a full calendar year.” The unemployment rate is also predicted to drop from the current 5.6 percent to 5.3 percent. The questions are: How much will American manufacturing benefit from this expansion and how many manufacturing jobs will be created?

While the country gained 252,000 jobs in December, only 17,000 were manufacturing jobs according the monthly report from the Bureau of Labor Statistics ? “In December, …Manufacturing added an average of 16,000 jobs per month in 2014, compared with an average gain of 7,000 jobs per month in 2013.”

This was a significant increase over the previous year, but notice that President Obama recently stated that “more than 764,000 manufacturing jobs have been gained since the end of the recession.” This means that we still have a long way to go to recoup the 5.8 million manufacturing jobs that we lost between the years 2000 – 2009. According to Scott Paul, President of the Alliance for American Manufacturing, “…December’s manufacturing job gains were behind the previous month, and that halfway through the president’s second term, the country is just over one-quarter of the way to his pledge to create 1 million new manufacturing jobs in that four-year span.”

While the U3 unemployment rate dropped to 5.6 percent, the U6 rate is double at11.2 percent. The U-6 rate includes “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”

In a recent article, business reporter Jonathan Horn of the San Diego Union-Tribune noted, “the unemployment rate fell in part because people dropped out of the labor force ? they either retired or left the labor force. Last month, the number of unemployed persons fell 383,000 to 8.7 million. However, less than one-third of people out of work found jobs; the rest stopped looking. The percentage of Americans who are either working or looking for work fell back to a 37-year low last touched in September.”

The January 6-11, 2015 edition of the San Diego Business Journal’s reported that manufacturing jobs in San Diego increased by 3.3 percent from November 2013 through November 2014, for a total of 97,400 industry jobs, up by 3,100 jobs. However, we still have a long way to go to get back to the 122,600 manufacturing jobs in the San Diego region we had at the end of 1999.

Two manufacturing sectors led the job growth in San Diego: shipbuilding and Unmanned Aerial Vehicles (drones.) General Dynamics’ Nassco division has contracts for five commercial tankers and one Navy ship and plans to “add about 300 additional jobs to the shipbuilder’s staff, bringing the total workforce to about 3,500.” General Atomics Aeronautical Systems Inc’s “local employment grew 9 percent year over year to 4,843 as of June 2014.”

In this same article, I was quoted as saying, “For those with skills and experience in a particular industry, things were definitely trending up in 2014…This (2014) has been a year when people could find jobs.” I’m also quoted as saying, “San Diego greatly diversified its economy following the previous major recession in the early 1990s, and that’s made a huge difference in the past several years…One of our strengths is that we’re not hurt as much from the lack of new defense programs.”

Looking Back at 2014

The R&D tax credit that had expired December 31, 2013 was extended for 2014, but has now expired again as of December 31, 2014. The R&D Tax Credit was originally introduced in the Economic Recovery Tax Act of 1981 sponsored by Rep. Jack Kemp and Senator William Roth. The credit has expired eight times and has been extended fifteen times. The frequent expiration of this tax credit creates unnecessary uncertainty for business investment planning. The R&D Credit Coalition, National Association of Manufacturers, and many other business groups recommend that this tax credit be made permanent.

One bright spot on the national scene is that a bill requiring a National Strategic Plan for Manufacturing authored by Rep. Daniel Lipinski (D-IL) and Rep. Adam Kinzinger (R-IL) became law right before Christmas. Three of Lipinski’s previously authored bills had passed the House three times over the past five years, but failed to either pass or be considered in the Senate. This bill was included in legislation that passed both houses and was signed into law by the President. U.S. Senators Mark Kirk (R-IL) and Chris Coons (D-DE) and Mark Pryor (D-AK) introduced the language in the Commerce, Science and Justice Appropriations bill passed by the Senate.

Rep. Lipinski stated, “After many years of hard work, my bipartisan legislation to boost domestic manufacturing and American jobs by. The bill requires that at least every four years the president works with public and private stakeholders to produce and publish a plan to promote American manufacturing. In addition, every year the president’s budget blueprint will have to contain an explanation of how it promotes the most recent manufacturing strategy. This bill guarantees that Washington has to pay attention to what can be done to help manufacturers and workers. Getting this provision into law can really make a difference by leading to economic growth, increased American security, and more middle class jobs that pay hard-working Americans a good wage. I look forward to finding many more “Made in USA” labels on products we see in our stores and online.”

In June 2013, I wrote an article criticizing an earlier version of this bill, H.R. 2447, the American Manufacturing Competitiveness Act of 2013, and was contacted by Rep. Lipinski’s Chief of Staff to discuss my criticisms. I am anxious to see whether or not the current language included in the Commerce, Science and Justice Appropriations bill addressed these criticisms.

In his 2014 State of the Union address, President Obama pledged to launch four new manufacturing institutes this year, for a total of eight institutes launched so far on an original goal of creating 15 manufacturing innovation institutes. On December 11th, President Obama announced that” the government will invest more than $290 million in public-private investment for two new Manufacturing Innovation Hub Competitions.

One will be in smart manufacturing at the Department of Energy and one in flexible hybrid electronics at the Department of Defense. Each institute will receive $70 million or more of federal investment to be matched by at least $70 million from the private sector for a total of more than $290 million in new investment.”

“The Department of Defense will lead a competition for a new public-private manufacturing innovation institute in flexible hybrid electronics…The Department of Energy will lead a competition for a new public-private manufacturing innovation institute focused on smart manufacturing, including advanced sensors, control, platforms, and models for manufacturing…” The press release invites interested applicants to find more information on the manufacturing innovation institute competitions at

While funding manufacturing institutes may have a long-term benefit similar to funding research at other government institutions, there are actions that President Obama and Congress could take that would have a more immediate benefit on the manufacturing industry and create more jobs, such as making the R&D tax credit permanent, addressing currency manipulation by our foreign trading partners, easing taxes to repatriate corporate profits, and actually doing comprehensive tax reform. Let us hope that the economic predictions of a better 2015 than 2014 will come true and that more manufacturing jobs will be created by even more companies returning manufacturing to America.

San Diego is a Hotbed of Innovation

December 16th, 2014

On Thursday, December 4th, CONNECT held its 27th Annual Most Innovative New Product (MIP) Award dinner to honor San Diego companies that had launched innovative new products within the last year. There were more than 700 attendees at the event held at the Hyatt Regency La Jolla at Aventine, led by Mistress of Ceremonies Maureen Cavanaugh of the Midday Edition of KPBS. There were 102 nominations that were narrowed down to 24 finalists by 100 judges, culminating in eight new MIP winners. The 2014 MIP Award winners selected were:

Aerospace & Security Technologies

CyberFlow Analytics for FlowScape – The “platform enables Advanced Threat Protection through a sophisticated Anomaly Detection system and has been designed in a modular fashion in alignment with cloud computing principles and runs entirely in the context of virtual machines…the system involves a series of connected multi-model ‘analytics engines’ that contain hundreds of mathematical predictors that can machine learn network communication transmissions and identify odd anomalous behavior across an entire network…[It} is scalable to handle big data network and application flows through cloud-ready virtualized analytics engines.”

The other finalists were: Cubic Defense Applications for Halo Array, 3D Robotics for IRIS, Space Micro, Inc. for IPC7000, Image Processing Computer.

Communications & IT

Cubic Transportation Systems for NextBus Fleet Management Application – The “application is a modular, mobile gateway for connecting passengers and public transport operators to valuable real-time travel and operations information. For passengers, this means knowing exactly where their next bus is so they know how long their wait time is. For operators, it is a cost-effective, high-quality and reliable application to keep buses on schedule and drive efficiencies in their services.”

This award shows that long-established company can still develop an innovative new product. Cubic Transportation System is “the leading provider of revenue collection management systems and services worldwide” and is one of three business segments of parent company, Cubic Corporation. Walter J. Zable founded Cubic Corporation as a small electronics company in San Diego in 1951, and he remained involved in the management of the company as CEO until his death in 2012 at the age of 97.

The other two segments are:

Mission Support Services is “an industry leader in providing comprehensive support services for all echelons of national militaries and security forces in the U.S. and allied nations.”

Cubic Defense Applications is “the leading provider of live air and ground combat training systems worldwide, a key supplier of virtual and immersive training systems, communications and electronics products, and an emerging provider of cyber technologies and global tracking solutions for commercial and national military customers.”

I started working at Cubic Defense when I was 19 years old for the Chief Scientist, Chief Physicist, and a Staff Engineer in the Marketing Department. The latter had previously developed the geodetic SECOR satellite surveying system, the first of its kind to produce a direct coast-to-coast measurement of the United States long before the Global Positioning System was developed. He was on the fast track for advancement and was promoted to Marketing Manager three years later, and I moved up with him as his assistant at age 22. When I started my own manufacturers’ sales rep agency in 1985, both Cubic Transportation and Cubic Defense became customers for companies that I have represented over the years.

The other finalists were: DVEO division of Computer Modules, Inc. for Ad+EAS Serter™ and Tricopian, LLC for FuelRod.

Diagnostics & Research Tools

Organovo, Inc. for 3D Human Liver Model – “Organovo’s Bioprinted Human Tissue Models are multi-cellular, dynamic, and functional 3D human tissue models for preclinical testing and drug discovery research. Created using proprietary 3D bioprinting process, the tissues remain viable and dynamic for extended time in vitro and exhibit key architectural and functional features that mimic key aspects of the natural 3D tissue environment. Biochemical, genomic, proteomic and unique histologic endpoints can be assessed over time.”

In addition to the MIP award, the life science magazine The Scientist’s selected Organovo’s ex Vive 3D human liver tissue for the seventh place spot of the top 10 innovations for 2014.

The other finalists were: bioTheranostics, Inc for Breast Cancer Index (BCI) and Edico Genome for DRAGEN Bio-IT Processor.

Mobile Apps

Rock My World, Inc. for RockMyRun – this is a mobile app that takes biometric data from smart phones and fitness wearable devices “to adjust the tempo of the music you’re listening to in order to match your pace or motivate you to push just a little harder.”

The other finalists were: GreatCall for Urgent Care and Visual Mobility Inc. for SEENiX.

Pharmaceutical Drugs and Medical Devices

Topera, Inc. for Topera’s 3D Mapping System – the system “consists of the FDA cleared and CE marked RhythmView™ Workstation and FIRMap™ Catheter, which are used in combination for the identification and localization of the sustaining mechanisms of cardiac arrhythmias such as atrial fibrillation, atrial flutter, atrial tachycardia, and ventricular tachycardia.”

On October 30, 2014, the Chicago-based healthcare company, Abbott announced it would acquire Topera “with all outstanding equity for $250 million upfront with potential future payments tied to performance milestones.”

The other finalists were: Bioness for Vector Gait and Safety System and Diazyme for 25-OH Vitamin D Assay for Clinical Chemistry Analyzers.


CloudBeds for CloudBeds – It is an operating system for hotels to “provide the hotel with an automated website, booking engine, Facebook presence, revenue management platform, distribution channels, rate and package manager, and light-weight property management system. The system “automates many of these functions so that an hotelier can focus on its guests instead of managing its property and selling its rooms.” Their “goal is to continue to help streamline connectivity between small hotels and their customers using the latest innovations in software — improving their operational and communication efficiencies.” Their focus is on “the large developing world marketplace.”

The other finalists were: Intific for NeuroBridge 2.0 and Raken, Inc. for Raken.

Sport & Active Lifestyle Technologies

Electrozyme LLC for ProFit SE Real-Time Sweat Electrolyte Sensor – this is world’s first wearable personal hydration monitor that can asses assess fluid and electrolyte loss in a real-time non-invasive way to determine if it’s time to rehydrate, what to rehydrate with, and how much to rehydrate.

The other finalists were: Bast Surf for Bast and Cardiff Skate Co. for Cardiff Skates.


Solatube International for Solatube SkyVault Series – the patented technologies of the Sky Vault series combines breakthrough optics with progressive engineering to enhance light capture, focus light over greater distances, or spread light evenly throughout a space.

I wrote about Solatube in the second edition of my book because they “reshored” by returning manufacturing from China to their plant in Vista at the end of 2011, partially because of the risk of intellectual property theft of their proprietary technologies, in addition to increasing costs and difficulty in managing their offshore manufacturing.

The other finalists were: Blue Wave International, Inc. for ClearWaveAir and Measurabl for Measurabl.

Two other awards were given at the event: CONNECT’s Distinguished Contribution Award for Life Sciences Innovation was awarded to philanthropist T. Denny Sanford received, and the Distinguished Contribution Award for Technology Innovation was awarded to Dr. Robert S. Sullivan, Dean of the Rady School of Management, University of California, San Diego.

From inventors being educated and mentored through the San Diego Inventors Forum to entrepreneurial teams developing technology based products being assisted and mentored through CONNECT’s Springboard program, San Diego is a hotbed of innovation. “Since the inception of the program in 1993, more than 3000 scientific and technological breakthroughs have been guided through the process of innovation to commercialization. Together, these companies have raised over $ 1.4 Billion in capital.” To me, this makes San Diego the “Silicon Beach” of California.

Miller Ingenuity Combines Innovation and Lean to Create a Unique Culture

December 9th, 2014

Last month, I had the pleasure of interviewing Steve Blue, President of Miller Ingenuity, located in Winona, Minnesota. Winona is a medium-sized Midwestern town of under 30,000 people located on bluffs overlooking the Mississippi River in the southeastern corner of Minnesota across the river from Wisconsin.

“Rudy” Miller founded the company more than 60 years ago after inventing the wick lubricator, a maintenance free lubricating system for locomotives. Miller’s inventiveness enabled the company to develop into a successful company by means of the ability to design, produce and deliver innovative railroad parts that meet the needs of the industry.

Miller Ingenuity currently has 50 employees at their 70, 000 sq. ft plant, but has 18 sales people around the world selling to 100 countries, including Asia. The company remained a privately held enterprise of the Miller family after Mr. Miller’s death 18 years ago, and Mr. Blue became president 15 years ago.

As described on their website, Mr. Blue is carrying on the innovation legacy of Mr. Miller: “Our continued innovations are driven by three core motivations: to take on customer challenges, to think more creatively about solutions, and, humbly, to be everyday heroes to our customers. We put these beliefs into action based on deep and “factory floor” relationships with our customers and on our ability to invent, engineer, and deliver ingenious solutions.”

Mr. Blue stated that the company started on their Lean journey ten years ago, and every employee went through the training. Two of their employees are Black Belts from training they had received when they worked for General Electric. The company has expanded Lean out of the shop floor into “lean office,” but not into “lean accounting” as yet.
In answer to my question as to whether the company is having problems finding employees with the right skills, Mr. Blue said, “Yes, but it is because we are picky by design. We have created a culture, and not everyone fits into our culture. We are slow to hire, but fast to fire if someone doesn’t fit. It’s easy to teach skills, but attitude is more important.”

Mr. Blue added, “We do continuous training as part of our Lean program. We have self-directed work teams and utilize peer interviewing and reviews. We have a “bounty” program with a $5,000 cash award for the most innovative ideas. For example, six production workers reduced a stamping die set up from four hours to 16 minutes.”

Since I saw a wide variety of products on their website utilizing many different fabrication processes, I asked if they were vertically integrated to do sheet metal fab, machining, rubber and plastic molding, wire forming, electronics assembly in-house or if they subcontracted out some of these fabrication services. Mr. Blue said, “We do metal stamping, compression rubber molding, and injection molding of plastics in-house, and subcontract out the other fabrication processes.”

Naturally, I asked if he outsourced any manufacturing offshore to China or other Asian countries, and he responded, “We have some electronic subassemblies and surface mount printed circuit boards sourced overseas, along with some overmolded rubber parts because our competition was selling products at our U. S. cost.”

On their website, I had noticed a heading for the Larry McGee Company and asked Mr. Blue about the company. He said, “We acquired the Larry McGee Company in March of this year. They were our third acquisition in the past 10 years. They had a great product line of radio-controlled interface devices, but no sales force. It was a low risk opportunity to enter into a different technology. We moved their operations into our plant from their Chicago facility.”

I had received a press release about the company’s Creation Station, so I asked Mr. Blue why they started it. He said, “We started the Creation Station because our ability to innovate was slowing down and needed to be accelerated. We hired the ex-Chief Creativity Officer from QVC to teach us innovation principles. We started by having an innovation session every Tuesday, but wanted innovation to be more spontaneous and not wait until Tuesdays. This led to creating a space away from their working space in the middle of the manufacturing area. Glass panels provide natural light. Smart boards are scattered about the room, and there is a pool table in the middle of the room. But, the magic is in the people, not the room.”

An article in the Winona Daily News provides further information, “Creation Station is a big investment in creativity and entrepreneurialism in manufacturing at a level where it needs a shot in the arm,” said Steve Blue, Miller Ingenuity President and CEO. “It’s truly a breakthrough moment for our company, the town of Winona, the region, and small and mid-sized manufacturers in this country.”

“Creation Station offers a flexible workspace designed for both large and more intimate presentations, trainings and meetings. Creation Station will also be made available during off-business-hours for regional organizations and companies looking for a high-tech “think tank” space.”

In addition to the Creation Station, Miller Ingenuity created the 2014 Ingenuity Challenge, open to employees and the general public. The public invitation stated: “The Ingenuity Challenge invites ALL college and graduate students to submit plans and creative ideas in response to the challenge – How Might American Manufacturers Attract the Best and Brightest Innovative Minds to Pursue Careers in the Manufacturing Industry. The best solutions will win: 1st place $7,000; 2nd place $2,000; and 3rd place $1,000.” The deadline was November 19th, and they had eight entries at the time of our interview on November 17th. The winners have not been announced yet, but the results will be made publicly available, and the ideas will not be proprietary to Miller Ingenuity.

In answer to my final question as to what does he attribute the company’s ability to prosper after 60 years in business, he answered, “Our culture by design, not default has enabled us to prosper. We have a cohesive, collaborative, and creative culture.”

We will be hearing more from Steve Blue as he told me that he had just signed a deal with Praeger Publishing to publish a book titled “American Manufacturing 2.0: What Went Wrong and How to Make it Right.” We obviously share a common love of manufacturing and realize its importance to our economy and the creation of good-paying jobs. His book is expected to be published in the fall of 2016 and will utilize “up-to-the-minute data and trends to discuss the future of manufacturing in America and offers an inspiring vision—featuring his own company’s case studies—for revitalizing an entire industry.”

Idea Jam Explores Future of Jobs in San Diego

December 2nd, 2014

On November 7, 2014, I attended the “Idea Jam – Innovating for the Future” session put on by the Pacific Center for Workforce Innovation in San Diego. The purpose of the session was to identify the major challenges to the San Diego workforce in the coming years and to generate audience participation in visioning exercises to explore new and innovative workforce development ideas. The event was held at Colman University, and major sponsors were SDG&E, Qualcomm, the Eastridge Group, Point Loma Nazarene College, and Cal State University, San Marcos.

To get our creative juices flowing, Master of Ceremonies, Susan Taylor, San Diego’s TV news icon, introduced Futurist Speaker, Thomas Frey, of the DaVinci Institute as the keynote speaker. It is difficult to do justice to his very visual presentation of images of break-through technologies, but his statements alone created much food for thought about the future. He stated, “We are a backward-looking society…the future gets created in the mind. The future creates the present…Visions of the future affect the way people act today.” He rhetorically asked, “What are the big things that need to be accomplished today?

He continued, “Catalytic innovation creates entirely new industries, like electricity did…Most successful companies today are in the second half of the bell curve…the steel industry had its peak employment in the 1980s.”

It was a shock to hear him state that “Two billion jobs will disappear by 2030…Every time you download a mobile app, you are eliminating a piece of a job.” In answer to his own rhetorical question, “Where will our next generation’s jobs come from, he answered, “from new industries that don’t exist now.” He added, “As you raise the bar for our achievement, we create the new norm.”

“Software is heating the world,” he proclaimed. “In 2030, there will be 100 trillion sensors in the world. Information is being parsed into small things.” He cited some of the new enhanced objects such as: Amazon’s Track Car, the Asteroid Moon Micro-imager Experiment (amie) For Smart-1 Mission, the Vitality Glow Cap for medication management, the Ambient Umbrella by Ambient Devices, Mimo’s Baby monitor, the flying Nixie camera (a tiny wearable camera on a wrist band in which the wrist straps unfold to create a quadcopter that flies, takes photos or video, then comes back to you), the Philips biometrics coffee maker that can recognize users via their fingerprint and make coffee just the way that individual likes it, and the Pintofeed, calling itself the “first intelligent pet feeder”

He explained that “we are entering the age of hyperawareness and the quantified self with products such as printable skin sensors, smart body watches, brain hacking, transcranial brain stimulation.”

Frey stated, “3D printing is changing the world. The new HP 3D printer has 30,000 spray nozzles and can utilize over 200 materials. The iBox Nano is now the world’s smallest, least expensive 3D resin printer. Even shoes can be 3D printed, and Contour Crafting has developed a type of ceramics printing that could be used in construction. Whole walls can now be made by 3D printing, and a company in China was the first company to print a small house for under $5,000. The goal is to print an entire house in one day. In the future, you may live in a printed house…Bio printing can now print skin, veins, organs like a liver, limbs, and an exo skeleton, and there is a pill printer that chemprints antibiotics.” He quoted Chris Anderson, former editor of WIRED magazine and now cofounder and CEO of 3DRobotics, as saying, “3D printing is going to be bigger than the internet.”

“We need to prepare our children for jobs that don’t exist and technology that hasn’t been invented, he declared…By 2030, the average person will have to ‘reboot’ their career six times in their lifetime. To do this, we need to frame our work to train people in a faster way…By 2020, half of all traditional colleges will disappear.”

To facilitate this rapid training, he shared that the DaVinci Institute now offers 11-13-week courses in such topics as 3D printing, web design, game design and development and becoming a drone pilot.” He concluded by saying, “The fastest way to create new jobs is to eliminate the old ones out of existence.”

In California, the community college system is already providing this type of accelerated, focused training through their certificate programs in such subjects as multimedia, web design, web server maintenance and security, and culinary arts. It will be relatively easy to add new training topics to the curriculum to meet future needs.

After Mr. Frey’s predictions of the future, a panel of business leaders discussed what is happening in their industries and what new industries should we focus on. Jeff Nichols from Sempra Energy stated that “San Diego is the nexus of cyber security…Delivering electricity and water is synergistic, so there are opportunities to putting these two together.”

Dr. Ed Abeyta from the University of California, San Diego said, “We need to teach skill sets in a non-university setting but he hasn’t seen an online program that successfully replaces teaching in person.” He added, “We need micro-credentials that you could earn rapidly.”

Matt Grob of Qualcomm said, “The companies that change fastest are the small, startup companies. San Diego is very well placed in the robotics industry…UCSD is starting an incubator for robotics” With regard to training, he said, “A combination of a person and a computer are better than a computer or a person alone.”

In answer to the question, how do we prepare for the change and foster the culture of change in others? Dr. Abeyta responded, “Humanity had its core values before technology came, and we must instill those in our children. We need to marry the technology with our core values. It is not about getting the answer; it is Are we asking the right questions?” Dr. Smith of West Health commented, “We can teach how to think and not what to know.”

The last half of the morning was spent in an idea jam session by small table groups to come up with two ideas: most innovative and most likely to succeed. After lunch, the following panel of judges discussed the ideas developed by the audience: Molly Cartmill, Sempra Energy, Michael Alston, Qualcomm, and Mary Walter-Brown, Voice of San Diego. After presenting all of the ideas for the 17 different tables, the audience voted on the best ideas for both categories. The best ideas were:

Most Likely to Succeed

“Tinder, but for networking and mentoring.” (Note: Tinder is a matchmaking mobile app that uses GPS technology, in which users can set a specific radius have the option to match with anyone that is within that distance.)

“Industry developed after school programs to build skill sets and networking for specific career areas.”

“Change the hiring process from resumes to problem solving practices.”

“Retool community centers and libraries to be career path hubs.” (my idea at my table)

Most Innovative:

“Programmer boot camps for under-served communities integrated with soft and life skills.”

“Establish a mentoring program for retired professionals to share advice and knowledge to persons in transition”

“Implement playgrounds of interests at schools to help students see the possibilities i.e. Maker Spacers & digital playgrounds.”

“Geolocation app that reveals available parking, especially in downtown SD via satellite, with timer alerts”

When I think of the fact that I am now on my fourth career path, I can see that six career paths is a realistic prediction for the future. Just like continuous improvement is one of the tools for becoming a Lean company, continuous learning will be a prerequisite for everyone who wants to keep working during their even longer productive lifetime in the future. My definition of success has been to learn something new to the point of proficiency, so I can highly recommend continuous learning to others. It’s what makes life interesting, challenging, and fun!

Why We Must Stop the Fast Track Authority in the “Lame Duck” Session

November 18th, 2014

The rumors in Washington, D. C. are that granting President Obama Fast Track Authority under Trade Promotion Authority will be brought up in the “Lame Duck” session, perhaps as an addition to one of the bills extending certain tax credits, called “Tax Extender bills.”

Simply put, granting Fast Track Authority to the president means:

  • Choice of countries is delegated to President
  • Executive Branch negotiates and signs a trade agreement before vote by Congress
  • Allows only 20 hours of debate by Congress
  • Forbids any amendments to the trade agreement
  • Requires only a simple majority vote in each House violating U.S. Constitution Article 1 Treaty clause giving the Senate authority to approve a treaty by a supermajority.
  • Gives Constitutional power over trade to President and takes it away from Congress
  • Usurps Constitution and is dangerous to give this much power to the Executive Branch

There are two trade agreements that have been in secret negotiations since 2010. The first is the Trans-Pacific Partnership. Eleven nations have participated in the negotiations: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan announced its intention to join the agreement last spring. However, the TPP is intended as a “docking agreement,” so other Pacific Rim countries could join over time, and the Philippines, Thailand, Colombia, and others have expressed interest. Even China could join the TPP at a later date without suffering any disadvantage though this would negate the original reason for the TPP as a counter to China’s hegemony in the Pacific.

The TPP is much more than a trade agreement; it is a Trade and Global Governance Agreement because only five of the 30 chapters relate to tariffs and quotas. The other 25 chapters cover such topics as: domestic regulation: food & product safety, financial regulation, investor states’ rights, immigration, intellectual property, federal, state and local laws on taxes, patents, copyrights, trademarks, immigration, environment, labor standards, among many other issues. Clauses in these chapters may even overrule prior acts of Congress without new legislation being introduced, passed in Congress, and signed by the president.

Most dangerous of all, International Tribunals, not U.S. courts, would decide on lawsuits between companies in member countries and U. S. In a commentary article on October 15, 2013, Lt. Col (Retired) Allen West wrote, “TPP would subject the U.S. to the jurisdiction of foreign tribunals under the authority of the World Bank and United Nations. These unelected, unaccountable panels would constitute a judicial authority higher than the U.S. Supreme Court. They would have the power to overrule federal court rulings and order payment of U.S. tax dollars to enforce the special privileges granted to foreign firms that would be exempt from EPA and other regulations that strangle American firms.”

In addition, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. What this means is that the TPP’s procurement chapter would require that all companies operating in any country signing the agreement be provided access equal to domestic firms to U.S. government procurement contracts over a certain dollar threshold. To meet this requirement, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. There are many companies that survived the recession and continue in business today because of the Buy American provisions for defense and military procurement. The TPP could be the death knoll for these companies!

The other trade agreement is the Transatlantic Trade and Investment Partnership (TTIP) also known as the Transatlantic Free Trade Agreement (TAFTA), which is a proposed free trade agreement between the European Union and the United States. The Obama administration considers the TTIP a companion agreement to the Trans-Pacific Partnership, and it is similar in scope and nature to the TPP, incorporating all the same global governance chapters.

In the last 20 years, the U. S. has made trade agreements with 20 nations, of which the major trade agreements are:

  • Created the World Trade Organization & let China join
  • Panama Free Trade Agreement
  • Central America Free Trade Agreement
  • Colombia Free Trade Agreement
  • Korea Free Trade Agreement

What have been the consequences of these past trade agreements? One consequence is an increasing trade deficit. In 2013, our total trade deficit in goods was $688.4 billion, of which China represented 46% at $318.4 billion. Our top six trading partners of Canada, China, Mexico, Japan, Germany, and South Korea represent 64% of our total trade deficit.

Another serious consequence is the loss of American jobs. From 2000 to 2010, the U. S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed. Where did most of the jobs go? U.S. Department of Commerce data 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.” Millions of people have lost their jobs because corporate CEOs concluded, “It’s cheaper to manufacture where they pay 50 cents/hour and let us pollute all we want.”

As a result, the real unemployment rate is 16.1%, and there are still nearly 2 million less jobs than there were at the start of the Great Recession in December 2007!

The TPP and TTIP/TAFTA are bad for American companies, American workers, and American consumers. What good does it do to have cheaper consumer goods if you don’t have a job?

I urge everyone to Contact your Congressman to ask them to vote no on granting Fast Track Authority!


Lean Sustainability Requires a Change in Culture

November 11th, 2014

On the second day of the Lean Accounting summit put on by Lean Fronteirs, Cheryl Jekiel, author of Lean HR, gave the keynote presentation on “The Future of the Horizontal Lean Enterprise, Rev Up Your Engines.”

Ms. Jekiel led off by comparing the support functions of a company (Accounting/Finance, Information Technology, Human Resources, Quality, etc.) as “potentially the engine of the organization” in “driving strong performance.”

She outlined six ways to power up support functions to create a different attitude in the whole team:

  1. “Gain clarity on how your work impacts your external customers.
  2. Shift attitudes beyond current expectations.
  3. Focus on highest priorities ? what is the #1 problem in your business?
  4. Develop a service attitude – how do you measure service? Does it meet the needs of your customers? Survey internal customers (other departments).
  5. Synthesize skills of Finance, IT, etc. and combine various items into a cohesive whole.
  6. Leverage diversity of skills ? you are better together”

In summary, she recommended that companies “identify ways that support staff impact external customers, expect more of team members in support functions, and prioritize work based on ability to achieve objectives.”

Retiring American Manufacturing Excellence President, Paul Kucharis, made a comment that has kept running through my mind, “What got you here, won’t get you there.” We have come a long way in the last 25 years since lean concepts, principles and tools diffused out of the Toyota Production System, but it is a never-ending road of continuous improvement to reach an ever-changing target. The underlying discussion among speakers and attendees of the summit seemed to be questioning whether enough progress had been made. The consensus from discussion was that we now have many companies that are lean manufacturers, but how many are lean enterprises? And, of particular importance to the theme of the summit, how many are using lean accounting rather than standard cost accounting?

This is why I selected the breakout session on Accellent Corporation’s “Solving the Standard Costing Problem,” presented by Jeremy Friedman, President and COO of the Cardio & Vascular Division. Accellent is a medical device manufacturer with 17 factories, 5,000 employees, and 20,000 SKUs.

He said, “Standard cost accounting is incomprehensible; we didn’t know where the numbers came from…Our prices were as high as three times competition. Standard costing didn’t work for our 20,000 SKUs…There were too many assumptions, too many variances.”

When he was the Executive V. P. and CFO, he researched the subject, read several books, and spoke to some of the experts, such as Jerry Solomon, Brian Maskell and Nick Katco, whom I met at the conference.

The decision was made to eliminate standard cost accounting, and they made the switch to “plain English P & Ls on October 1, 2012.” He said, “We began with value stream management and focused on cutting costs…We eliminated variance analysis and changed from using standard costs and adding a markup…We had to teach that pricing isn’t a function of cost. Besides the benefits at the operations level, we are no longer pricing products at two to three times higher than competition. We changed to a new paradigm ? lean cash flow.” The old model was “What is the lowest price we can charge based on standard costs and markup. The new is “What is the highest price we can charge and still win the business.”

The companies I represent sometime lose orders for being two to four times higher than the competition, so I have a very good reason for encouraging a transition from standard cost accounting to lean accounting. I firmly believe that if more companies would make this transition, we would be losing less business to China and other offshore suppliers.

Next, I attended the session on “Lean Product and Process Development ? Creating the Future” by Dr. James Morgan, President of Emc Network and a Sr. Advisor for the Lean Enterprise Institute. Dr. Morgan shared his experiences as the Director of Global Body Exterior, Safety and SBU Engineering at Ford Motor Company from 2006 to early 2013 when he left the company.

He said, “Every time you develop a new product, you have the opportunity to create/change the future…Apple and Google changed the future.”

“In many companies,” he commented, “new product development is a nightmare: design and quality problems, late launches, [etc.]…Great products drive enterprise growth and require interdepartmental collaboration…Lean product development requires that you develop the people and product simultaneously.”

Morgan said that at the time of the economic crash in 2008 “Ford had $17 billion in losses over the previous three years and a 20-year market share decline…Ford’s recovery was a product driven recovery based on a new product portfolio and new global development process.

The Body department was organized around the value stream and developing engineers was made a priority following the Technical Maturity Model (TMM), Technical Independent Development Process (TIPD), using mentoring and targeted assignments, and design reviews to demonstrate efficient design. They included the extended enterprise of the UAW and suppliers and used the Matched Pair Process for engineering and purchasing to shape processes, tools, and objectives. They spoke as one voice.”

In summary, he said, “They tightly synchronized activities to create effective concurrency and increase probability of success. The process they followed was:

  • “Study – to create the right product
  • Execution – to deliver the right product
  • Reflection/learning”

He recommended that “you use A3 forms for business planning and align your organization with the right tools and stretch your team.”

In between, the keynotes and one-hour workshops, I attended two of the 20-minute “scrambles.” The first was “Kata, Coaching and TWI” by Jim Huntzinger and Dwayne Butcher, the principals of Lean Frontiers. I was familiar with TWI (Training within Industry) from my Lean Six Sigma Yellow Belt class. It was briefly described as the program implemented during WWII to train women and non-military qualified men to replace men in industry that had been drafted. It contained three “J” programs: Job Relations, Job Instruction, and Job Methods.

They explained that the objective of Coaching Kata is: “Create an organization that solves every problem every time…Coaching Kata shows how to develop problem solving skills one-on-one using PDCA in coaching/mentoring on actual projects.” Huntzinger said, “You will not become lean by doing TWI, but you will not become lean without doing TWI.”

To me, the last “scramble” of the day came full circle from the first keynote by Robert Miller on the future of Lean leadership and put everything into perspective ? Orry Fiume’s discussion of “Executive Leadership.” He stated that whether or not your company has built a sustainable culture of excellence based on Lean principles can be easily determined by using the following simple comparison Mr. Fiume presented:

Traditional Lean
Functional form Business form
Managers direct Managers teach
Management delegates Management supports
Blame people Root cause analysis
Us vs. Them Real teams
Results focused Process focused
Internal focus Customer focus
Managers control Workers control
Hierarchy Flattened organization
Employee is a cost Employee is an asset
Rewards individual Rewards group sharing

I would add one more comparison to this matrix to fit the theme of the conference: traditional standard cost accounting vs. Lean Accounting.

Less than half the attendees and speakers were present for the final panel discussion on “Your Organization in 10 years.” The consensus of comments by panelists and members of the audience seemed to be that while the “Lean movement” has come a long way, many companies, still have a long way to go.

Within the San Diego region, I see many companies that participate in the CONNECT Operations Roundtable workshops apply lean principles and tools on the shop floor. They seem to have transformed from traditional companies to lean companies in about half to two thirds of the above matrix. However, I don’t know of any company that utilizes lean accounting.

The problem is that most of these companies are medium to large companies. Very few companies under 50 employees have begun to adopt lean principles and tools. Only two of the small companies I have represented in the past 15 years have gone through lean training. The first was a metal stamping company with less than 40 employees. They obtained the training through one of the California Centers for Applied Competitive Technologies offsetting the cost with some funding from the Employment Training Panel. As a result, average throughput was reduced from five weeks to five days, on-time delivery improved by 70% and work-in-process was reduced by 40%. The other company was a rubber molder with only 15 employees, and they received their training through the southern California Manufacturing Extension Program, California Manufacturing Technology Consulting. Their biggest benefit was eliminating wasted movement and time by implementing 5S and rearranging equipment. The cost of their training was also reduced by Employment Training Panel funding. Small companies have the advantage of not having much of a hierarchy to flatten, and the president has to be fully committed to becoming lean to even initiate the training. This makes it easier for lean to become integral to the culture of the company.

Utilizing lean tools is not enough to become a lean company. Lean concepts and principles must become part of the culture. Lean will not be sustainable in the long run unless it does.

Lean Principles Must Expand Beyond Shop Floor

November 4th, 2014

I had the pleasure of attending the 2014 Lean Accounting Summit on October 21-22 in Savannah, GA, produced by Lean Frontiers, headed up by founder and President, Jim Huntzinger. It was two days of information-packed presentations and workshops that included case studies showing lean principles in action. I was honored to be part of such an illustrious group of lean experts to give a presentation on “Returning Manufacturing to American Using Total Cost of Analysis.” I attended all five of the keynote presentations during the two-day summit and selected one of the four sessions in each breakout period between the keynotes.

The summit began with a keynote presentation on “The Future of Lean Leadership, How Leaders Build Sustainable Cultures of Excellence Based on Principles,” by Robert Miller, now President of Arches Leadership and former Executive Director of the Shingo Prize.

Miller outlined how we got to the present concept of lean starting with the quality circles of the 1960s, leading to the Kepner-Tregoe methodology ofwork simplification in the 1970s, the Just-in-Time and Statistical Process Control programs of the 1980s, the Total Quality Management philosophy of the 1990s, and now the Lean Six Sigma culture of the 21st Century. As a sales rep for Tier 2 and 3 suppliers to Original Equipment Manufacturers starting in the mid 1980s, I remember trying to comply with the JIT and SPC requirements of my customers. I took an intensive 100-hour class in 1993 to get my certificate in Total Quality Management to be prepared for the future, but saw TQM fizzle out as the decade ended because it wasn’t embraced by top management of companies.

Miller affirmed my opinion by saying, “We keep reinventing new versions of known practices, tools, and programs, using a few key principles that are timeless, universal, natural laws that govern consequences in our businesses… Tools and systems are necessary, but are insufficient. Sustainability requires culture. Culture is the sum of all learned and socially demonstrated behavior patterns that exist at many levels: civilizations, regions, countries, communities, organizations, families, etc.”

He explained that “individual acts or behaviors are visible, observable, recordable, and measurable. You can’t improve unless you measure, but measuring requires a standard or principle… Culture is influenced by a leader, reinforced by rules, embedded by routine, validated by recognition, and guided by beliefs. Beliefs are deeply personal.”

He then outlined the six strategies for leaders based on the10 universally accepted Guiding Principles of The Shingo Model™:

  1. Leaders understand principles and know what behaviors flow from principles
  2. Leaders have to be honest with themselves and others
  3. Leaders are humble
  4. Leaders value potential of everyone
  5. Leaders ensure systems align with principles
  6. Leaders balance Scorecard (results and behaviors)

He concluded, “Sustainability requires changes in thinking…attempting to implement practices without understanding the reasons behind them leads to failure,” This is what we saw happen with the philosophy of Total Quality Management because company leaders didn’t learn to understand the principles and didn’t practice the strategies necessary to embrace and embed the philosophy into the culture of their companies. Lean Six Sigma will only be sustainable for the next ten years and beyond if company leaders follow these six recommended strategies so that lean becomes embedded into the culture of their companies and embraced by all employees.

The next keynote speaker, Tom Hood, CEO Maryland Association of CPAs and Business Learning Institute, spoke on “What’s the Future of Accounting?” He caught everyone’s attention by showing the list of jobs that are most likely to being disrupted by technology, and accountants were the second most likely at 94%, just after telemarketers at 96%. He said, “We are in a race with machines, and we can’t beat them.” In my business as a manufacturers’ sales rep, I have to do more telemarketing than ever before, so I took this data to heart.

He continued, “We are experiencing the largest shift change in history in: leadership, learning, technology, generation, and workplace…For every two Baby Boomers, there is only one Gen Xer, while Millennials (Gen Ys) are equal or greater than Baby Boomers in numbers.”

He questioned whether the” leadership of accounting is changing in collaboration, cultural awareness, technology and transparency.” He explained that “incumbent practices, resources, and institutions are in decline, and new business models, practices, and technologies are emerging…The challenge and opportunity is to make the shift from the first curve to the second at the right time and with the right strategy.”

He stated that the MACPA CPA Vision for 2025 is: “CPAs are trusted advisors who, combining insight and integrity, deliver value by:

  • Communicating the total picture with clarity and objectivity
  • Translating complex information into critical knowledge
  • Anticipating and creating opportunities
  • Turning insights into action to transform vision into reality

He briefly highlighted the five ways to thrive in a shift change:

  1. Power of vision, purpose, and alignment
  2. People – strengths and positivity
  3. Collaboration and engagement
  4. Learning and Development
  5. Technology (RONI = Risk of Not Investing)

In conclusion, he stated, “In a period of rapid change and increasing complexity, the winners are going to be the people who can learn faster than the rate of change and faster than their competitors.”

Next, I attended an interesting breakout session by Bill Waddell, author of Simple Excellence and Rebirth of American Industry, on “How to Create and Transition into Value Streams.” From my Lean Six Sigma yellow Belt class, I learned how manufacturers can organize based on their product value streams, but I still didn’t understand how other types of companies could transition into value streams.

Waddell stated, “How we construct value streams should be different for each unique value proposition we have to optimize in order to achieve the objective.” He briefly outlined the following steps a company can take to “pursue the things that have the greatest impact on results:”

  • “Nail down the markets you serve and separate them by the different value propositions/necessary cost structures they require.
  • Identify critical key performance indicators (KPIs) that define how to achieve strategic objectives.
  • Select your value stream managers.
  • Determine initial scope of the value streams by function.
  • Assign the human and physical resources.
  • Restructure core managements systems, ERP systems, accounting, budgeting, and supply chain systems to match value streams”

Waddell featured Wahl Clipper Corporation as an example of a company that has been successful in transitioning to value streams.Wahl has been manufacturing professional styling products, home styling products and animal grooming products since 1919. As an advocate for manufacturing in America, I was delighted to hear that “Wahl has captured 80% of the consumer market in clippers” while manufacturing in the U. S.

In my opinion, becoming a Lean Enterprise is one of the keys to American companies being able to maintain or return manufacturing to America while being competitive and profitable in the global marketplace.

In my next blog article, I will cover day two of the summit.

“Manufacturing in Golden State Summit Highlights Threats to Prosperity”

October 28th, 2014

On October 16th, about 130 business leaders met at the conference facilities of AMN Healthcare in San Diego for the third “Manufacturing in the Golden State – Making California Thrive” economic summit. The summit was hosted by State Senator Mark Wyland in partnership with the Coalition for a Prosperous America and a long list of other regional businesses and associations. The purpose of the summit was to discuss how several national and California policies are threatening the growth and prosperity of California manufacturers and what policies should be changed to help them grow and thrive.

After State Senator Wyland welcomed attendees, Michael Stumo, CEO of the Coalition for a Prosperous America, provided an overview of the schedule for the day.

I provided an update to the overview of California manufacturing that I had presented at our summit in Brea on March19th covered in a previous article. California lost 33.3% of manufacturing jobs between 2000 and 2009 compared to 29.8% nationwide and 25% of its manufacturing companies. California lags in manufacturing job growth at a .36% rate compared to the national 6.09% rate.

I highlighted that the San Diego region offers a great deal of help for inventors and start-up technology based companies through the San Diego Inventors Forum, CONNECT’s Springboard program, the Small Business Development Centers in North County and South County, CleanTech San Diego, as well as groups like the San Diego Sports Innovators. San Diego also offers more career path and workforce training programs than most other states, including those offered by three of our event sponsors: California Manufacturing Technology Consulting, the Center for Applied Competitive Technologies, and the Lean Six Sigma Institute.

The good news is that California is benefitting from the reshoring trend that is sweeping the county. According to data collected by the Reshoring Initiative, California ranks first in the number of companies (28) that have reshored and third in the number of jobs created by reshoring (6,014).

I then moderated a panel of the following local manufacturers, who gave their viewpoints of the effects of some of our national policies and the challenges of doing business in California:

  • James Hedgecock, Founder and General Manager of Bounce Composites
  • Scott Martin, President, Lyon Technologies
  • Robert Reyes, Head of Strategic Sourcing, Stone Brewing Company

Hedgecock stated that Bounce Composites is less than two years old and makes thermoset composites, starting with paddle boards and branching into small wind turbine blades this year. He bemoaned the fact that in California you have to pay $800 to incorporate a company, which is double to quintuple the cost of incorporating in other states. Also, as a LLC, you have to pay taxes on gross profits rather than net profits, which is tough on a start-up company.

Martin said that Lyon Technologies has been in business since 1915 and has changed its products several times over the years. Current products include bird and reptile incubators, poultry products, and veterinary products, which they export to about 100 countries. He stated that the Value Added Taxes (VATs) that are added to the products they export and the currency manipulation practiced by several countries make it difficult for their products to be competitive in the world marketplace.

Reyes said they are expanding out of San Diego and are building a new $25M brewery and restaurant in the Marienpark Berlin, scheduled to open by end 2015/beginning 2016. Stone exports beer to Germany and other European countries and having a brewery in Germany will ave on shipping costs for exporting. They are also planning on opening a brewery on the East Coast in Virgina.

The national expert panel included Greg Autry, Adjunct Professor of Entrepreneurship, Marshall School of Business, University of Southern California; Pat Choate, economist and author, “Saving Capitalism: Keeping America Strong”; Mike Dolan, Legislative Rep., International Brotherhood of Teamsters; and Michael Stumo, CEO of CPA.  The focus of the talks was on national security, manufacturing growth strategies, tax strategies and fixing the trade deficit.

Autry, led off the national panel with the topic of “National Security Concerns with U. S. Trade Regime.” He began by stating, “An economy that builds only F-35s is unsustainable – productive capacity is what wins real wars. Sophisticated systems require complex supply chains of supporting industries. They require experienced production engineers and experienced machinists.” He added that we cannot rely on China to produce what we need for our military and defense systems. “We should not be relying on Russia’s Mr. Putin to launch our satellites and space vehicles and provide us a seat to get to the international space station.”

He pointed out that our technical superiority in military systems will not assure our national security any more than the technical superiority of Nazi Germany’s aircraft and tanks did for them. Economic superiority is what matters. The manufacturing industry of the U. S. out produced Germany during WWII and the Soviet Union in the Cold War.

Autry stated that Wall Street’s new hero, Jack Ma, founder of Chinese company Alibaba Group Holding Ltd, is a danger to American interests by the fact that Alibaba just overtook Amazon as the world’s largest online retailer by market capitalization. It was the wealth he created at Amazon that enabled founder Jeff Bezos to now lead a new company, Blue Origin, which was just selected by the United Launch Alliance to finish development of a new engine to replace the Russian made RD-180 rocket engine used by ULA’s Atlas 5 rocket. There is considerable skepticism by many of Mr. Ma’s independence from the Chinese government. Mr. Ma’s next target appears to be PayPal, which is responsible for the wealth of Elon Musk, now CEO and CTO of SpaceX, CEO and chief product architect of Tesla Motors, and chairman of SolarCity.

Next, Michael Stumo presented “A Competitiveness Strategy for America: Balance Trade and Rebuild Domestic Supply Chains.” He said, “Our ultimate goals should be: improved standard of living, full employment, and durable, sustainable growth. America has no strategy to win. Our trade deficit cuts our growth in half. Domestic supply chains were sacrificed to global supply chains; i.e. offshored and hollowed out….We need a strategy to win.”

He pointed out that “free trade is supposed to produce balance and address foreign mercantilism, but our trade policies enable mercantilism…We must replace the goal of ‘eliminating trade barriers’ and have Congress establish a new directive via statue to balance trade.”

He said that to achieve balanced trade, we must address, reciprocity, currency manipulation, forced technology transfer [by China], foreign VAT rebates, state-owned enterprises, and government subsidies.

In conclusion, he recommended that we should:

  • Create durable comparative advantage through technical superiority, infrastructure, low energy costs, etc.
  • Balance trade and fight foreign mercantilism
  • Create our own comparative advantage
  • Maximize domestic value added
  • Identify and minimize our advantages while minimizing our disadvantages

In conclusion, he urged, “Don’t be afraid of asserting and pursing our national economic interest.”

The next speaker was Mike Dolan, Legislative Representative for the Teamsters, who has long experience working for Fair Trade (fighting expansion of the job-killing NAFTA/WTO model). He said that big corporations want Congress to pass Trade Promotion Authority in the “lame duck” session to grant the president Fast track Authority for the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) Agreements. He called the TPP “NAFTA on steroids” and said that TTIP is just as bad. He said that Fast Track was invented by President Nixon and has been used 16 times. He said that we need a new form a Trade Promotion Authority where Congress has input with regard to the countries involved in the Agreement, certifies that negotiating goals were met, and votes to approve it before it is signed. He urged attendees to contact their Congressional Representative to oppose the TPP for the following reasons:

  • “Lack of transparency during negotiations warrants more thorough consideration than a up or down vote
  • Under previous trade deals, the U. S. has hemorrhaged jobs and cannot afford more of the same
  • The TPP is too large and complex to delegate constitutional authority away from Congress”

Pat Choate (Economist; Author, Saving Capitalism: Keeping America Strong) discussed how our trading partners have used Value Added Taxes (VATs), and currency manipulation to their advantage and to the disadvantage of the U. S. VATs or border adjustable consumption taxes are used by other countries to offset income, payroll, or other employer taxes to help their manufacturers be more competitive in the global marketplace or to offset other costs like national health care or pension programs. VATs range from a low of 10% to a high of 24%, for an average of 17%.

While tariffs have been dropped since 1968 as part of many trade agreements signed since then, the effective trade barriers have remained constant because of the VATs being imposed.

These consumption taxes have been a causative factor in increasing our trade deficits with our trading partners, which was $471.5 billion in 2013, $318 billion with China alone. He supports CPA’s advocacy of making changes in U. S. trade policy to address this unfairness which tremendously distorts trade flows.

During lunch, keynote speaker Dan DiMicco, Chairman Emeritus of Nucor Steel Corporation, spoke on “Seizing the Opportunity.” He led off by shocking the audience with facts about the real state of our economy and our unemployment rate. By September 2014, we still had not reached the level of employment that we had when the recession began in December 2007 although 81 months had passed. We lost 8.7 million jobs from December 2007 to the “trough” reached in February 2010, but because our recovery has been much slower than the previous recessions of 1974, 1981, 1990, and 2001, the gap in recovery of jobs compared to these recessions is actually 12,363 jobs.

In contrast to the misleading U-3 unemployment rate of 5.9% for September 2014 that is reported in the news media, the U-6 rate was 11.8%. The government’s U-6 rate is more accurate because it counts “marginally attached workers and those working part-time for economic reasons.”However, the actual unemployment is worse because the participation in the workforce has dropped from 66.0% to 62.7%. In other words, if the December 2013 Civilian Labor Force Participation Rate was back to the December 2007 level of 66.0%, it would add 8.2 million people to the ranks of those looking for jobs.The manufacturing industry lost 20% of its jobs, and the construction industry lost 19% of its jobs.

Unemployment Data Adjusted For Decline in Civilian Labor Force Participation Rate
(Adjusted For Decline from December 2007 Level Of 66.0% to 62.8% in September 2014)

Reported Unemployed U.S. Workers 9,262,000
Involuntary Part-time workers 7,103,000
Marginally Attached To Labor Force Workers 2,226,000
Additional Unemployed Workers With 66% CLF Participation Rate 8,199,000 
Unemployed U.S. Workers In Reality 26,770,000
Adjusted Civilian Labor force 166,287,000
Unemployment Rate In Reality 16.1%


DiMicco said, “We got in this position from 1970 until today because of failed trade policies allowing mercantilism to win out against true FREE Trade. We bought into wrongheaded economic opinions that America could become a service-based economy to replace a manufacturing-based economy. Manufacturing supply chains are the Wealth Creation Engine of our economy and the driver for a healthy and growing middle class! The result has been that manufacturing shrank from over 30% to 9.9% of GDP causing the destruction of the middle class. It created the service/financial based Bubble Economy ( scheme type financial instruments.)”

He added, “We have had 30 years of massive increases in inefficient and unnecessary Government regulations. These regulations, for the most part, in the past have been put in place by Congress and the Executive Branch. However, today they are increasingly being put in place by unelected officials/bureaucrats as they intentionally by-pass Congress.

American’s prosperity in the 20th century arose from producing more than it consumed, saving more than it spent, and keeping deficits to manageable and sustainable levels. Today, America’s trade and budget deficits are on track to reach record levels threatening our prosperity and our future.”

He said, “Creating jobs must be our top priority, and we need to create 26-29 million jobs over the next 4-5 years. There are four steps we can take to bring about job creation:

  • Achieve energy independence.
  • Balance our trade deficit.
  • Rebuild our infrastructure for this century.
  • Rework American’s regulatory nightmare.

In conclusion, DiMicco said, “We need to recapture American independence through investment in our country’s people, infrastructure, and energy independence, and by reversing the deficit-driven trends that currently define our nation’s economic policy. Real and lasting wealth IS, and always has been, created by innovating, making and building things — ALL 3 ? and servicing the goods producing sector NOT by a predominance of servicing services!”

As the mid-term election approaches, we need to cast our votes for candidates who address the serious issues discussed at the summit, so that we can work together as Americans to restore California to the Golden State it once was and restore America to be “a shining city upon a hill whose beacon light guides freedom-loving people everywhere,” as declared by Ronald Reagan in 1974.

San Diego Celebrates Manufacturing Week not just Manufacturing Day

October 14th, 2014

To highlight the importance of manufacturing to the economy of the San Diego region, the Mayor and City Council declared the week of September 30 – October 5, 2014 to be Manufacturing Week instead of only Manufacturing Day on October 3rd.

One of the highlights of the week was an all day Workforce Conference held on October 2nd put on by the San Diego Workforce Partnership and the San Diego and Imperial Counties Community Colleges Association Regional Consortium. The conference presented a summary of a detailed research report conducted by these two organizations of each of the sectors that are vital to the regional economy. San Diego’s five priority sectors are:

  • Life Sciences
  • Health Care
  • Clean Energy
  • Information & Communication Technologies
  • Advanced Manufacturing

More than 250 businesses were surveyed for the report, and industry associations and organizations with industry expertise also contributed to the study. The results of the study can be used to help these priority sectors, which are experiencing rapid growth and projected skills shortages, conduct workforce planning and management of resources. The Conference presentations included an overview of the research findings and panel discussions with industry experts and employers.

Since my interest in these sectors is limited to manufacturing, I only attended the session on Advanced Manufacturing, presented by Dr. Mary Walshok, dean of UC San Diego Extension. Describing San Diego’s manufacturing industry, she said, “It ain’t your old assembly line manufacturing. It’s about a network of suppliers. It’s about organizations that are prototyping and doing R & D on site…I think the moniker for San Diego should be drones, phones and genomes … Let’s add to that surfboards, skateboards, and golf equipment.”

Key data presented was the fact that “The Advanced Manufacturing sector accounts for 10% of all establishments, 15% of all paid employment and 22% of all annual payrolls” in San Diego County. The fact that the “sector is dominated by small-to-medium-sized businesses with 82% of firms employing less than 20 employees” confirmed my more than 30 years experience in San Diego’s manufacturing industry.

Utilizing a broader definition of what constitutes manufacturing, the report listed the manufacturing employment at 170,800 in contrast to the California Economic Development Department total of 96,900 manufacturing jobs in San Diego in August 2014, an increase of 2,200 manufacturing jobs since August 2013. The report projects a 6% increase in manufacturing jobs by 2018 for a total of 180,700 jobs.

The Advanced Manufacturing sector is no longer dominated by any one industry like it was 20 years when aerospace/defense was the dominant industry. Now, it is comprised of diverse industries in which no industry has more than 13% (electronic equipment and components). Aerospace/defense has dropped to 11%, and the fabricated metal products industry comes in a close third at 10%. Industrial/commercial machinery and computer equipment represents 8% of the industry, and signs and advertising specialties represents 6% of the sector. I was surprised that biotechnology only represents 5%, when San Diego is ranked third in the nation as a center of the Life Science industry sector after Greater Boston and the San Francisco Bay Area.

The report states, “Most Advanced Manufacturing occupations require high school education at a minimum. Moving up the career ladder requires on-the-job experience or more academic credentials, some are provided by 2-year or 4-year colleges. Many occupations require a specific set of skills for their workers, which can be acquired with an education credential. There are certain educational credentials that can be applied to multiple occupations.”

The study revealed the four occupational clusters that are most commonly employed in Advanced Manufacturing:

  • Engineers
  • Computer/Software
  • Drafters and Technicians
  • Production

The drafter category has morphed into people with expertise in Computer Aided Design and 3D modeling skills instead of traditional hand-drawn drafting skills.

The top five occupations that have a gap in the supply of workers produced by the regions educational institutions compared with the number of available job openings are:

  • Software developers, applications and systems software
  • Assemblers and fabricators
  • Aerospace engineers
  • Computer user support specialists
  • Machinists

The report goes into specific detail about the skill sets needed for each of the above occupations. To address this gap in the supply of workers with the requisite skills, the following recommendations are made:

•” Inform the public about the skills and levels of compensation in the Advanced Manufacturing sector.

• Develop an Advanced Manufacturing talent pipeline.

• Increase employer knowledge about business assistance programs for workforce training.

• Add an internship and/or work experience requirements to education and training programs.

• Encourage critical thinking and real world application in education and training programs.

• Standardize certifications and articulation agreements.”

Dr. Trudy Gerald, Deputy Sector Navigator for Advanced Manufacturing at San Diego City College moderated a panel of that included two manufacturing representatives: Nancy Boessow, HR Manager for Johnson Matthey Medical Components and Rick Urban, COO and CFO of Quality Controlled Manufacturing, Inc., a leading precision machining manufacturer of complex components and assemblies for the aerospace, defense, and energy industries.

Joining the panel was Jo Marie Diamond, President and CEO of the East County Economic Development Council and newly appointed as the region’s representative on the Executive Board for the Advanced Manufacturing Partnership – Southern California, one of only 12 federally designated Investing in Manufacturing Community Partnership (IMCP) consortia and the only one west of the Mississippi. Ms. Diamond said that the advanced manufacturing sector has an aging workforce, so “We’re going to have to fill that pipeline [with training and education].”

There has been a shortage of skilled machinists, especially lathe operators for the past 15 years, and since I have discussed this issue with Mr. Urban personally, I am aware of what his company is doing with regard to training. The company website states, “QCMI needed to establish an Education / Training Competitive Workforce Initiative. The QCMI WEA winning initiative includes: a mentoring program for entry-level employees; promotion and training from within; partnering with high schools and colleges; and the creation of a nonprofit Academy.” The Academy training and apprenticeship program began earlier this year with a curriculum that took a year to develop.

At the conference, he stated, “We’re going to do a lot of training…The people that come in at an entry level position are allowed to stay there for six months. They have to move up or it doesn’t make sense because we have to keep that pipeline going.”

The conference was well attended by people within the five industry sectors, as well as those seeking to make career transitions or improve their skills, career counselors, trainers, and educators. The presentations and panelists provided a complete picture of what employers are looking for in the current and future labor force and set the stage for the events that followed on Manufacturing Day.

Manufacturing Day began with a breakfast at the new central library in downtown San Diego organized by the San Diego Regional Economic Development Corporation. President and CEO Mark Cafferty and Congressional Representatives Susan Davis and Scott Peters gave introductory remarks welcoming attendees, and then Jack Stewart, president of the California Manufacturers and Technology Association, moderated the following a panel of local manufacturers that represent a cross section of San Diego’s diverse industries:

Bob Cassidy, Senior Director of Operations, ViaSat – producer of satellite and other digital communication products for the commercial and government sectors

Guillermo Romero, General Manager, 3D Robotics’ plant in Tijuana – producer of miniature commercial unmanned aerial vehicles (drones)

Kevin Graney, Vice President and General Manager, General Dynamics NASSCO – shipbuilding of Naval and commercial ships and tankers

Carlos Nunez, COO, Care Fusion – producer of infusion, interventional procedures, medication and medical supply management, respiratory care and surgical products.

Dave Klimkiewicz, co-founder of Sector 9 skateboards

Mr. Stewart remarked, “Manufacturing was the industry on the outs. Service industries aren’t creating the good paying jobs…”This isn’t your father’s factory floor anymore…Now manufacturing is new, high tech, and robotic…Just as manufacturers have retooled their operations to be more efficient, more clean, more innovative, the universities, community colleges, the high schools must retool their education systems.” He added, “Advanced manufacturers in California have to be the cleanest, the best, cut costs, and improve productivity.”

Each panelist gave a brief overview of their company’s products and services, and then took turns answering questions posed by the moderator. With regard to finding qualified workers, their comments corroborated the comments of the panelists the previous day at the Workforce Partnership conference.

Cassidy said, “We have a very stable workforce with very low turnover, but it’s an aging population, especially on the electro-mechanical team…We need more with solder training and wireless technician certificates.”

Graney said that they have the largest backlog in their history and are hiring anyone who can fit or weld. “We end up training everybody that basically comes in the gate,” he said. “We’ve got eight weeks to develop a fitter or welder, before they’re out on the production run. We have had really only frankly limited success doing it any other way.” He added that they are making data available electronically to their welders at their workstations, and their painting process has reduced 90% of emissions.

All of the panelists made comments about how high schools need to get back to basics, including computer skills and technical training in wood shop, auto shop, and metal shop for those not going to go to college. Mr. Nunez said that STEM education needs to be supplemented with hands-on projects, such as ones using a “Raspberry Pi [A breadboard device for prototyping circuits].”

In answer to the moderator’s question about what are the benefits of bi-national manufacturing, Mr. Nunez said that the majority of the manufacturing for their infusion pumps and tubing takes place in Tijuana and Mexicali. Mr. Romero said that most of their SKUs are made in Tijuana, and the close proximity allows their engineers to visit the plant in the morning. He said, “It’s important to buy the right equipment and hire the right people.

The panelists touted San Diego’s collaborative effort among businesses and organizations, as well as opportunities created by the region’s proximity to Mexico. They also commented on the higher costs of doing business in California compared with other regions.

After the breakfast ended, I went on three tours out of the more than 25 tours offered in the San Diego region’s manufacturers. First, I visited D & K Engineering in Rancho Bernardo. D&K Engineering was started in 1999 by Scott Dennis and Alex Kunczynski as an engineering design and product development firm that evolved into providing contract manufacturing services for such companies as ecoATM and Retail Inkjet. D & K offered tours every half hour from 11 AM – 3 PM and 10 people were allowed on each tour. Besides business people, there were one mother and her pre-teen, home-schooled son and daughter on my tour.

Next, I visited Alphatec Spine in Carlsbad that makes implants made from PEEK and Titanium used in spinal surgery and reconstruction. My last stop was a mixer sponsored by the California Manufacturing Technology Consulting and the City of Santee at one of our many microbreweries, BNS Brewing & Distilling Company in Santee. The guest of honor at the mixer was Sid Voorakkara, a Senior Business Development Specialist from the Office Governor Brown. He provided the attendees with a brief overview of the new California Competes Tax Credit and the Manufacturing and R & D equipment sales and use tax exemption (for details go to )

The producers of Manufacturing Day 2014 have bragged that “This year’s Manufacturing Day set another record with almost twice as many events as last year. The final count was over 1,650 events in all 50 U.S. states, three Canadian provinces, and Puerto Rico.” However, until we get more educators, parents, and students to attend these tours, we will not achieve our goal of attracting more youth to manufacturing and other STEM careers.