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Innovation Spurs Growth in Piedmont Triad Region of North Carolina

Tuesday, 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.

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North Carolina Rebounds from Effects of Offshoring and Recession

Saturday, 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.

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

Thursday, 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.

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Charleston Manufacturers Focus on Training Current and Future Workers

Tuesday, 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.

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High-Performing Port and Workforce Training Drive Global Manufacturing in South Carolina

Tuesday, October 17th, 2017

Last week I had the opportunity to spend two days visiting the Charleston, South Carolina metro area as the guest of the Charleston Regional Development Alliance (CRDA).  Claire Gibbons, Director of Global Marketing & Communications, was my hostess, and told me that if you drew a line along the 32nd parallel across the U. S. from San Diego, you would wind up at Charleston.  Like San Diego, Charleston is a major port, being the deepest port along the south Atlantic coast, able to handle ships with up to 48 ft. draft, depending on tides. Charleston is about 50% lower in population than San Diego (761,000 vs. 1.407 million (2016), but is growing 3X faster than the U.S. average (14.5% vs. 4.7%).

Charleston is a military town like San Diego and is home to Joint Base Charleston, one of twelve joint facilities operated by the Department of Defense; the U.S. Space & Naval Warfare Systems Center Atlantic (SPAWAR), one of the Navy’s only two cyber mission engineering centers; and nearly all U.S. Dept. of Defense and Dept. of Homeland Security agencies. These facilities represent more than 23,000 active duty, civilian and contract civilian personnel.

Our first stop on my visit was the South Carolina Ports Authority (SCSPA), where we met with James Newsome, III, President and CEO.  He said “Charleston meets the needs of today’s global shipping industry, particularly as large vessels are deployed to East Coast trade routes. Our South Atlantic location is a significant driver of the Port of Charleston’s above-market average cargo volume growth, offering proximity to the fastest growing population in the U.S., as well as a booming manufacturing economy.”

He said, “We just received approval to dredge to 52 ft. depth to be able to handle the new, larger container ships that are coming online.  Two new taller cranes just came online (155 ft. vs. 115 ft.), and we have two more on order to install in 2018. We are also raising four existing cranes, for a total of eight cranes offering 155 ft. of lift height. We have three active cargo terminals now, and a new terminal is in development on the former Navy Base.

One of our terminals is a drive off terminal for automobiles, and the other two handle container ships. The new terminal will also handle container ships. The larger container ships are 13,000 TEUs in capacity. We also built a new rail connection from Charleston to the Inland Port in Greer to able to reduce truck congestion at the port and expedite rail shipments out of the region. “

As we drove around the terminal that has the new cranes, I was dismayed to see thousands of containers from Chinese and German shipping lines, but was encouraged when Mr. Newsome said that according to the latest report, Charleston is the port that is the most balanced in terms of imports and exports on the Atlantic coast. The port is also seeing good growth in exports of manufactured goods. The three terminals turn over the entire number of containers every 7-10 days.

Mr. Newsome said, “Charleston ships more tires than any other port in the United States.  Michelin came in the 1970s and has invested $6-7 billion in their manufacturing facilities. BMW came in 1994 and has invested about $10 billion in their facilities. About 70% of BMWs are shipped out of the Charleston port from the entire line made in the U. S. Boeing built a plant in 2009. Mercedes-Benz Vans is building their new Sprinter vans here. Volvo will open a new $500 million facility near Ridgeville in 2018. Five companies represent about 70% of our shipping volume.”

After I returned home, I found this important data on the Port’s website: “A 2015 study by the University of South Carolina’s Darla Moore School of Business concluded that the Port’s statewide impacts include:

  • $53 billion in annual economic activity
  • 187,600 jobs
  • $10.2 billion in labor income
  • 10 percent of total annual gross state product
  • $912 million in tax revenue”

Besides cars, tires, and other manufactured goods, Mr. Newsome said that the major products shipped out of Charleston are: agricultural (soybeans, grains), forest products (including diaper pulp, poultry, and pork.

According to the SCSPA website, the five fast-growing business sectors for the Port are:

  • Automotive manufacturing
    •Consumer goods distribution
    •Refrigerated/frozen exports
    •Transloading resin & grain
    •Tire manufacturing & distribution

Charleston shares some of the same industry clusters that San Diego has:  Aerospace, Information Technology, and Life Sciences. Their other two largest industry clusters are automotive and logistics. The following chart derived from data on the CRDA website shows the top ten manufacturers ranked by number of employees:

Company Products Employees Nationality
The Boeing Company
Aircraft manufacturing 7,400 American
Robert Bosch LLC Antilock brake systems, fuel injectors 1,800 German
SAIC Electronic security and communications systems 1,500 American
BlackBaud Inc Specialty computer software 1,300 American
Kapstone Charleston Kraft LLC Specialty paper & packaging 1,000 American
Nucor Steel Carbon & alloy steel 1,000 American
IFA North America LLC Automobile drive shafts 600 German
Mahle Behr Engine cooling systems 375 German
BAE Systems Electronic security and communications systems 350 British
V. T. Milcon Fabrication & assembly of communications systems 275 British

On our drive to our next appointment, I asked Claire to fill me in on the South Carolina business climate, so I could understand why so many foreign companies have established plants in the state. She said, “South Carolina offers a strategic location, particularly for companies based in Europe, and a business-friendly climate. We are a “right to work” state with one of the lowest corporate income tax rates in the south.” There are other benefits shown on the CRDA website: “no state property tax, no local income tax, no inventory tax, no sales tax on manufacturing machinery, industrial power or materials for finished products, no wholesale tax, and no unitary tax on worldwide profits.”

Claire added that another big advantage is that when a company relocates or expands to South Carolina, they can get training at little to no cost for their employees through readySC™, a division of the South Carolina Technical College System.  ReadySC’s mission is to “To promote the economic and workforce development of the state of SC. We provide customized training for new and expanding business and industry in the state of SC…”

Later in the day, I had the opportunity to visit the Mercedes-Benz Vans Training Center, where I met with Terrance Rivers, Area Director of readySC™, Susan Pretulak, V. P. Economic Development of the SC Technical College System., and Alyssa Bean, responsible for communications at Mercedes-Benz Vans manufacturing plant.

Ms. Pretulak said, “The Division of Economic Development works to not only attract new and expanding companies to the state but also provide the workforce development tools necessary to make certain they grow and prosper in South Carolina over the long term. The division is touted as providing a comprehensive solution for companies looking to grow their workforce in South Carolina. Housed within the division are the System’s nationally renowned statewide programs — readySC™ and Apprenticeship Carolina™.”

She explained, “Training is state-funded and is open to companies who will hire 10+ new, permanent, full-time employees with benefits.  There is a simple two-page agreement to participate in the program.  We have 16 technical colleges in our system, and each college has a readySC™ group. We are working with 89 companies at present.  We have two programs: (1) Pre-hiring Training, which is an unpaid training experience to provide potential employees for a company client and (2) Post-hiring Training, which is job specific training, such as welding, machining, assembly, etc.”

I asked if they have developed their own curriculum or do they use the SME ToolingU curriculum, and she said, “Some of both.” Mr. Rivers said. “We have a three-phase program:  Design, Discovery, and Delivery to customize the training to meet a company’s needs. Daimler was one of our first clients before they switched their name to Mercedes-Benz Vans. They make the Sprinter van at their plant.”

The readySC website expands on the requirements to participate in the program, specifying: To qualify, we require that:

  • Jobs projected must be permanent.
  • Pay represents a competitive wage for the area.
  • Benefit package must include health insurance.
  • Number of jobs created must be sufficient enough to allow readySC™ to provide training in a cost-effective manner.

Ms. Pretulak informed me that the SC Technical College System is also responsible for the Apprenticeship Carolina™ program, which “works to ensure all employers in South Carolina have access to the information and technical assistance they need to create demand-driven registered apprenticeship programs. At no cost to the employer, apprenticeship consultants are available to guide companies through the registered apprenticeship development process from initial information to full recognition in the national Registered Apprenticeship System.

The program started with 90 apprenticeship programs in 2007, and now has 918 programs today, representing 14,475 apprentices. One in three participating employers offer programs in more than one occupation.  The target industries are:  advanced manufacturing, construction technologies, energy, health care, information technology, and tourism and service industries. The total number of apprentices trained to date is 26,864, and the program is averaging more than 120 new apprentices per month.

At dinner that evening, I met Robin Willis, Associate Vice President, Talent Pipeline Strategies for the Charleston Metro Chamber of Commerce.  She said, “We are very proud of the growing number of Youth Apprenticeship students and their hosts in our region. We feel strongly that this program provides life changing experience for students and helps companies fill their critical Talent needs, so much so we have funded the program in its entirety. There are 105 Youth Apprentices currently in the workforce – 66 new ones that started in August 2017 and 39 who started their 2nd year in August 2017 and will complete the program in June 2018.

I told everyone that I haven’t visited any other state that has such comprehensive training and apprenticeship programs, and I am very impressed by what South Carolina has to offer to existing and relocating companies. It is no surprise that so many foreign companies are choosing South Carolina to establish or expand their U.S. presence. Other states (particularly California) would be smart to emulate the business incentives and training programs offered by South Carolina.

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Do Low American Savings Rate Cause Trade Deficits?

Saturday, September 2nd, 2017

Mainstream trade news continues to assert that trade deficits don’t matter. Economists help reporters write these fake news stories by claiming that America’s failure to save money is the problems, not foreign trade cheating. On June 20, 2017, the Coalition for a Prosperous America released a research paper titled “Do Savings Rates Cause Trade Deficits? by Michael Stumo (CEO) and Jeff Ferry (Research Director) that shows why globalist economists are wrong about what causes trade deficits, offshoring and job losses.

They write, “A popular, but misleading, claim is that low US savings, relative to investment, causes our trade deficit. For exam­ple, Harvard professor and former Reagan administration advisor Martin Feldstein.has said that the US fiscal defi­cit, which indeed reduces national savings, is the cause of the trade deficit. ‘If a country consumes more than it produces [thus saving little], it must import more than it exports.’”

These macroeconomists “claim that Americans spend too much, save too little, produce too little, and thus must import to support their gluttony.” They are incorrect.

White House economists use the “savings rate causes trade deficits” claim to create the false illusion that nothing can be done. But the real problem is that a few foreign countries – like China, Japan, Germany and South Korea – have economic strategies to overproduce, under consume and ship their overcapacity to the US. Their growth strategy is their full employment program. They export their unemployment to the US.

DISTINGUISHING CAUSES FROM MATHE­MATICAL INTERRELATIONSHIPS

To macroeconomists, the ”National savings, investment and net trade are variables within equations or formulas known as ‘national income identities’. Because the variables are within the identity, they are called “endogenous’ and are explained by the equation.” But they do not explain what causes the changes.

“The basic Gross Domestic Product equation is referred to as a national income identity, expressed in the following equation:

GDP = C + I + G + NE

C = Consumption; I = Investment, G =  Government and NE = Net Exports. Net Exports are also expressed as X – M in another version of this equation. When the Net Exports is a negative figure as it has been since 1979, this reduces the GDP.  According to previous research by the Coalition for a Prosperous America, “the annual trade deficit has reduced each year’s GDP by some 3% to 5.5% each year, and those reductions compound over time.”

The purpose of the paper is to explain “how to distinguish (a) causation from (b) math­ematical interrelationships in the national income identity or equation that underlies this debate. For reasons explained below, real world changes (exogenous factors) outside the identity are the true causes. These real-world changes directly impact one or more variables within the identity, transmitting through the equation by mathematical necessity. In short, na­tional savings is related to the trade deficit in an accounting sense but does not cause it.”

Government policies often affect each one of the variables of the above equation. For example, the income tax rate may affect Consumption.  If rates are high, then American consumers have less money to devote to consumption.  If Government consumption and expenditures through procurement is down as it was under Sequestration, then companies that sell to the government make less money and have less money to buy products as business and corporate consumers.

To clarify the relationship between savings and trade deficits, the authors cite Robert Scott of the Economic Policy Institute: “Accounting identities do not, and cannot, explain the causal relationships between savings, investment, and trade flows. Do low savings rates cause trade deficits, or does causation run in the other direction? A trade deficit reduces the incomes of domestic workers, pushing many into lower income brackets. Families with lower incomes gen­erally find it much harder to save. Therefore, increasing trade deficits can and do reduce national savings.”

DEBUNKING THE MORALITY VS SAVINGS RATE HYPOTHESIS

International economists in important positions “im­plicitly argue that no policy action is necessary or effective because US citizens simply do not save enough. We have caused our own problem. Our immoral, gotta-spend-it-now culture must become more austere.”

However, the authors explain that “National savings, in the context of the national in­come identity, is the aggregate of household, business and government savings. It is the extent to which national in­come exceeds private and public spending.

Household savings can, for example, go down if family earnings fall but they spend the same as before on necessities. Taxes or interest rates could go up causing con­sumers to spend less. Neither cause has anything to do with financial morality.”

Instead, government policies can and do affect savings rates. The authors state, “Surplus countries such as Germany and China have been deficit countries in the past… with low savings rates and trade deficits. Their cultural propensity to spend or save did not miraculously change…policy changes in the 1990’s and 2000’s caused trans­fers of wealth from households to industry forcing less consumption and more production at increased scale and with very competitive prices. The result was more national savings and trade surpluses.”

HOW OVERSUPPLY IS TRANSFERRED TO DEFICIT COUNTRIES

The authors show how the oversupply (overproduction) of some countries is transferred to other countries causing them to become deficit countries.  They write; “All countries cannot run trade surpluses. Offset­ting deficits must exist elsewhere. The primary reason for a country to engineer persistent surpluses is to spur domestic employment by excessive reliance upon foreign consumers. The deficit country, however, experiences de­valuation of its formerly well employed labor.”

They point out that in 2005, “then-Federal Re­serve Board chairman Ben Bernanke argued that the large and growing U.S. current account deficit is caused not by anything happening in the U.S., but by decisions taken by emerging economy nations to run very high savings rates, pursue export-led growth, and lend money to other countries, especially the U.S. He called the situation a ‘global savings glut.’ These excessive inflows of foreign savings raise the U.S. dollar exchange rate, drive down our interest rates, and force our economy into a trade deficit.”

The method by which this transfer takes place is described by Professor Michael Pettis, quoted in the paper:

“If any country takes steps to change the gap between its total domestic savings and its total domestic investment, then those steps must also affect its trade balance. Because a change in one country’s trade balance must be matched with an opposite change in the trade balance of all other countries, there must also be an opposite and equal change in the gap between the total domestic savings of the rest of the world and the total domestic investment of the rest of the world.”

Other factors affecting this transfer are “wage suppression (intentionally as in Germany) or because high volumes of new workers are entering the labor market (as in Asia) and redirect household resources to investment. The result is that productivity increases faster than wages. Increased production outstrips the ability of domestic households to consume. Domestic supply exceeds demand and the coun­try must rely upon foreign consumers to soak up the excess.”

What Tactics Do Surplus Countries Use?

The authors explain that “Export-oriented or investment-oriented countries can utilize policies to reduce consumption, increase pro­duction and export at very competitive prices.”

China:

  • Wage growth is constrained to well be­low the growth in worker productivity
  • Undervalued exchange rate…for much of the past two decades
  • Government subsidizes Chinese manufacturing exporters
  • Financial repression of Chi­nese households
  • Vast amounts of surplus labor that produces more than it consumes.

In essence, the authors state “They export oversupply, deflation and unemployment. The result is excessive reliance on demand from consum­ers in deficit countries.”

Germany

  • Holds down domestic wages
  • German banks provide direct loans and vendor financing to foreign countries to buy German products
  • Impose a 19% consumption tax (VAT) that is rebated to exporters

As a result, “The eco­nomic distress caused by the German-policy-induced cri­sis in other eurozone countries perversely holds down the value of the euro” making Germany’s exports more price competitive in the global marketplace.

SOLUTIONS TO REBALANCE TRADE AND CAPITAL FLOWS

The authors present the following recommended solutions to reduce trade deficits:

  1. Fix currency misalignment, especially the overvalued dollar.
  2. Implement a US consumption tax, such as a goods and services tax (GST), in a revenue neutral and distribution neutral way by completely offset­ting the payroll tax burden.
  3. Adopt a territorial business income tax called sales factor apportionment (SFA)
  4. Consider broadly applied tariffs to counter the unearned ad­vantages of trade surplus countries
  5. Apply selec­tive tariffs to high value or strategic products that the US wants to produce

In conclusion, the authors state: “…the level of US savings and invest­ment cannot and do not ‘cause’ our trade deficit. The true causes are surplus country policies, misaligned exchange rates and global labor oversupply. Persistent trade surplus countries export their oversupply and unemployment to deficit countries characterized by open economies and open financial markets. Policy leaders must become adept at determining the actual causes, how they are transmit­ted through national income identities and how they re­sult in imbalances. Effective policy responses can then be designed to rebalance trade and capital flows, increase US employment and restore our economic growth.”

The paper shows why America’s economy grew when the majority of manufactured goods were Made in America and consumed by US consumers.  The wages paid to the manufacturing workers who produced these products allowed them to save more because they earned more. When the U. S. lost 5.8 million higher paying manufacturing jobs from the 2000 – 2010 because American production was offshored to China and other Asian countries, American workers no longer had any money to save. The overproduction of trade surplus countries resulted in a glut of cheap imported products that further depressed or destroyed some American manufacturing industry sectors. The cheap imported goods that consumers bought became a curse rather than a blessing.

Therefore, the preposterous premise of many macroeconomists that low savings create trade deficits was proven false. It is incomprehensible to me why macroeconomists don’t understand that you can’t save if you don’t have a job or your non-manufacturing job is paying way less than your manufacturing job did. This is why I strongly support the recommended policies of the Coalition for a Prosperous America and urge you to do so also.

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North Dakota’s Northern Plains UAS Test Site

Wednesday, July 12th, 2017

When I was first invited to North Dakota, the plan was for me to visit the Northern Plains UAS Test Site in Grand Forks, but it was about 80 miles away from Fargo, and the Site’s Director was going to be out of town the week of my trip.

My first thought was questioning why North Dakota was selected as one of the six UAS test sites compared to San Diego, which is home to Northrop Grumman’s Global Hawk and General Atomics’ Predator unmanned vehicles. I had given a presentation at the San Diego Lindbergh Chapter of the Association for Unmanned Vehicle Systems International in the spring of 2013 while they were collaborating to prepare a proposal for being selected as a test site and was surprised when San Diego was not selected.

I posed this question to my host, Paul Lucy, the first evening we met during my trip, and he supplied part of the answer. It turns out that the University of North Dakota in Grand Forks had a long history of training airline pilots starting in the late 1960s and more recently expanded into training pilots for unmanned vehicles.

In December 2013, the Federal Aviation Administration selected North Dakota to be one of the six test sites, officially known as the Northern Plains UAS Test Site. According to the website, the mission is:  “Collaborate with FAA and industry partners to develop equipment, systems, rules, and procedures to safely integrate unmanned aircraft into the NAS without negatively impacting existing general or commercial aviation.”

After I had written my other articles about North Dakota, I set up a phone interview with Nick Flom, Executive Director of the Northern Plains UAS Test Site. He took over the position in 2016 after the founding Executive Director, Robert Becklund, was promoted to Brigadier General and Deputy Adjunct General for the State of North Dakota. However, Nick is not new to the center since he was Becklund’s first hire when the site was established.

Nick provided me the rest of the answer as to why North Dakota was selected. He said, “When they were preparing for the selection process, the entire state went into what we called the “one voice” effort by the Governor, the North Dakota Department of Commerce, and the Office of the Adjunct General of the National Guard, the University of North Dakota, and other organizations in the state. Over $20 million was committed to establishing the UAS Test Site because the FAA test site designation did not include any Federal funding.”

As a point of reference, he told me that whole population of North Dakota is about 775,000, and there are only three Congressional Representatives. The population of the City of San Diego, California where I live is nearly double at 1.4 million.

He explained that “the wide open space of North Dakota was a big consideration, and there is no restricted air space because of population density. The FAA also wanted to diversify the test sites to reflect extremes of temperatures, and North Dakota has some of the highest and lowest temperatures of the U. S.”

The UAS Test Site website sums up the reasons why North Dakota was chosen as follows:

  • “Unequalled history, legacy, and culture of UAS.
  • Immediate access to uncongested airspace statewide and custom tailored to support your research.
  • Diverse climate and open terrain.
  • Unified commitment from North Dakota and congressional leadership, local industry, and key business decision makers.
  • State grant program to match funds from industry-academia research.
  • Strong relationship with Grand Sky, a UAS Business and Aviation Park at Grand Forks Air Force Base.”

When I asked what are his responsibilities, he answered, “We have a couple of different missions to integrate unmanned vehicles into the national air space:  supporting industry as rules are being developed, providing the test environment for application-based processes in agriculture, building inspection, insurance claims, etc., and as an economic driver for agriculture and energy. We look at unmanned vehicles as an opportunity to diversify the state’s economy. Grand Forks has an Air Force Base that has underutilized space, and there was 217 acres in Grand Forks available to establish a UAS business park. The first two tenants in the park are General Atomics and Northrop Grumman. General Atomics has a flight training facility for their sales of vehicles to foreign countries. They were training their pilots to fly in civilian air space. Northrop Grumman flies Global Hawks out of the Grand Forks Air Force Base to support some of their military customers. We help support these capabilities and have the goal of flying beyond the line of sight using the radar system at the Grand Forks Air Force Base. Right now, when General Atomics is doing flight training, they have a chase airplane following along. When they can fly beyond line of sight, they won’t have to have a chase aircraft follow along and will be able to execute their mission at a lower cost.”

Nick Flom provided me with more detail about UND’s history of pilot training. He said, “UND started with two airplanes in the 1960s, and then added a helicopter program in 1980. Now, they have 150 airplanes for commercial aviation pilot training. They were the first university to add unmanned vehicle pilot training in 2010, and are now filling the increasing demand for unmanned vehicle pilots. They are the first university to offer a four-year UAS Operations Bachelor of Science degree in the U. S. We have a close relationship with UND, and we can leverage a lot of their research. The President of UND established the Research Institute for Autonomous Systems on the campus. The top leaders understand the importance of unmanned aircraft.”

Nick explained, “UND offers specialized training and curriculum development for UAS crew training and certification that includes human factors, safety management systems. It has an indoor UAS flight laboratory, a Predator Reaper Integrated Networked Computer Environment (PRINCE) simulator, a Predator Mission Aircrew Training System (PMATS) simulator, as well as a UAS Scan Eagle aircraft and simulators.”

From the University of North Dakota Aerospace home page, I learned that UND specializes in Unmanned Aircraft Systems (UAS) research, education and training for private industry, government, UAS researchers and UND graduates. The UAS research collaboration includes:

  • “UND Institute for Unmanned and Autonomous Research (IUAR)
  • John D. Odegard School of Aerospace Sciences
    • Aviation, Atmospheric Sciences, Computer Sciences, Space Studies, Earth Systems Science & Policy
  • UND Aerospace Foundation
  • Northern Plains UAS Test Site (NP UAS TS)
  • UND School of Engineering
    • Unmanned Aircraft Systems Engineering Lab
    • Robotics and Intelligence Systems Lab
  • UND Department of Psychology
    • Northern Plains Center for Behavioral Research”

From all of this information, I could see that it was entirely appropriate for the UAS Test Site to be established in North Dakota near University of North Dakota.

I asked Nick about funding for the UAS Test, and he responded, “The state of North Dakota has appropriated dollars to support the test center. We also contract with government agencies such as NASA and the FAA as well as private companies to do services for which we are paid.”

Before ending our discussion, I asked Nick what were the future plans. He answered, “It depends on the needs of industry. The ability to fly aircraft beyond line of sight is very important, along with the ability to safely perform operations over populated cities. Right now, it is one pilot per aircraft, but it may be possible to have one pilot flying more than one unmanned vehicle.”

In retrospect, I realize that San Diego County would not have been a good choice for a FAA test site as we have too much restricted air restricted air space due to three military airports, San Diego’s Lindberg Field international airport, several small airports spread throughout the county, and the Tijuana, Mexico international airport right across the border. In addition, the population of San Diego County is 3.3 million, and there is only a small variation in temperature from winter to summer. There is no doubt in my mind now that North Dakota was a good choice for being selected as one of the six designated test sites.

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NDSU Research & Technology Park Leads Region in Job Creation

Wednesday, May 31st, 2017

On the first day of my visit to Fargo, North Dakota, I met with Chuck Hoge, Executive Director of the North Dakota State University Research & Technology Park (RTP), which is “dedicated to enhancing the investments in North Dakota State University by the citizens of North Dakota. The development of facilities and research centers conducive to cutting-edge research is also part of the NDSU Research and Technology Park.” The Research Park operates a 50,000 sq. ft. technology incubator, which offers space, facilities, and services to technology-based entrepreneurs and businesses.

Mr. Hoge also serves on the Fargo Moorhead Growth Initiative Fund Board. Prior to the Research Park, he was president of the Ottertail Corporation Manufacturing Platform for six years, and before that, he was president and CEO of Bobcat Corporation.

Mr. Hoge said, “I was on the board of directors of the Park before I became Interim Director in 2013 and the Executive Director in 2016. The Research Park is a 501 (c3) corporation with its own Board of Directors. The Park is home to two NDSU research buildings, the John Deere Electronic Solutions building, and two buildings occupied by Appareo, one of our Incubator graduates.”

Explaining the purpose of the research park, he said, “The Park’s goals mirror those of the State of North Dakota. Our shared mission is to diversify the economy through high-tech STEM jobs, develop the workforce and provide valuable, in-state career opportunities for North Dakota students. In the past, many of NDSU’s 15,000 students were seeking well-paid, high-tech positions out of state, so we made it our goal to create those opportunities for them in-state. The Research Park has created 1,339 direct jobs, of which 52% are held by graduates of North Dakota colleges and universities.”

“In the Incubator, our mission is to help companies succeed faster, which is why we have two of our partner organizations in the Incubator; the Small Business Development Center (SBDC) and the Bank of North Dakota. The SBDC helps startups with anything from business plans to financial modeling and because the Bank of North Dakota is the only state-owned bank in the country, they have many programs aimed at helping startup companies.”

When I asked for information about the founding of the Research Park and incubator, he said, “The Research Park was founded in 1999 and the incubator in 2007. Our funding sources were a combination of private donations, a State Centers of Excellence grant and an EDA grant.”

Hoge, said, “The Bank of North Dakota isn’t the only state entity creating programs for local startups. The Department of Commerce’s Innovate North Dakota program provides up to $32,500 in startup funds to companies in four phases ? $2,500, $5,000, $10,000, and $15,000. In the last couple years, we had over 50 companies in the Fargo area use the program to kick start their companies with a great success rate. The program doesn’t only provide monetary support; the company founders attend entrepreneur training boot camps to network with fellow founders and learn from world-renown entrepreneur, Dr. Jeffery Stamp of Bold Thinking, LLC.”

He told me that the incubator has 12 current incubator clients and has graduated five companies:  Appareo, Fargo 3D Printing, Intelligent InSites, Myriad Mobile, and Pedigree Technologies.

“In addition to programs designed to target local entrepreneurs, we also have a student competition called Innovation Challenge, where $27,000 is awarded to teams of NDSU students with the most innovative ideas. Through three rounds of judging by industry professionals, the students are challenged to pitch their innovations through a written proposal, a trade show scenario and a mock fundraising pitch. We want to inspire students to think about entrepreneurship as a career path and we use innovation as the gateway to entrepreneurship. We had three companies get their start in Innovation Challenge last year and we are hoping for more this year. The program is financially supported by a combination of a University Center EDA grant, state matching funds and contributions from local businesses and organizations.

The Incubator Manager, John Cosgriff, has a background in venture funds, and he assists companies with intellectual property, human resources and raising capital. We have monthly founder meetings where the entrepreneurs advise each other and ‘Lunch and Learn’ events where founders learn from and network with industry experts.”

After I returned home, I was emailed an Economic Impact Study released November, 2016, and a few highlights are:

  • Its companies support an estimated 1,300 indirect jobs in the Fargo-Moorhead area.
  • Its companies employ 489 graduates of NDSU (37% of total RTP employment)
  • Another 202 are graduates of other North Dakota University System schools.
  • 107 student interns are employed by the RTP companies.

While at the Incubator, we met with Chad Ulven and Corey Kratcha, who are the co-founders and CTO and CEO, respectively, of one of the incubator tenants, c2renew, which “uses proprietary biocomposite formulations to design materials, compounds, and parts that satisfy demanding engineering specifications.” With this technology, it is possible to take advantage of lower-cost, renewable resources while meeting, maintaining, and even improving upon the mechanical properties required for a product.

Dr. Ulven said, “I was trained in advanced composite materials when I was in graduate school and at the Aberdeen Proving Grounds Army Research Laboratory. Then I became faculty at NDSU researching agricultural products for use as fillers for composites. I wanted to use a variety of materials and built several predictive models based on biomass constituent make up. I met Corey by chance, and we decided to take the technology out of the lab and spin it off to make products. We started working with big companies like Bobcat and John Deere, but the time to market was too long.”

He explained, “We decided to target companies that are focused on new products and started working with EarthKind to develop consumer market products using a PLA based resin along with flax fiber.”

They showed us some of the products where their materials are used:

EarthKind Pouch Pod – All natural repellent holder that uses flax sourced from North Dakota farms as the filler to the resin.

Bogobrush – An eco-friendly toothbrush where materials, production, and shipping all take place in North Dakota and the surrounding area. The company gives a toothbrush away for everyone bought.

Corey said, “In a partnership with 3DomFuel, we have developed a collection of bio-based 3D printing filaments called c2composites. Our expertise in biocomposite formulation matched with the expertise 3DomFuel has in producing filament means that anyone with a 3D printer capable of printing PLA can print with the following custom filaments:

Wound Up – a coffee plant fiber waste filled filament

Buzzed – made from byproducts of beer production

Entwined – made from industrial hemp

LandFilament – made from upcycled municipal solid waste

We have created many different biocomposites for various customers, but we had never created anything that was 100 percent done for us. So we thought about ways to take one of our favorite things, coffee, and use it in a new and innovative design. We developed the c2cup by creating a new biocomposite formulation that is a hybridization of a bio-based resin and coffee plant fiber. We then used this biocomposite to make 3D printer filament and printed the first coffee cup. The biomass resources we use are taking the waste off the hands of the producer to be utilized in a rapidly renewable manner. We use carbon rich byproducts that also have high lignin content that improves a material’s UVA resistance. We look at how we can meet performance specifications by finding a solution that is bio-based, renewable, and sustainable.

We have a 9,500 sq. ft. production facility in a nearby industrial space. We have at least two interns from NDSU at any one time that we meet through the Incubator and other meetings.

We now have experience working with a wide variety of thermoplastics including: PP, PE, PLA, ABS, ABS/PC, and PA, and a wide variety of agricultural inputs are possible as fillers:

  • flax fiber
  • wood flour
  • hemp fiber
  • sunflower hull
  • dried distiller grains with solubles
  • soybean hull
  • oat hull
  • sugar beet pulp

Our formulations are more environmentally responsible since the petroleum feedstock can be replaced with agricultural byproducts which would otherwise be left to decay in the soil or be sent to the landfill.”

Chad told me about the collaboration they are doing with NDSU researchers to spin out c2sensor, as a result of the “development of a micro-sensor made from biocomposites and non-bioaccumulating metals. He said, “The Sensing Earth Environment Directly (SEED) Sensor can be placed during planting for in-situ measurement of soil conditions, as opposed to current methods which often require a combination of direct (i.e. soil sampling) and indirect measurements (i.e. remote sensing).

Biodegradable materials used in SEED Sensors allow them to degrade after use where planted without adding toxins to the soil. Since wireless communication with the sensor is based on passive radio-frequency identification (RFID) technology, batteries are not required for operation. This technology has been tested in lab and in field trials.”

Chad said, “The SEED Sensors provide:

  • Salinity levels for allowing adjustments as needed
  • Nutrient levels for variable rate fertilizer applications
  • Moisture levels to have more focused irrigation
  • pH levels to more proactively manage inputs
  • Real time soil analysis for end of year fieldwork
  • couple with aerial mapping via UAVs or satellite imager”

At the end of our visit, Chad said, “We also provide engineering services to help design, analyze, and develop plastic and plastic-composite parts for virtually any application. While we specialize in utilizing natural and recycled materials in place of virgin polymers, we also produce solutions with more tradition materials like fiberglass and carbon fiber.”

If c2renew is an example of the cutting edge technology of the startup companies in the Incubator, North Dakota will certainly be able to reach its goal of accelerating the growth of startup and emerging companies to expand their manufacturing base and keep college graduates from leaving the state. The Park’s website describes the success to date: “The NDSU Research & Technology (RTP) Park and its companies have seen tremendous growth over the last five years according to a survey conducted by EMSI in 2010 and repeated by the RTP in 2015. As of December 2015, there were 1,105 jobs at companies located in the park and 234 jobs at RTP incubator graduate companies located around the Fargo-Moorhead area. This is a 50 percent increase over the number of jobs at the end of 2010.”

It would have been great to be able to visit with more Incubator tenants, but we had other more established companies to visit the rest of the day that I will discuss in my next article.

 

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North Dakota Focuses on Accelerating Growth of Emerging Companies

Wednesday, May 24th, 2017

The last week of April, I visited the Fargo, North Dakota region as the guest of the North Dakota Department of Commerce’s Economic Development & Finance Division, which is charged with coordinating the state’s economic development resources to attract, retain and expand wealth. My host was Paul Lucy, former director of the Economic Development & Finance Division, and we visited several companies and met with heads of organizations working to accelerate the growth of emerging companies and retain successful existing companies.

For many people, the only impression they have of Fargo is based on the movie and subsequent TV series of the same name. I never saw the movie and haven’t watched the TV series, but have a cousin in Fargo who is always bragging about what is happening, especially what celerity is coming to perform. I learned that the Red River is the boundary between North Dakota and Minnesota, and about 230,000 people live in the greater Fargo/Moorhead region. It has one private and two public four-year universities, along with several community, technical, and business schools. With nearly 30,000 college students, it is a college town that rivals any in the nation.

As we began our first day of appointments, Paul said, “There are development projects in motion that have  a vision of making downtown Fargo a more vibrant place to live and work, which could lessen urban sprawl and result in more efficient investment in city infrastructure and services. An added bonus would be the preservation of more of North Dakota’s fertile farmland for agriculture production.”

Our first appointment was a breakfast meeting at Emerging Prairie, a co-working space in downtown Fargo. We met with Greg Tehven, Executive Director of Emerging Prairie. He said he grew up on a farm and is a 5th generation North Dakotan. When he was attending the University of Minnesota, he remembers that one of his professors recommended that North Dakota be turned back to the prairie because from 1930 – 2000 there was a “brain drain,” when the best and brightest left the state.

Greg said, “I never intended to go back to North Dakota when I graduated, but while I was an undergrad at the Carlson School of Management at the University of Minnesota in 2003, I co-founded Students Today, Leaders Forever. After graduating, I joined the Kilbourne Group and worked on a variety of projects to stimulate growth and entrepreneurship in downtown Fargo.

He explained, “I burned out and worked my way around the world in 2010. I had a Rotary Ambassador scholarship and got accepted to the University of Manchester to study social change in 2011. I had a year before I started school, so I worked for Doug Burgum for a year and discovered “urbanism.” When I gave a TEDx Talk in Minneapolis, I made a conscious choice that instead of studying social change, I wanted to practice social change.”

He said, “Three of my friends and I founded Emerging Prairie in 2013 to turn Fargo into a vibrant startup community. Our mission is to connect and celebrate the entrepreneurial ecosystem in Fargo-Moorhead. We do so by operating a wide variety of events and initiatives, such as the Drone Focus Monthly, the Prairie Den co-working and event space Hackathon, Meetup groups, and the Intern Experience. We have TEDx Fargo, an independently organized TED event, and 1 Million Cups Fargo, the largest and most active 1 Million Cups program in the country.

We support tech-based entrepreneurs. We are not very involved with manufacturing – most of our entrepreneurs are in software. We provide entrepreneurs: (1) a founders-only retreat (2) a platform to share their work and investment opportunities, and (3) access to consultants. I believe in transfer of information, but not a formal mentor relationship. We have to make it a “cool” climate for college students. We host midnight brunches and do a lot of weird and strange things. We have 144 members of our co-working space, modeled like a student union. We have no desire to maximize profits, but to maximize impact. Millennials are wired to maximize impact rather than maximize profits.”

He expanded, “We host the Ted Ex Fargo and will have about 2,000 people at the event this summer where the CEO of the Kauffman Foundation will speak. We host an Ecommerce conference in Moorhead. We support the drone industry and run a drone conference that started two years ago with 240 attendees the first year and 330 the second year. We expect about 600 people this year on May 31st. We host different other events and also operate an online publication that highlights the regions entrepreneurs and innovators that are turning Fargo into a flourishing tech hub. In 2016, we became a 501(c) 3 non-profit.”

Our next visit put what Greg has said into perspective. We visited the Greater Fargo Moorhead Economic Development Corporation (GFMEDC) where we met with James Gartin, President, Mark Vaux, Executive V.P, Business Development, and Lisa Gulland Nelson, V. P., Marketing and Public Relations. Mr. Gartin said, “Our goal is to be a key catalyst for business growth and prosperity for the region. As far back as five years ago, we felt that we had a difficult situation because of our workforce and ability to attract new companies with our extremely low unemployment rate that is currently3.4%. Every time we get a RFQ, the first thing we get asked is:  Do you have enough employees? We made a commitment early on that we weren’t going to take away employees from our existing employers. While we still work to attract companies to our region, we realized that if we need to work with our two universities to change the philosophy from ‘research for papers’ to ‘research for commercialization’ to facilitate start-up companies.”

He explained, “We have funded Emerging Prairie since its inception and are helping them to support entrepreneurism. We attend and support 1 Million Cups, where the entrepreneurial community meets with K-12 superintendants, organizes manufacturing tours for high schoolers, and recruits companies to our community.

He added, “Governor Doug Burgum’s son, Joe Burgum, is committed to making Fargo the best place on earth to live. He founded Folkways that is a community-building collective dedicated to supporting the region’s culture creators. He created the Red River Market,  successfully lobbied to bring the ride-sharing service Uber to North Dakota, and puts on a course to help entrepreneurs launch local businesses.”

He said, “At North Dakota State University’s Research and Technology Park, there is great collaboration to make it a leader in developing Intellectual Property. Entrepreneur magazine ranked Fargo in the top 10 for entrepreneurism. We have a number of ‘0-60’ speed companies in operation, and a lot more that are on the cusp. The most important thing is that our senior leaders are seeing a difference in the growth of business. We modeled our approach after Brad Feld’s book, Startup Communities: Building an Entrepreneurial Ecosystem in Your City, based on Boulder, Colorado. The start-up phase is ten years, and we are only 4-5 years into the program. Cities can’t push entrepreneurism. You can’t make people start companies, but you can help to build the ecosystem.”

The supplemental material I was provided revealed that the costs of doing business in North Dakota are around 15 percent less than the national average because of the following:

* Research and development tax credits

* Corporate income tax exemption

* Property tax exemptions for new or improved buildings

* No personal property or gross receipts taxes

* No sales tax on eligible services, manufacturing or computer/ telecommunications equipment

* Seed and angel capital investment tax credits

* Early-stage financing resources

* State-sponsored workforce training grants

The GFMEDC website states, “Some of our largest employers include divisional, regional, national and global headquarters & facilities for Microsoft Business Solutions, Bobcat Co., John Deere Electronic Solutions, Border States Electric Supply, RDO Equipment Co., Tech Mahindra, Titan Machinery, Nokia HERE and American Crystal Sugar.” The Microsoft campus came about when Great Plains Software, Inc. was acquired in 2001. There doesn’t seem to be a dominant manufacturing industry in Fargo, as the list of top manufacturers includes farm and construction equipment, power equipment, windows/doors, metal fabrication, steel, and composites.

We also discussed the challenges of solving the skills gap and attracting the next generation of manufacturing workers. Mr. Gartin said, “Tip Strategies out of Austin, TX did an economic development strategy study for us on how to grow economy and our workforce. We have funded the plan and are implementing it. We have some of the most unique workforce strategies in the country. Industry and education mesh. We have a very robust manufacturing Day that we handle. We have funded a Maker Space in Moorhead and helped NDSU create a Maker Space, job shadowing and internships. We have a Tri-College University consortium. Students can take classes and get credit at any of the colleges and pay the same rate. Last year, the two-year technical schools collaborated so that students can take classes at any one for the same rate.”

Tri-College University is a unique consortium that allows students enrolled at any one of its five member institutions to take courses at the others at no extra charge, and to apply the credits toward graduation requirements at the home campus. The five member colleges are:

  • Concordia College – Moorhead
  • Minnesota State University Moorhead
  • North Dakota State University – Fargo
  • Minnesota State Community & Technical College – Moorhead
  • North Dakota State College of Science – Wahpeton & Fargo

When I mentioned The Playbook for Teens program I have written about that mentors middle school girls to get them interested in STEM careers, he said, “We think it needs to start in elementary school in the second or third grade when students are starting to learn math. At NDSU, there is an Engineers in the Classroom program where engineering students work in classrooms to teach math. They matched first and second graders with an engineering student to work with them on project based learning. It was tested in an 8-week program, and every student jumped up two levels. This year, there is an engineering student in every classroom, and the students are about to be tested. This could be the opportunity to show that this works, so that we can apply for a Pew grant to fund the program.”

Mark Vaux said, “Our business development program is based on attraction, business retention, and expansion. We visit at least 150 companies on an annual basis looking for opportunities and challenges, so we can help them through the challenges and barriers to growth and recommend actions to take. If companies are buying new equipment or adding workers, there are state programs that will help them.”

Lisa Gulland Nelson described some of the Workforce programs they have:

  • Operation Intern – primary sector business are eligible for matching funds of up to $30,000 per legislative biennium or $3,000 per intern for hiring North Dakota college students or high school juniors or seniors.
  • New Jobs Training Program – matching grants to assist qualified North Dakota employers in training or upgrading their employees’ skills.

Overall, I was impressed with North Dakota’s policies to provide a favorable business climate for its businesses and wish that California would adopt some of these same policies. The Fargo region is smart to focus on emerging businesses to retain their college graduates and keep them from going to other states for jobs. My next article will cover the incubator at the NDSU Research & Technology Park.

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MEPs are Essential to Rebuilding American Manufacturing Competitiveness

Tuesday, April 18th, 2017

Last month, President Trump submitted a “Skinny Budget” with the goal of removing some of the “fat” within Washington DC. Unfortunately, one of the programs eliminated in his budget is not “fat.” The Manufacturing Extension Partnership (MEP) is the only federally funded national network dedicated to serving small and medium-sized U. S. manufacturers. The MEP program was re-authorized by both Houses of Congress by unanimous consent earlier in January when the MEP program went back to 1:1 cost matching. The reality is that the MEP network is essential to helping manufacturers be competitive in the global marketplace and rebuilding American manufacturing. Eliminating the MEP program seems contradictory to President Trump’s focus on manufacturing.

The MEP website states, “Since 1988, the Hollings Manufacturing Extension Partnership (MEP) has worked to strengthen U.S. manufacturing. MEP is part of the National Institute of Standards and Technology (NIST), a U.S. Department of Commerce agency…MEP is built on a national system of centers located in all 50 states and Puerto Rico. “Each center is a partnership between the federal government and a variety of public or private entities, including state, university, and nonprofit organizations. This diverse network, with nearly 600 service locations, has close to 1,300 field staff serving as trusted business advisors and technical experts to assist manufacturers in communities across the country.”

This public-private partnership provides a high return on investment to taxpayers. “For every one dollar of federal investment, the MEP national network generates $17.9 in new sales growth for manufacturers and $27.0 in new client investment. This translates into $2.3 billion in new sales annually. And, for every $1,501 of federal investment, MEP creates or retains one manufacturing job.”

The top challenges reported to MEP by manufacturers are:

  • Cost Reduction 70%
  • Growth 54%
  • Employee Recruitment 47%
  • Product Development 45%

In FY 2016, the MEP national network interacted with 25,445 manufacturers and achieved these results through their wide range of services:

  • $9.3 Billion New and Retained Sales
  • 86,602 New and Retained Jobs
  • $3.5 Billion New Client Investments
  • $1.4 Billion $1.4 Billion Cost Savings

I have long been aware of the work of the California MEP, California Manufacturing Technology Consulting (CMTC), headed up by Jim Watson, but when I visited Cincinnati, Ohio last fall, I had the pleasure of meeting with Scott Broughton, Director of the Advantage Kentucky Alliance (Kentucky’s  MEP), and David Linger, President & CEO of TechSolve, one of the Ohio MEP affiliates.

I contacted all three for input for this article, and Scott Broughton was the first to respond. He said, “AKA has generated over $88 million in impacts with 50 clients working with over 1,300 employees in the past 12 months alone. We are currently working with small manufacturers in Eastern Kentucky, who used to work in the coal industry to identify, vet, and implement change allowing them to work in non-coal industries and helping them to be sustainable in the future. These companies have worked with other entities with mixed results. AKA’s programs are centered on AKA facilitators mentoring and training employees, allowing them to be the driver of change with continued support. This allows the employees to ‘learn by doing’ with the support and assistance of AKA’s specialists. AKA’s average engagements are over 12 months with monthly interactions allowing for sustainable support, change, and implementation.”

He added, “For every federal dollar spent, it has resulted in $170K in impacts in Kentucky! Specific impacts in the past 12 months are below and that does not include the 762 new jobs created/retained:

  • $9.9 million in new sales
  • $21.6 million in retained sales
  • $10.8 million in cost savings
  • $40.3 million in investments made”

Broughton provided me with case studies for six clients, which are too lengthy to cite in detail in this article. Three of the six received training in Lean manufacturing through AKA, two were helped to find new markets, and two were helped with new product development. Highlights of the results are:

  • Skillcraft Sheetmetal, Inc. – “a reduction in labor equating $27,000 in 2014 alone”
  • Post Glover Resistors – ” 12% reduction unnecessary Labor”
  • Outdoor Venture Corporation – “Increased sales by $500,000 and increased cost savings by $1 million”
  • Cumberland Mine Service, Inc. – “Uncovered 17 potential industries/business opportunities and 21 potential future customers”
  • RT Welding & Fabrication, Inc. – “Uncovered 21 potential industries/business opportunities other than mining and identified 13 potential revenue streams”
  • Taper Roller Bearings – “$10 Million in retained sales, $200,000 in cost savings, and $20,000 in new product development”

David Linger responded, “The Ohio Manufacturing Extension Partnership, located in Columbus, OH, provides technical services for small and medium-sized manufacturers to drive productivity, growth and global competitiveness; and can ultimately help Ohio’s manufacturers become more profitable and competitive. From October 2015 – September 2016, the Ohio Manufacturing Extension Partnership served 439 Manufacturers resulting in new and retained sales of   $277,900,000, created and retained 2,399 jobs, facilitated cost savings of over $41,700,000, and created new investments of $132,600,000.”

He commented, “An often overseen benefit of the relationship of a MEP and their regional clients is the two-way information exchange. That is, the MEP receives constant Voice Of the Customer information from the regional clients throughout the year. This allows the MEP to proactively develop new solution packages that meet those needs,  needs that are often unique to small and midsized manufacturing firms. This feedback loop drives the MEP to be current with the latest technology or methods and be an ongoing subject matter expert to push this new know-how back out to the manufacturing community. A few great examples of this are the work MEP’s are doing in regards to Cyber Security as it relates to manufacturing, Additive Manufacturing or 3D Printing, Data Analytics, and System Integration (Industrial Internet of Things, IIOT).”

Jim Watson responded, “Last year, CMTC was awarded a five-year agreement to be the California MEP. In 2016 CMTC served 1,065 small and medium-sized manufacturers, creating or retaining 8,575 high paying jobs statewide resulting in $169 million in cost savings, $647 million in total sales, and $305 million in total investment. For every manufacturing job, there are 3-4 full-time jobs created elsewhere in the United States to support manufacturers. Manufacturing is critical to the California economy, employing more than 1.2 million workers at more than 39,000 companies.”

He added, “CMTC’s services provide innovation, growth, technology and operational solutions that foster profitable growth for small manufacturers impacting personal income, tax revenues and the California economy. A study by the LAEDC Institute for Applied Economics indicated that the annual economic contribution from California MEP projects with customers surveyed in 2014 was an estimated $1.8 billion to California’s GDP and more than $450 million in federal, state and local tax revenues. The California MEP program is a valuable partner for manufacturers and generates a significant dividend for the State of California.”

There were four client case studies mentioned in their 2016 end of year report, which I have briefly summarized below:

Amflex Plastics – a woman-owned company making polyolefin co-polymer formulated plastic hoses and spiral hose equipment. Amflex needed help getting prepared to get their ISO 9001:2008 certification to retain current business and get new customers. After CMTC coaching, they passed their audit and got their certification, resulting in $675,000 in projected increased sales, $300,000 in retained sales, three new jobs, 10 jobs retained, and $209,000 in cost savings.

Summertree Interiors is a minority owned business that builds finely crafted baby and children’s furniture. The company needed help reducing lead times and improving on-time delivery. CMTC provided them with Lean manufacturing training, which resulted in:

  • $400,000 in increased sales
  • 1,000,000 in retained sales
  • 6 jobs created
  • 12 jobs retained
  • $250,000 in cost savings
  • $115,000 in capital investments

Space Systems Loral is a manufacturer of communications satellites and satellite systems. Because former customers are now making their own satellites, “SSL needed programs to reduce costs and lead times as well as provide an in-house team to lead and implement their continuous improvement philosophy. CMTC provided Yellow Belt Lean training and a “Train the Trainer” program, which resulted in $7,500,000 in retained sales, 17 jobs retained, $1,861,000 of cost savings, and $500,000 in capital investment.

OHIO Design is a builder of custom, made-to-order, modern furniture and interiors. The company needed help with their manufacturing processes, finding qualified workers, and access to capital. CEO coaching helped OHIO to understand and implement business metrics a cost structure to track their manufacturing expenses, and a continuous improvement program to focus on solutions to fix problems. As a result, they experienced $500,000 in increased sales, retained 7 jobs, achieved $150,000 in cost savings, and made $55,999 in capital investment.

One of the companies I represent as a manufacturers’ sales rep has been a repeat client of CMTC. President Steve Cozzetto of Century Rubber Company wrote me, “As the business climate has become more demanding, CMTC has been instrumental in providing the training that we need to remain competitive. In the past 10 years, we have used their resources and expertise to develop our Lean Manufacturing procedures, to upgrade our marketing methods, and most recently to take our quality program from ISO: 9001 and prepare us for our AS9100D certification which should occur this year. As a small company, the variety of programs offered by CMTC makes it possible to accomplish goals that would otherwise be difficult to achieve.”

These success stories illustrate why the nationwide Manufacturing Extension Partnership network is essential to the growth of the United States economy. When the President submits his budget, it is the first step in the long process that results in a federal budget. No President’s budget ever gets approved without substantial amendment by Congress, and Congress has the final say on governmental spending. To support the MEP program, you should contact your Congressional Representative to urge them to keep funding for the MEP program in the federal budget.

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