Posts Tagged ‘American manufacturing’

ITIF Report Assesses Competitiveness of North American States

Tuesday, July 5th, 2022

On June 21, 2022, the Information Technology & Innovation Foundation conducted a webinar entitled, “Assessing the Competitiveness of North America: The North American Subnational Innovation Competitiveness Index,” based on a report by Luke Dascoli and Stephen Ezel of ITIF, and prepared in collaboration with the Macdonald-Laurier Institute, Fundación IDEA, and the Bay Area Economic Council Institute.

I was unable to attend the webinar, but later read the 49-page report with the goal of identifying examples of the vision of Industry Reimagined 2030 to convert the narrative of American manufacturing from one of “inevitable decline” to “vibrant opportunities.”

The purpose of the report was “to identify economic differences among states and provinces and highlight regions needing more federal attention, identify cross-national innovation performance, and track the continent’s overall competitiveness in the innovation-driven global economy.”

A vibrant opportunity was identified in the first paragraph of the Overview: “North America—Canada, Mexico, and the United States—represents one of the world’s most economically vibrant regions, accounting for 28 percent of global economic output. The region also forms one of the world’s largest free trade zones, with deeply integrated supply chains…the three nations form a high-wage/low-wage partnership, bringing complementary labor forces, infrastructure, innovation capacities, and industry strengths together to create a highly competitive economic region. This relationship is poised to make North American manufacturing value chains globally cost competitive with Asian ones and thus make North America a leading global innovation and manufacturing powerhouse.”

“This report assesses how prepared North American states are to compete in today’s increasingly innovation-driven economy. The North American Subnational Innovation Competitiveness Index (NASICI) uses 13 measures across 3 categories to quantify the extent to which each state’s economy is knowledge based, globalized, and innovation ready and form composite scores (between 0 to 100) that identify each state’s level of performance in the innovation economy.”

Knowledge Economy

•Immigration of knowledge workers – number of highly educated foreign-born residents as a share of total state population
•Workforce Education – total workforce finishing postsecondary education (including universities, trade schools, and colleges)
•Professional, scientific, tech – total employment enrolled in professional, scientific,
and technical activities

•Manufacturing Gross Value Added per worker – measures the average GVA per manufacturing worker

Globalization

•Inward foreign direct investment – flow of funds into a state from foreign-based enterprises to purchase that state’s existing facilities or to develop new ones
•High tech exports – (NAICS 333, 334, & 335) as a Share of GDP

Innovation Capacity

•R & D Intensity – Total R&D Investment Relative to GDP
•R & D Personnel – as a Share of Total State Employment
•Patents (per capita) – PCT Patents Issued per Million Persons
•Venture Capital Investment – shows a state’s total VC investment (based on VC-receiving firms located therein) relative to the size of its GDP.
•Broadband telecommunications – Share of all Households Subscribing to Broadband Internet

•Decarbonization (CO2 emissions) – Tons of CO 2 Emissions per Capita

The Composite NASICI scores for the top ten states/provinces are:

RankingState/ProvinceCountryNASICI SCORE
1MassachusettsUnited States91.5
2CaliforniaUnited States83.9
3OntarioCanada75.2
4MarylandUnited States75.0
5WashingtonUnited States74.2
6British ColumbiaCanada70.4
7New JerseyUnited States70.2
8New MexicoUnited States68.3
9QuebecCanada68.1
10OregonUnited States66.0


Notice that Canada has three provinces in the top ten, but Alberta was the only other Canadian province to rank in the top 30. Arkansas, Mississippi, and South Dakota came in last for U. S. states, with South Dakota at number 60.  The ranking of Mexico’s states was “concentrated at the low-scoring end of the subnational index (61–92).”

The report commented that “Massachusetts ranks first due to the state’s massive network of software, hardware, and biotech firms in the Greater Boston area. Boston also holds one of the country’s most densely populated clusters of top-performing research universities, many of which focus on science, technology, engineering, and mathematics (STEM) education. California places second due to its bustling tech economy of Silicon Valley and other southern Californian innovation hubs with access to leading research universities such as Stanford, Caltech, and the University of California, San Diego. Maryland earns its spot due to the state’s abundance of D.C.-commuting knowledge workers employed in scientific, technical, and professional activities, alongside its R&D and innovation activities attributable to a plethora of federal contracts. Washington state ranks fifth because of its high-tech exports, cutting-edge tech businesses bringing in foreign investment, patent generation in areas such as artificial intelligence (AI) and cloud computing, and digitalization of the service sector.”

The report goes into some detail regarding the rankings in the 13 subcategories which are too complex for this article to cover. With regard to high tech exports, it discusses the successful cross-border region of the Pacific Northwest states of Oregon and Washington with the Canadian province of British Columbia, as well as the cross-border regions of California, Arizona, and Texas with the Mexican states of Chihuahua, Baja California, and Tamaulipas…These Mexican “states include the major manufacturing cities of Ciudad Juarez, Tijuana, and Matamoros, which together comprise most of Mexico’s
“maquiladora” manufacturing plants.”

The report makes the following policy recommendations for the United States:

Expand the R&D Tax Credit to Be Competitive with Canada – Canada’s “overall federal subsidy rate of 19.1 percent on business R&D investment” is “above the 16.6 percent median among 34 developed countries observed” and considerably higher than the U.S. “sub-median federal-state subsidy rate of 9.5 percent.”

Build Globally Competitive North American Supply Chains – This recommendation advocates the partnering of companies in the U.S. and Canada with the low-wage states of Mexico to “nearshore their production of innovative goods and the low-tech complementary manufacturing of products in high-tech industries into Mexico….This collaboration of complementary labor forces would help North American supply chains perform as a region that’s globally competitive with the supply chains of Asian low-cost competitors.”

Promote Industry-University Partnerships – “Firms on the cutting edge of new research can benefit from tapping the skills of the next generation of scientists and engineers early on by collaborating with neighboring universities via internships, fellowships, and other resource sharing with academic institutions. As federal funding for intramural research in states/provinces lags behind, industry investment in university research is increasingly important.”

Expand Collaborative Research Between U.S. and Canadian Leaders – “Firms engaging in international research collaboration tend to generate more valuable research than firms not collaborating in research or only collaborating among domestic firms do… Firms of U.S. and Canadian states/provinces should thus pursue greater research collaboration and co-patenting, given the proven benefits in international research collaboration and diversifying with new research partners. Doing so would help expand the network of shared research knowledge to drive more frequent and impactful innovations for both U.S. and Canadian states.”

Fully Embrace USMCA’s Commitments to Create a Free-Flowing North American   Digital Economy – The USMCA provided stronger rules for digital services across industries such as finance, e-
commerce, and software, for cross-border data transfers. The United States, Canada, and Mexico must “utilize the full economic value of data and remain competitive in the global digital economy.”

Expand National Place-Based Development Projects – The report recommends thatnational and regional policymakers should use the NASICI rankings to identify regions or states that are lagging behind in economic development.  The authors note that the efforts of the U. S. Economic Development Agency and regional commissions have “fallen off” and that the EDA’s budget had been reduced over time.  “Federal investment to build up economic attractiveness for underperforming states can improve their competitive edge and reduce economic hardships for the populations of those states.”

Improve Economic Indicator Data Availability Among North American States – “…the NASICI, ITIF and its Canadian and Mexican partners were only able to identify 13 indicators for which data was uniformly and readily available across North America’s 92 subnational regions. Statisticians from Canada, Mexico, and the United States should collaborate to make more such indicators available.”

In conclusion, the report states: “Today’s 21st-century economy has different success markers than the post-war economy experienced in the latter half of the 20th century. There are many more global competitors in the space of advanced technology production, R&D, and digital services.”  For the United States, “NASICI scores are helpful to bring to light regions needing more federal attention to support innovation competitiveness.”

Th9is report confirms that the narrative of the “inevitable decline” of American manufacturing of American manufacturing is no longer true and “vibrant opportunities” already exist.  These “vibrant opportunities” need to be expanded to be achieve the goal of fostering 50,000 more world-class companies and creating five million more manufacturing jobs by 2030.

The Manufacturing Institute Grows FAME’s Technical Training Program

Tuesday, June 21st, 2022

In late 2019, I interviewed Dennis Dio Parker for an article published in early 2020. At that time, Dennis headed up the Federation for Advanced Manufacturing Education (FAME), founded by Toyota as an outgrowth of training that provided for employees when they built their new manufacturing plant for vehicles in Georgetown, KY in 1987. 

I recently reconnected with Dennis and found out the transfer of the program to The Manufacturing Institute had been completed after our interview. He said, “FAME was moved under the leadership of The Manufacturing Institute to gain the infrastructure and network needed to support and grow the program, but Toyota still participates in FAME and uses the Advanced Manufacturing Technician program (AMT) program in its eight manufacturing locations.”

Dennis connected me with Tony Davis, who is now the National Director for FAME USA for The Manufacturing Institute. When I spoke with Tony, he said, “The Manufacturing Institute is the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. The MI grows and supports the manufacturing industry’s skilled workers for the advancement of modern manufacturing. The MI does this through diverse initiatives including FAME. The MI is a separate legal entity from the NAM and is a 501(c)(3) public charity.”

The new website states, “FAME provides global-best workforce development through strong technical training, integration of manufacturing core competencies, intensive professional practices and hands-on experience to build the future of the modern manufacturing industry.”

Tony said, “FAME currently has 37 chapters in the following 13 states:

Tony explained that the chapters denote a collaboration of employers with an Economic Development Corporation or a Chamber of Commerce with a community college or university.  He said, “the Advanced Manufacturing Technician (AMT) program administered under the FAME model leverages a work/learn framework to weave technical knowledge, professional behaviors, and distinct manufacturing core exercises into a focused co-op experience to build global-best, entry-level, multiskilled technicians.”

He said, “FAME is the premier advanced manufacturing workforce education and development program, helping students become highly skilled, globally competitive, well-rounded and sought-after talent that can meet the unique needs and challenges of today’s modern manufacturing workforce.”

I asked what are the requirements for students, and he said “Candidates for FAME should be career-oriented, academically prepared students seeking rewarding work.  All participants must be high school graduates who are ready to participate in a highly regimented, hands-on programs and are aiming to advance quickly in their career. The program consists of five semesters after which the graduates have a debt-free degree as an Advanced Manufacturing technician.  Every year, FAME graduates transition into well-paying, diverse career pathways in critical disciplines across the manufacturing industry and across the country.”

I told Tony that I have written about how important I believe Lean training is critical to rebuilding American manufacturing and is important to enable American companies to become more competitive in the global marketplace.  I asked Tony if the AMT curriculum incorporates Lean training, and if so, how  does it do it?

Tony answered, “There are five core topics in the five-semester curriculum and each core topic incorporates core aspects of Lean:

  1. Safety culture
  2. Visual Management and 5S (housekeeping)
  3. Lean principles and practices
  4. 8-step problem solving
  5. machine reliability

He added, “In the first semester, students make a personal safety commitment that they must always include when giving their personal introduction.  This is part of the learn and live it model of the program. The program uses a mix of lectures, college-level activities, employer activities, and real, added value solutions in project-based exercises. The program also ties in professional behaviors, such as timeliness, dress code, grooming, posture, and working as a team.”

I mentioned that I had noticed the FAME Live event that was held May 24-25 in Louisville, KY. He said, “This was the first live event since 2018.  It is a day-long learning event in which attendees meet and hear from students, instructors, and graduates, as well as employers and community partners to understand how each stakeholder plays a part in making these programs successful. The day allows interested stakeholders to leave with a strong understanding of the model and with solid action items to help them implement this solution to meet the growing demand for skilled workers.”

I asked Tony if FAME is still partnering with Project Lead the Way (PLTW) that I had mentioned in my previous article.  He replied, “We know the vital importance of a pipeline of preparation into programs like FAME AMT, and continue to encourage local partnerships between chapters and programs in their respective schools systems, programs like Project Lead the Way and FIRST Robotics. Industry tours through broad support of initiatives like MFG Day make a huge difference, too, in the awareness of local students relative to opportunities in manufacturing near them.

And of course, we are always exploring new ways to better attract and engage more diverse audiences into manufacturing, whether into programs like FAME AMT or into other manufacturing roles such engineering, technology, management, etc. The MI continues to be a thought leader around DEI in manufacturing and we carry this effort into our chapter training and communications.”

At the end of my interview, Tony said, “We are always looking for industry partners to help expand manufacturing education opportunities to talent across the country. If you are an employer, business leader, city official or industry association interested in learning about the FAME model, joining a FAME chapter, or starting a new FAME chapter, contact our team at FAME@nam.org or schedule an informational session.

I thanked Tony for the information he shared with me and told him that the kind of training FAME provides is crucial to achieving one of the goals of Industry Reimagined 2030; that is, adding 5 million to the manufacturing-related, middle-income workforce by 2030 (a 40% increase.) I told him that I hoped FAME will expand to more states in the West in the near future.

How to Have a Secure Supply Chain

Tuesday, May 10th, 2022

For more than the first 150 years of its history, the United States was a protectionist country in order to protect its fledgling manufacturing industries and then gain preeminence as an industrial nation in the 20th century.  We had secure supply chain until after WWII because we imported very little and were pretty much self-sufficient for consumer goods as well as good for our national defense.

After World War II, the U.S. switched from protectionism to free trade in order to rebuild the economies of Europe and Japan through the Marshall Plan and bind the economies of the non-Communist world to the United States for geopolitical reasons.

To accomplish these objectives, the General Agreement on Tariffs and Trade (GATT) was negotiated during the UN Conference on Trade and Employment. Originally signed by 23 countries at Geneva in 1947, GATT became the most effective instrument in the massive expansion of world trade in the second half of the 20th century.

GATT’s most important principle was trade without discrimination, in which member nations opened their markets equally to one another. Once a country and one of its trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members. GATT also established uniform customs regulations and sought to eliminate import quotas.

Unfortunately, our government leaders didn’t pay attention to the effect this was having on American businesses, and we started having a trade deficit in 1980 because of greater imports from Japan, Germany, South Korea, Taiwan, and the Philippines. 

When NAFTA went into effect in 1994, it started the trend of moving manufacturing outside the U.S.  When the World Trade Organization was formed in 1995, tariffs were reduced between all member countries.  However, after President Clinton granted China Most Favored Nation status in the year 2000 and China was allowed to become a member of the WTO, the great exodus to setting up manufacturing in China began, and the trade deficit sky rocketed. According to Alan Uke’s book, Buying Back America, the United States has a trade deficit with 88 countries—some deficits are small, but some are enormous, such as China. 

As a result, over 70,000 manufacturing sites closed in the past 25 years, and at the low point in 2010, we had lost 5.8 million lost middle-income manufacturing jobs.

Globalization of U.S. Supply Chains Failed

When the COVID pandemic hit, it sent shock waves throughout the world of manufacturing. Too late, we realized that we had become 70 to 95% import dependent, primarily on China.  It was impossible to scale up our domestic supply chain fast enough for PPE goods and pharmaceuticals.  

In an article,It’s About Time to Build Regional Supply Chains,” on March 30, 2022 on Industry Week, Christopher S. Tang wrote, “I do believe most global supply chains are going to end. They had a good run over the last few decades, enabling Western companies to grow profitably and helping developing countries alleviate poverty. But concurrent and unprecedented events have blown apart their cost efficiency…Decades of outsourcing and offshoring have hollowed out the U.S. manufacturing sector. Building domestic supply chains in the U.S. can be time-consuming and cost-ineffective…Small and medium-sized manufacturers are facing the reality that there will inevitably be more disruptions in the future and they must prepare themselves now by strategically evaluating and mitigating their supply chain risks.”

This crisis could have been prevented if more American Manufacturers had utilized Total Cost of Ownership Estimator™ that Harry Moser made available for free in 2010 when he founded the Reshoring Initiative. Mr. Moser’s TCO Estimator has been the right tool to facilitate returning manufacturing to America. It actually includes calculations for the “hidden costs of doing business offshore,” such as Intellectual Property risk, political instability risk, effect on innovation, product liability risk, annual wage inflation, and currency appreciation.

In my experience as a sales rep, most companies only consider the quoted piece price or landed cost, at best. Because of inaccurate data, many companies make the decision to offshore on the basis of faulty assumptions. Some faulty assumptions are:  Overseas laws will protect IP, longer lead times won’t affect costs much, travel costs won’t be significant, communication won’t be a problem, and quality will be just as good as USA. The reality is that many companies are saving less than they expected, and in some cases, the hidden costs exceed the anticipated cost savings.

We need to change the main considerations for selecting suppliers from one based on the lowest price to other considerations, such as

  • Location
  • Transportation alternatives
  • Inventory costs and control
  • Quality controls
  • Reserve capacity of supplier
  • Responsiveness of supplier
  • Technological depth of supplier

Choosing the right location is the most critical choice. The choices are: Made in USA, “Offshoring” to China or another location in Asia, or nearsourcing to Mexico or Canada. The location of your customers influences the choice of manufacturing location.  Here are some variables to consider:

  • Where are your customers? USA, Asia, Europe, Latin America
  • How high is your labor content?
  • Is your annual production volume forecast low, medium, or high?
  • Do you have low vs. high product mix?
  • What certifications are required?  Example:  FDA, U/L, Mil Spec, ISO 9100, AS9100, etc.  

There are current manufacturing trends that are also influencing supplier choice.  Some of these are:

  • Wages rising in China
  • Increased “Made in USA” demand by government agencies and American consumers
  • Additive Manufacturing
  • Use of Industry 4.0 by suppliers (Automation, Robotics, Industrial Internet of Things (IIOT)

Some of the advantages of sourcing in the USA are:

  • No Intellectual Property infringement
  • Ease of communication
  • Flexible delivery by means of reliable transportation
  • Smoother design changes
  • Lower cost of inventory
  • Higher quality parts
  • Lower travel expenses
  • Favorable Purchase Order and Credit Terms

In today’s manufacturing supply chain, Reshoring helps companies have:

  • Faster lead times: 49-50% reduction
  • Delivery accuracy: 30-40% improved
  • Ability to respond swiftly to unforeseen disruptions
  • Handle volatile demand as closer proximity to customers drives agility 
  • Increased competitiveness
  • Better serving local markets while maintaining low costs

I strongly believe that if more companies would learn to understand and utilize the Reshoring Initiative’s TCO estimator (free at www.reshorenow.org), they would realize that the best value for their company is to source their parts, assemblies, and products in America.

America is at a crossroads. We can either continue down the path of increasing trade deficits, increasing national debt, and loss of manufacturing jobs by allowing anything mined, manufactured, grown, or serviced to be outsourced to countries with predatory trade policies.  Or, we can forge a new path by developing and implementing a national strategy to win the international competition for good jobs, sustained economic growth, and create a strong, secure domestic supply chain.

Doing this will help us achieve the vision of Industry Reimagined 2030 to change the national narrative of American manufacturing from a prevailing worldview of “inevitable decline” to one of “vibrant opportunity.”

If enough manufacturing is “reshored” from China, we would drastically reduce our national average annual trade deficit of more than $700 billion.  By 2030, we could also add five million middle-income manufacturing workers to the American workforce. 

Imperial Capital Conference Highlights Vibrant Opportunity for Advanced Manufacturing Sector

Tuesday, April 26th, 2022

The non-profit Industry Reimagined 2030 was pleased to speak at the second annual Imperial Capital Advanced Manufacturing & Supply Chain Conference, held on April 13-14 in Santa Monica, CA and sponsored by Moss Adams, The Association for Manufacturing Technology, Smart Room, and Marsh.

On April 14th, presentations during breakfast were given by Kevin Frisch, Managing Director and Head of Industrial Investment Banking, Imperial Capital, Brian Ruttenbur, Institutional Research Managing Director, Imperial Capital, and Guy Knuf, Partner, Moss Adams.

Mr. Frisch explained that Imperial Capital, LLC is a full-service investment bank offering a uniquely integrated platform of comprehensive services to middle market companies and institutional investor. He said,” We have approximately 150 employees worldwide, across 10 offices throughout the United States and Europe. Our comprehensive and integrated service platform, expertise across the global capital structure, and deep industry sector knowledge enable us to provide clients with research driven ideas, superior advisory services, and trade execution. We have a dedicated focus in Advanced Manufacturing, including additive manufacturing, robotics, automation, laser components, specialty metals, specialty chemicals, semi-conductor equipment, optics/photonics, industrial software, and subtractive manufacturing.”

He provided a brief overview of the $26.3 trillion global Advanced Manufacturing market.

The trending Industry Segments

  • Specialty Materials – new light-weight materials, nanotechnology and carbon fibers and new applications are reducing waste and increasing efficiency
  • Aerospace & Defense – Light-weighting demand for planes, rockets, spacecraft will continue to drive demand for superior materials, AM production and other break-throughs
  • Medical – This industry drives demand for superior material advances and new technologies like AM, advanced laser manufacturing as well as design software etc.
  • Optics & Photonics – This industry cuts across the Advanced Manufacturing landscape
  • MR&O demand
  • Increased Reshoring/near shoring in all sectors

Trending Manufacturing Processes

  • Faster product development and shorter product life
  • Internet of Things – data acquisition and AI-enabled features
  • Digital Factory – data integration and overall productivity increasing
  • Reshoring/next shoring
  • Mass customization in production
  • Faster product development and shorter product life
  • New technologies – 3D printing, software, robotics
  • Light-weighting material demand
  • Internet of Things
  • Reshoring/next shoring
  • New Materials – nanotechnology, carbon fibers, powders
  • Mass customization in production
  • MR&O demand

Sector Valuation and Vibrancy

Deal volume for capital markets and M&A activity hit a record high at the end of 2021, the dramatic increase in deal flow was driven by optimistic executives, cheap financing and a stock market rebound from the 2020 COVID-19 pandemic. “U.S. Private Equity deal making is expected to continue at high levels. Mega-funds are predicted to raise $250 billion in 2022, including some of the largest ever buyout funds.”

Brian Ruttenbur, Managing Director of the Institutional Research Group of Imperial Capital covered macro trends in Advanced Manufacturing that influence their security and industrial research coverage.

Demand for manufactured products is up across most end-markets and private and public valuations have remained solid. The challenge to meet demand is inflation and material price increases, a tight and expensive labor market, and overall supply chain disruption. Industry is adapting through:

  • Automation to alleviate labor shortage issues
  • Niche players filling gaps
  • Rethinking Onshoring or Nearshoring driven by advanced manufacturing technologies, logistics complexity and national health and security sourcing.
  • On-time delivery and just-in-case supply chain resilience are commanding a premium

Guy Knuf, Partner, Transaction Services, Moss Adams was the third speaker covering “The Modern Quality of Earnings (QoE).  He said the “drivers of change are:

  • More intense buy-side process
  • Increased multiples
  • Drive for efficiency
  • RWI [Reps and Warrants Insurance]
  • Credibility”

The benefits of working with a QoE provider are: “maximize value, mitigate surprises, speed (more efficient & effective), prepare management team for buy-side diligence, and credibility.”

After breakfast, the period from 9:00 – 11:50 was divided into Sector Focused Panel Discussions. The presenters in advanced manufacturing technology were:

3DEO Inc. – one of the highest volume metal 3D printing companies in the world

ADDMAN Engineering LLC – metal and polymer 3D printed parts, precision machining to make parts for aerospace and defense, space, medical, and automotive, including niobium parts for hypersonics

Humtown Products – manufacturer of conventional and 3D printed sand cores and molds for the foundry industry

Optomec, Inc. – offers a full range of Additive Manufacturing systems, including their patented Aerosol Jet Systems for printed electronics

Clinkenbeard – specialized expertise in engineering, advanced machining, fabrication and foundry tooling capabilities come together to form a unique mix of services to serve Aerospace, Defense, Heavy Truck, Power Gen and Automotive applications

HB Aerospace Holdings, LLC – provides high quality, specialized aerospace products and value-added services that includes hardware, shims, spacers, handles, brackets, and rubber products such as grommets, seals and gaskets

Tribus Aerospace Corporation – provides precision machining of complex components and assemblies primarily, but not exclusively, for “Power, Propel, Control” applications for turbine engines, auxiliary power units, motion control and flow control

Valence Surface Technologies – provides a comprehensive set of metal processing capabilities and approvals for high-value, mission-critical parts, including NDT, sot peen and blast, chemical processing, plating, painting, and spray coatings

FormAlloy Technologies, Inc. – provides 3D metal additive manufacturing using the Directed Energy Deposition process for making parts, repairing parts, and cladding existing parts

Optomec, Inc. – provides a full range of Additive Manufacturing systems, including their patented Aerosol Jet Systems for printed electronics

pureLiFi – LiFi is high speed bi-directional and fully networked light communications and pureLiFi is the world leader in Light Fidelity (LiFi) innovation

Syntec Optics – offers injection molding, diamond turning, precision machining, optical assembly and coating services for optics and photonics

I was especially delighted to be reunited with Melanie Lang, CEO of FormAlloy as I had the pleasure of being one of her company’s mentors in the CONNECT Springboard program for startup companies in 2017.  I was very proud to hear of the progress the company had made, going from a startup with only two customers in 2017 to doing over $4 million in sales last year.

Tim Shinbara Jr, Vice President & Chief Technology Officer, The Association for Manufacturing Technology, delivered the lunch keynote on “The State of U.S Manufacturing –A Macro Analysis.” He reported that manufacturing technology orders were the highest in two decades for first two months of 2022. The key market trends are higher automation, increased reshoring, and Made in America supply chain focus. The industry segments for 2022 growth are: motor vehicles, agriculture implements, metal valves, and medical equipment and supplies. AMT is predicting increasing demand for commercial aerospace and decreasing demand for defense aerospace. Deliveries are improving with suppliers at 70% capacity.

The afternoon sessions were devoted to single company presentations in two tracks. Each presentation was 25 minutes long, starting at 1:15 PM and ending at 4:15 PM

I gave my own presentation on Industry Reimagined 2030: transforming the prevailing worldview of American manufacturing from ‘inevitable decline’ to one of ‘vibrant opportunity’ brought the theme of the conference home.  The U.S. has a window of opportunity to recognize the importance of manufacturing and to revitalize our investment in plant, equipment and workforce. The common thread of all companies participating in the panels and individual company presentations was one of vibrant opportunity. We can feasibly imagine having 50,000 world class manufacturers by 2030 if the adoption of these trends and technologies crosses the chasm from early adopters to the mainstream of manufacturers.

Manufacturing Renaissance: Recommendations to Bolster National Security & Economic Prosperity 

Tuesday, April 5th, 2022

In November 2021, the Ronald Reagan Institute released a Report of the Task Force on National Security and U.S. Manufacturing Competitiveness titled “A Manufacturing Renaissance: Bolstering U.S. Production for National Security and Economic Prosperity.”

I came across this article last week, having missed it when it was released because many reports similar to this are ignored by the mainstream news outlets focused on the daily news and don’t reach the large national audience they deserve.

The Task Force was co-chaired by Ms. Marillyn Hewson, Former Chairman, President, & CEO, Lockheed Martin Corporation and Dr. David McCormick, CEO, Bridgewater Associates, and former Undersecretary for International Affairs, U.S. Department of Treasury. The Task Force members represented a cross section of business, government, and elected representatives.

I recently joined the board of the non-profit Industry Reimagined 2030, which is transforming the myriad of well-intentioned efforts to revitalize U.S. manufacturing into coherent, aligned action. Our strategic aim is to shift the implicit national narrative from manufacturing in ‘inevitable decline’ to one of ‘vibrant opportunity.’

What the Manufacturing Renaissance report has to say about ‘inevitable decline.’

In the Introduction, the Task Force “considered the causes and implications of the continued erosion of American industrial and manufacturing capabilities in sectors critical to national security, such as defense equipment, semiconductors, telecom supplies, and pharmaceuticals.”  They acknowledge that the U. S. is at a “dangerous status quo” and as a result, “at the highest ranks of the U.S. federal government, consensus is emerging that the continued degradation of America’s industrial base is creating domestic vulnerabilities and weakening our ability to compete.” 

As I have pointed out in previous articles, the Task Force admitted that “As America moves slowly, China is accelerating ahead. In 2019, China led the world in global manufacturing output at a level 12 percent higher than the United States.” In addition, “China’s push for self-reliance starkly contrasts with America’s increasing dependence on imports…”

To usher in a new era, it is essential that we wake up to the consequences of this prevailing worldview. I participate on the Buy American committee for the Coalition for a Prosperous America, and the members of Congress who have spoken at our virtual committee meetings recently have emphasized the realization that we have become too dependent on imports from China and other nations and urgently need to rebuild the supply chain of American manufacturing to produce critical products in the U.S.

The Executive Summary emphasized the following key points:

  • “The COVID-19 pandemic underscored manufacturing’s essential role in ensuring our national health, safety, security, and economic vitality. It also revealed how vulnerable the global supply chains are to shocks and disruptions.”
  • “Chinese leadership is leveraging state industrial and technological planning to achieve global economic and military power. In doing so, it has made substantial progress in achieving its stated goals of supplanting America as the world’s foremost economy and recasting the rules-based international system.”

What the Manufacturing Renaissance report has to say about ‘vibrant opportunity.’

The Task Force commented that “The daunting challenge before America also brings with it an opportunity to usher in a new era of productivity and economic growth through new technologies, human capital, managerial innovation, and updated business models.” 

  1. Build unprecedented collaboration at the local level to scale the skilling and placement of workers in high demand, high skill jobs. Let’s encourage U.S.-headquartered manufacturers to fund 500,000 apprenticeships over the next decade.  Let’s write policy allowing employers and high school graduates to use federal education grants for credential programs, apprenticeships, and internships.
  • Modernize the Defense Production Act (DPA) for the 21st Century. There are specific “industries that require the establishment of new, enhanced policy measures to support supplier ecosystems and strengthen government coordination.” They recommend updating the DPA to “enable holistic solutions for critical manufacturing facilities.”
  • Stand up a public-private capability to finance investments in domestic manufacturing sectors critical to national security. It could be done by “a new government-sponsored investment entity like the proposed Industrial Finance Corporation, changes to existing institutions such as the U.S. International Development Finance Corporation, direct bond buying programs, a sovereign fund, or private capital funds focused on the on-shore manufacturing ecosystem.”

The Task Force recommends setting the following goals to use as metrics to measure progress over the coming decade:

  • “Bring 2 million new or retrained workers into strategic manufacturing sectors by 2030”
  • “Improve American productivity growth in critical industries to 3.9 percent, which would represent a return to the historic average for manufacturing growth.”
  • Widely deploy and couple modern technology and management practices
  • “Add 35,000 new small- and medium-sized enterprise (SME) manufacturers in critical subsectors by 2030 to strengthen the core of the American supplier base and replace half of the small business capacity lost since the late 1990s.”

It’s amazing how close three of the above five goals are to the goals our board has established for the new non-profit, Industry Reimagined 2030, that I wrote about in my last blog article. It’s also coincidental that the Task Force also chose 2030 as the date for achieving their goals.

We have two distinct futures … It is up to each of us to make a choice and take a stand

The report states that “America stands at a fork in the road, facing a choice between two distinct futures” — “Mounting National Security Risk and Economic Vulnerability” or a “A Better Way Forward: Strength, Renewal, and Prosperity.” The Task Force “is confident that a renaissance of American manufacturing is possible if policy makers and business leaders make the necessary choices for our economy and our long-term security.”

As I wrote last time, we have a choice of continuing “inevitable decline” or choosing “vibrant opportunity” for American manufacturing. As a country, we have the choice of becoming subservient to China or remaining a free, independent nation. The future of our country rests on which choice we make.

Clarifying Misperceptions about American Manufacturing

Tuesday, March 22nd, 2022

There are several misperceptions about American manufacturing that I will clarify in this article.

The first misperception is Manufacturing is in inevitable decline.

Evidence that this is not true is provided by the latest U.S. Manufacturing Technology Orders Report published by the Association For Manufacturing Technology AMT on March 14, 2022. It states, “Manufacturing technology orders totaled $436.6 million in January 2022…January orders were also the strongest on record since USMTO began tracking orders.

The United States still maintains its second position as the world’s largest manufacturing country by a substantial lead over Japan at third place.

U.S. can’t compete with China

First, rising wages in China are helping U.S. manufacturers be more competitive in the global marketplace.

Second,the Total Cost of Ownership Worksheet calculator developed by Harry Moser’s Reshoring Initiative is helping more and more American manufacturers be competitive domestically so they can reshore manufacturing from overseas back to America. The TCO worksheet is available for free at www.reshorenow.org., According to data provided by the Reshoring Initiative, we regained one million jobs through reshoring and foreign direct investment between 2010 to 2021.

Manufacturing doesn’t pay wages for a middle-class family life

According to the National Association for Manufacturers, “average hourly earnings of production and nonsupervisory workers in manufacturing rose 0.5% from $24.37 in December to $24.48 in January, up from $23.27 in January 2021.” While these wages for production workers may be as low as some retail and service jobs, the wages for skilled workers range from $60,000 to $80,000/year. Salary and supervisory workers in manufacturing “earned $92,832 on average, including pay and benefits.”

The reality is that skilled trade jobs provide an excellent career opportunity for those looking for a stable, high-demand, high-paying job. Workers with the skills needed by manufacturers are in high demand. There were 856,000 manufacturing job openings in December. It was the ninth straight month with openings that have exceeded 800,000, with job postings remaining well above pre-pandemic levels.” The manufacturing industry has forecasted to have 2.1 million unfilled jobs by 2030.

According the 4th quarter 2021 Manufacturer Outlook Survey, “85.2% had unfilled positions within their companies for which they were struggling to find qualified applicants. Companies were addressing the skills shortage by creating or expanding internal training programs (62.7%), utilizing temporary staffing services (50.4%), collaborating with educational institutions on skills certification programs (41.2%) and encouraging possible retirees to stay longer in their roles (39.9%) …”

Manufacturing jobs are boring, dirty, and dangerous

While one picture is worth a thousand words, I can’t include enough pictures in this article to disprove this misperception. I will, however, explain why manufacturing jobs are not as boring, dirty, and dangerous as they previously were.

First, Congress created the Occupational Safety and Health Administration (OSHA) as part of the Department of Labor to ensure safe and healthful working conditions for workers by setting and enforcing standards and by providing training, outreach, education and assistance. “Under the provisions of the Occupational Safety and Health Act of 1970 (OSH Act), employers must provide a workplace free from recognized hazards that are causing, or are likely to cause, death or serious physical harm to employees regardless of the size of business.” OSHA standards cover hazardous chemicals and materials, machine operation, machine guarding, electrical hazards, fall protection, sanitation, indoor air quality, drinking water, ergonomic guidelines, temperature & weather, personal protective equipment, etc.

Second, in the past 20 years, there have been standards established by the International Organization for Standardization (ISO) that cover quality Management, Information Security, Occupational Health and Safety, Medical Devices, among many others. It has become common for companies to be required to get certified that they meet these standards in order to become a vendor or service provider.  Aircraft companies and their supply chain are required to be certified to AS9100, and automobile manufacturers are required to meet TS 16949 standards.

Third, the use of automation, robots, cobots, and sensors are reducing dangerous and physically difficult tasks in manufacturing.  The difference between robots and cobots is that robots are programmed to perform a standalone function and cobots are design to partner with a person to perform a function.

For example, a robot can pick up a slab of hot glass off the production line in making sheet glass and place the sheet in a stack.  Robots have taken over dipping and swirling a sprue loaded with wax parts into the ceramic slurry to make an investment casting. A cobot can rotate a part to allow a person to perform a task, such as assembly of a transmission on an automobile production line. Sensors can detect whether a person’s hand or other body part is in the way of a machine operation and stop the machine.  All stamping machines have such sensors to make sure a person’s hand is out of the way before the punch press stamps out the metal part.

Fourth, processes that would be very boring for a person to do repetitively have been automated.  Some examples are cutting wire to be inserted into a plastic molding part, filling or sealing a plastic bag or bottle, placing labels on bottles, containers, and boxes, as well as placing components on a printed circuit board.   

Although many businesses have labeled these standards as too onerous and expensive, there is no doubt that they have dramatically enhanced the health and safety of American manufacturing workers.

Shifting the Narrative from ‘Inevitable Decline” to ‘Vibrant Opportunity.”

Now that we’ve clarified the common misperceptions about manufacturing, let me introduce you to a vision for the future.  I am now a founding member with Doug Berger of a new non-profit organization, Industry Reimagined 2030. The vision of Industry Reimagined 2030 is to bring about a generational sea-change in U.S. Industry from a prevailing worldview of “inevitable decline” to one of “‘vibrant opportunity.”

Thinking at a national scale is different than thinking at a national level.  Policy is at the national level.  Scaling successful initiatives at a local level to thousands of communities is thinking at a national scale.  In this regard, there are many local successes that I have written about previously that aren’t being scaled.

We are thinking from the future-back for these bold outcomes … standing in the gap to today and asking “What is missing?”  “What needs to happen?”  In this regard, we are advancing the idea of Reimagine Dialogues to engage people to be imaginative first and then develop practical action steps to close the gap.

By 2030 U.S. manufacturing will be revitalized, globally competitive and advancing societal interests.  There will be:

  • 50,000 world-class domestic manufacturers (10x increase)
  • Additional 5 million to the manufacturing-related, middle-income workforce (40%)
  • Environmental footprint to supply U.S. goods reduced by 30%
  • Consumer purchases of US made goods increased by $500 million

It will take unprecedented collaboration between ourselves and other organizations to achieve this vision. If you support the concept of these Reimagine Dialogues, please contact me at michele@savingusmanufacturing.com.

What is the State of America’s Manufacturing Supply Chain?

Tuesday, March 8th, 2022

It is crucial for American companies to make the right decision on where to outsource manufacturing to have a secure supply chain.  Choosing the wrong company or a company in the wrong location as a supplier can mean the difference between success and failure as a company.  Companies need to learn how important it is to carefully consider all of the factors that impact the decision of where to source manufacturing to be able to handle risks and disruptions in the supply chain to maintain operations in the event of natural disasters or unforeseen events such as the COVID-19 pandemic, as well as prepare for the future.

The Association of Manufacturing Excellence (AME) and Lean DNA “conducted market research to explore the specific areas in which manufacturers are looking to digitally invest, the top challenges inhibiting transformation, and the biggest opportunities on the table for 2022 and beyond.”  On February 18, 2022, they released a report titled, “State of Supply Chain in the New Shortage Economy” that presented the results of their research on the supply chain shortages manufacturers have been experiencing as a result of the COVID-19 pandemic.

The research revealed that new market dynamics are making it evident that existing processes are no longer sufficient.  Some of these new dynamics are: 

  • Supply chains have become progressively more complex
  • Manufacturers are dealing with increasingly customized orders from customers
  • Complex sub-assemblies and parts coming from increasingly global suppliers
  • Burdened planning and procurement teams
  • Volatile demand
  • Global materials shortages

The report states that because of the COVID-19 pandemic, “a majority of manufacturers feel increased pressure to digitally transform” [75%] and “more than three-fourths, also recognize the opportunity to improve customer satisfaction and reduce the number of operational issues through digital transformation. They anticipate that digitization, advanced analytics, and predictive intelligence are their best opportunities to achieve that.”

The report explained that digital transformation means:

  • Deploying advanced analytics and predictive intelligence (54.5%)
  • Ditching manual spreadsheets (19.5%)
  • Deploying data analytics and/or Business Intelligence (BI) (10.4%)
  • Automating and integrating supply chain functions (10.4%)
  • Inventing in ERP/IBP planning and scheduling tools (5.2%)

The results of the survey showed “glaring technology and process gaps that need to be addressed

first before the majority of manufacturers can truly adopt advanced and modern digital technologies. Overall, survey participants responded that they were still very early in their digital transformation journeys…” The biggest technology gaps in technology were identified as:

  • Reliance on spreadsheets and manual processes (32.5%)
  • Lack of connectedness between ERP, MRP, and more (19.5%)
  • Visibility into real-time supply and demand shifts (14.5%)
  • Inability to predict future shifts and make proactive decisions to counter issues (13%)
  • Inability to understand which inventory actions have biggest impact (11.5%)
  • Lack of skilled personnel (9%)

Manufacturers experienced the following challenges caused by the COVID-19 pandemic:

  • 86% Supply chain Disruptions
  • 52% Demand Forecasting Difficulties
  • 49% Working Remotely
  • 42% Demand Increases/Part and Inventory Shortages
  • 27% Demand Increases/Excess Inventory
  • 26% Visibility into Inventory and Shortage Data across sites and ERPs

Key findings of the survey were:

  • 65% of manufacturers are increasing visibility into factory inventory levels and requirements because of COVID-19, with an eye towards managing shortages.
  • 95% of manufacturers are investing in factory automation, but most haven’t automated the factory’s critical data and intelligence aspects.

The top hurdles to factory transformation were identified as:

  • lack of expertise (60%)
  • lack of resources (46%)
  • limited budget (43%)
  • ineffective change management (42%).

The survey identified the following top priorities for the manufacturers surveyed:  “Shortages (47%) and improving inventory turnover (43%), yet procurement and supply chain teams

don’t have the information they need to increase factory efficiency.”

The authors recommended that manufacturers “address this problem by having planning and procurement teams, and even suppliers, work together more efficiently…Digital transformation doesn’t mean rebuilding the technology stack from scratch, rather it can mean leveraging data and harnessing insights from existing systems and investments.”

Specifically, they recommended the follow three steps:

Understand – “collating data from ERP, MRP, and MPS systems, manufacturers can gain visibility across their material inventory levels and see the impact across their factory operations processes from planning to purchasing to manufacturing.”

Prioritize – sift through data “to isolate the most impactful insights and actions that will most

affect business results…identify and resolve critical shortages that prevent production from moving forward…identifying SKUs and component parts that have the highest monetary impact helps buyers to prioritize their time.”

Collaborate – Having a single, up-to-date view of materials inventory and demand is key to having

teams work efficiently together…planning and procurement can work in unison to optimize production, improve cash flow, reduce costs, and mitigate risk in delivering on-time. Collaboration is not only necessary internally within manufacturing organizations, but also with suppliers.”

What was missing from this survey was where their suppliers were located – in the U. S. or another country.  The survey would have been a good opportunity to learn how many manufacturers had suppliers in China and/or whether or not manufacturers had reshored manufacturing to the U.S. from China or another country.  We know that there were many more supply chain disruptions occurring from goods being shipped by container ships from China, especially last fall. In fact, the Reshoring Initiative lists long lead times and supply chain disruptions in the top ten reasons for reshoring manufacturing.

It is important to consider the geographical location of suppliers when a company seeks to establish a secure supply chain and mitigate disruptions as conditions change due to unexpected crises such as COVID-19, natural disasters, and transportation bottlenecks. Some of the advantages of prioritizing “Buy American” and “Buy Local” as a guideline in selection of suppliers are:

  • Faster lead times: 49-50% reduction
  • Delivery accuracy: 30-40% improved
  • Smoother Design Changes
  • Lower Cost of Inventory
  • Higher Quality
  • No Intellectual Property Infringement

It is also important to consider the technological depth, reserve capacity, and responsiveness of suppliers. These capabilities are more readily available from American companies. When demand is volatile, the ability of a supplier to either ramp up or slow down production will affect inventory costs and delivery performance to customers.  Since many Chinese companies require high volume orders to meet target prices, this is difficult to obtain from Chinese suppliers.

I highly recommend that American manufacturers carefully consider these factors in selecting suppliers in the future if they want to have a more secure supply chain.   

How Technology & Currency Policy Contribute to ‘Build Back Better’

Tuesday, April 20th, 2021

The panels on the third day (March 25th) of the virtual CPA conference highlighted how the technology industry contributes to national security and the economy as well as how a currency policy would contribute to President Biden’s “Build Back Better” industrial strategy.

Jeff Ferry, CPA Chief Economist, began the day’s program with a brief discussion of the white paper he wrote, “Reclaiming the US Solar Supply Chain from China, He said, “I looked at Section 201 tariffs on solar, which are 30% on solar modules, and we gained 19.8% market share from 2018 – 2019 after the tariffs were imposed. New companies came on line to make solar modules, and prices declined 8% that year as there was sufficient domestic competition.  Sales of solar modules and installations of solar also rose. Solar modules are downstream, but China controls over 90% of the upstream production of ingots and wafers. We only have three US polysilicon sources in Tennessee, Michigan, and Washington.  We need to make ingots and wafers in the U.S.  We proposed a “Made-in -USA solar tax credit” available to US-based solar manufacturers, increased federal investment in solar R & D, and strengthening Buy American policies requiring the federal government to buy only US-made solar equipment and power generated only from US-made solar equipment.

Jeff then introduced Roslyn Layton, PhD, co-founder of China Tech Threat, who participated in a live video from Denmark where she is currently working. Jeff and co-wrote a white paper that was released on March 22nd,  titled “Maintaining U.S. Leadership in Semiconductors and Countering China’s Threats.”

Jeff said that the steep decline in U.S. market share in global semiconductor manufacturing is a risk to U.S economic and national security. The U.S. semiconductor industry is in danger of being surpassed by foreign competitors, especially those in China. The U.S. must maintain leadership in the semiconductor industry.

Roslyn said, “The U. S. share of the semiconductor industry has shrunk to 12%, and U.S. companies are selling equipment to make chips to Chinese companies most of which are government-owned companies or allied with the Chinese military.  The semiconductor equipment and chips are now being used by the Chinese military. The export controls on sales of equipment have loopholes that allow American companies to sell to Chinese companies. Taiwan Semiconductor Manufacturing Corporation (TSMC) and Samsung in South Korea account for over half of global chip foundry production, and their governments offer lots of incentives to companies to make chips in their countries. We need to develop a comprehensive policy to increase chip production in the U.S. We need to be making 50% of the chips we need in the U.S. for our national security and to increase jobs.” The white paper makes key policy recommendations.

Next, Jeff Ferry moderated a panel on how the U.S. technology industry can maximize its contribution to U.S. national security and the economy..  Participants were Mark Widmar, CEO of First Solar, Steve Papa, Founder and CEO of Parallel Wireless, and Roslyn Layton. Mark Widmar said, “I joined First Solar 10 years ago.  It is one of the largest solar companies because it is the only company that produces advanced thin film photovoltaic (PV) module.” Mark said, “We started off with a disruptive technology,” and then briefly described the technology and its advantages over silicon solar panels. He said, “We have a very vertically integrated production system. Our headquarters is in Tempe, AZ, but we do R&D in California and have a production plant in Ohio.

When Jeff asked how the U.S. can compete against China, Mark said, “It’s difficult to compete against the unfair, anti-competitive, predatory pricing of the Chinese. The concern I have is that the U.S. has become the victim of solar at any cost. The solar industry grew over 19% in only 16 months after the tariffs were imposed.

Steve Papa said, “I compete against Huawei, and the problem is the government financing and subsidies they are receiving from the Chinese government.  We can beat Huawei with American innovation, but if we want to beat Huawei, we have to solve the capital problem. American venture capitalists are investing in American companies that have plants in China. We need more innovation capital here in the U.S.”

Mark added, “There is no new capital coming into the solar industry because of the pat history of company failures due to China dumping.  China is trying to stymie any new technology development in the U.S. We are too slow to respond to competition. If we don’t address the root cause, Chinese government subsidies to their solar industry, we won’t succeed in the long-term.” 

After this panel, Michael Stumo, CEO of CPA, moderated a panel on currency policy.  Panel participants were Marty Davis, Cambria USA, Jason Kearns, U.S. International Trade Commission (ITC), and Stephen Vaughn, Partner of King & Spalding (trade lawyer).

Jason Kearns began by saying, “The ITC does three main things: (1) act as judges in trade cases, determine if there is surge in dumping cases and determine if imports are being transshipped, (2) provide reports to the President and Congress (3) change numbers on tariffs.”

He added, “The trade mindset is changing – more assertive approach to handle trade and process more reports and economic studies, but we are not receiving funding for more work. The ITC has a more important role to play. Prior to Trump’s implementation of tariffs, we really had no leverage in handling trade cases.”

Marty Davis said, “Cambria was founded about 20 years ago in the early 2000s. We have invested about $450 million in equipment to make quartz slabs for counter top industries. Then, China started dumping quartz slabs, and by 2016, China had 65% of the marketplace.  China violated our intellectual property. We started exploring trade enforcement with the ITC as China has violated trade law.  Chinese companies are selling slabs below the cost of the material. We filed a case with the Department of Commerce and the ITC.  We had to prove “standing” to be able to file the case, and we were able to do so because we controlled 60% of the market before the Chinese dumping. The resellers protested the case because they wanted cheap products. After winning the case, we got 300-500% tariffs, and we are going to invest $120 million in new plants. We had to spend $5 million to win the case.”

Stephen Vaughn stated, “Free trade was the policy from the end of the cold war in the early 1990s onward.  President Trump changed all this and was willing to take the heat. I worked under U.S. Trade Representative Robert Lighthizer during the Trump Administration. We did what the Administration wanted us to do. We should be asking: Do we want a middle class?  What industries do we want to have?  We need to make policy decisions based on the outcomes we want.”

The outcome I want is a strong domestic manufacturing base that creates higher paying jobs, so more Americans will be able to be in the middle class.  This goal has been the focus of everything I have done for the past 13 years by writing three books, writing hundreds of blog articles, and giving hundreds of presentations wherever I can.  This is why I’ve been a member of the Coalition for Prosperous America since 2011 and have attended six previous in-person trade conferences.

CPA Annual Trade Conference was a Virtual Success

Wednesday, April 7th, 2021

The Coalition for a Prosperous America held its annual trade conference virtually for the first time on March 23 – 26, 2021. I had the pleasure of attending the annual trade conference in person six years in a row when it was held in Washington, D. C., but last year’s conference had to be canceled on short notice because of COVID shutdowns.  This year’s virtual conference was free to all CPA members and the program ran from 11 AM – 4 PM ET each day. The conference was a huge success because of the valuable content of the sessions, lack of technical glitches, and Melissa Tallman’s hard work.

On the first morning, CEO Michael Stumo and Board Chairman Zach Mottl of Atlas Tool welcomed everyone and gave an overview of the conference.  Michael Stumo outlined the following CPA’s priorities for 2021:

  • Promote reshoring of pharmaceutical and health care products
  • Fix overvalued dollar
  • Support customs enforcement vs. lawlessness
  • Create model tariff schedule to increase tariffs across the board  
  • Support decoupling from China
  • Focus on domestic production of energy, oil, gas, and renewables, such as solar
  • Continue Job Quality Index, now licensed to Bloomberg and Yahoo Business
  • Show how job quality affects minorities
  • Support reshoring of semiconductors
  • Support Country of Origin Labeling (COOL) for beef, pork, and online sales

The first session was a panel on Reshoring Healthcare, moderated by Rosemary Gibson, author of China RX.  Panelists were, Eric Edwards, Phlow Pharmaceuticals, Usman Ahmed, Nexus Pharmaceuticals, Jon Toomey, CPA Government Relations Director, and Rep. Vicky Hartzler (R-MO), pre-recorded.

Rep Hartzler said in October 2019, she and Rep. John Garamendi (D-CA) introduced H.R. 4710, the Pharmaceutical Independent Long-Term Readiness Reform Act. “The legislation requires the Department of Defense to identify the vulnerabilities faced by our country’s dependence on Chinese pharmaceuticals, and to only purchase American-made raw materials, medicines, and vaccines for the military.” While the bill wasn’t passed in the last session, they were able to get part of it into the NDAA for 2021.

Eric Edwards said he founded Phlow last year as a public benefit corporation to use advanced manufacturing technology to produce critical and essential drugs using strategic partnerships with Civica Rx, Virginia Commonwealth University’s Medicines for All Institute, and AMPAC Fine Chemicals to make chemical precursor ingredients, active pharmaceutical ingredients (APIs), and finished dosage forms for over a dozen essential medicines to treat hospitalized patients with COVID-19-related illnesses.

He said, “In May 2020, we were awarded federal funding of $354 million for advanced manufacturing of America’s most essential medicines from BARDA, ASPR, and DHHS  [Biomedical Advanced Research and Development Authority (), part of the office of Assistant Secretary for Preparedness and Response (ASPR) at the U.S. Department of Health and Human Services]  We now have 20 employees and will be up to 50 by mid-year, ramping up to 350 by next year when we are in full production.”

Usman Ahmed shared that Nexus was founded in 2003 by his parents in Lincolnshire, Illinois, using contract manufacturers in the United States and Europe difficult-to-manufacture, high-quality specialty and generic drugs. However, when critical drug shortages became apparent at the start of the COVID pandemic, they made plans to build their own manufacturing plant in Pleasant Prairie, WI. When the plant opens soon, they will shift some of the manufacturing in-house to make medications including those used in critical care, cardiac care and the central nervous system.

Rosemary Gibson said that the research for her book revealed that 80% of pharmaceuticals are made in China, so there is a critical need to reshore.  Last October, the FDA published a list of 227 drug and biological product essential medicines, as well as a list of 96 device medical countermeasures.

The next session was “How Can a Currency Policy Contribute to ‘Build Back Better” Industrial Strategy,” moderated by CPA board member Marc Fasteau.  Panelists were, Joe Gagnon, Senior Fellow at Peterson Institute for International Economics, Brian O’Shaungnessy, Chairman of Revere Copper, Jeff Ferry, CPA Economist, and Robert Scott, Senior Economist and Director of Trade and Manufacturing Policy Research at the Economic Policy Institute.

Jeff Ferry stated that the value of the U.S. dollar has gone up by 30% since 2013, and the overvalued dollar depresses our economy and increases our trade deficit. Each one-billion-dollar trade deficit costs 6,000 jobs, so our 2020 deficit of ___ cost four million jobs.  Goss capital inflows in 2020 were $40 billion. The dollar is currently overvalued by 24.6%.  If the dollar was devalued by 6%/year, it would achieve trade balance in four years and add 3.7 million jobs and add 1% to the national GDP.

Brian O’Shaughnessy said that Revere was founded by Paul Revere in 1801 so may be the oldest company in the U.S. The Revere line of cookware was sold off in 1989, so now Revere makes copper sheet, plate and strip for industrial applications.  He said, “all of our principal competitors have gone bankrupt because of overvalued dollar making it difficult to compete in the global marketplace, and foreign competition has prevented investment.”

Joe Gagnon stated that the trade deficits prove that we have an overvalue dollar, and the dollar has been overvalued for a long time.  We need to have a countervailing currency intervention to address the overvalued dollar.  Other countries are buying U.S. currency to build dollar reserves, and the U.S. could buy foreign currencies.  We could also tax foreign purchases of U. S. dollars.

Rob Scott discussed past actions to rebalance currency and said that from 2000 – 2013, foreign government currency manipulation contributed to the problem and from 2014 to the present, private investors buying dollars and other U.S. assets have added to the problem.  He said, “Action is needed now to rebalance the overvalue dollar to create good paying jobs for non-college graduates.  The simplest way is to charge a tax on net purchases of assets” as proposed by the Market Access Charge that CPA has endorsed.

The first day ended with a report by CPA Government Relations Director, Jon Toomey, giving an inside view of what to expect in 2021. Future articles will cover the rest of the conference.

The major sponsors for the conference were:  MFGgear™, The Consilio Group, IT Guidepoint, SK International, and Amodex. Other sponsors were Liberty Tabletop, MadeinAmericaAgain.org, MadeinAmerica.com and my book Rebuild Manufacturing – the key to American Prosperity.

Maketory Grows New Manufacturing Companies in San Diego

Tuesday, March 9th, 2021

It’s exciting to have a new Maker Space in southern California. Maketory is an industrial coworking facility that provides flexible fabrication and manufacturing in a 26,000 sq. ft. building in the Miramar/Mira Mesa area of San Diego, California.  Since opening in December 2019, Maketory has become a hub of creativity and innovation for inventors, innovators, and entrepreneurs as the only Maker Space south of Carlsbad in north San Diego County.

I visited Maketory on February 11th and was given a tour by Manager Shaun Kain.  He said that they offer private office suites, private work studios, on-site storage for materials and supplies, free Wi-Fi and free parking. The ground floor of the facility contains a wood shop, metal shop, welding area, prototype/assembly area, 34 private work studios, and a blacksmith shop outside the back of the building.  The second floor has a small and large conference room, an open space for meetings or training sessions, and private offices.

The wood shop contains the following equipment: a 4’ X 8’ 3-axis router, bandsaw, table, scroll, panel, and chop saws, lathes, drill presses, wide belt sander, disc, spindle and edge sanders, a 20” planer and 12” jointer.

The metal shop has 10’ X 6’ Flow waterjet, MIG and TIG welders, belt and disk grinders, manual lathe, manual and CNC mill, plate roller, shear, and tube bender, cold saw, band saw, and drill press.

The prototyping/ assembly area contains 150- and 80-watt lasers, 3D printers, and workbenches. The blacksmith shop contains 110- and 135-ton pneumatic hammers, 50-ton screw press, as well as forges, anvils and hammers.

I was also able to speak with Carlos Shteremberg, one of the founders of Maketory When I asked for background information to help understand why he established Maketory, he said, “I was born in Mexico City and moved to San Diego in 1998 and got a degree from USD in business and accounting. I worked in manufacturing and became president of Pico Digital, a communication company that provided digital TV to hotels and apartments. We were a partner with Dish Network and had a significant market share. The majority of our manufacturing was in San Diego, as well in Taiwan, Canada, and Mexico. The company was purchased in 2016 by HIG Capital, a private equity firm, but I continued as president for a while.  Then, I looked for something to do next, and we created Maketory, a facility that would be a place for coworking and small-scale manufacturing while serving as a tech and industrial incubator for the San Diego community.” 

He explained, “I learned that opening a new business is always more difficult than you expect and takes more money than you expect.  So, you have to endure some rough times, and some entrepreneurs give up. It’s also hard to transition from working in an established business to starting a new business.  We wanted to create an environment where businesses and individuals can quickly achieve success with minimal investment. Not everyone is a software developer that can work out of a home office or a traditional coworking space. There are a lot of individuals, small businesses, and entrepreneurs that have to do physical things so they need a physical operating space that isn’t cost prohibitive. Also, people don’t want to be alone so a Maker Space creates a social atmosphere.” 

In response to my question about funding to start Maketory, he said, “We are totally self-funded as a for-profit corporation when most Maker Spaces have a non-profit sponsor.  Our lowest membership is $249/month for using all of the shop space.  Private work studios and offices start at $300/month.  We require a commitment of one year for a membership agreement because we want to develop a commitment of respect for our facility and equipment. We have a professional staff of managers and instructors for the classes we provide. At Maketory you to go as fast as you want. We have some of our members that have been able to make products in only a few weeks.”

He added, “Larger existing companies can benefit from using the facilities of Maker Space to develop prototypes for new products because there are many companies that subcontract out manufacturing services and don’t have the in-house equipment to make a prototype.”

I asked if they offered classes on how to use the equipment, and he said, “Yes, our Maketory Academy provides classes for operating every machine, as well as how to design, Lean manufacturing, and robotics. Members have to pay separately for the classes they need, which range from $120 – $350, depending on the topic. We partner with LSSI and CMTC to help some members get help on subsidizing the classes. Our Maketory Academy is an aspect of our business that we see expanding into the future to service the San Diego community, including students, colleges, high schools, veterans, active military. And local entrepreneurs. The Lean training is provided by LSSI, headed up by Luis Socconini.”  I told him that I got my Lean certification from LSSI in 2014.

I asked how they were affected by the COVID pandemic that put another Maker Space, Vocademy, out of business in Riverside.  He said, “We had only been open three months, so it hurt to have to close for a few weeks.  But it gave us time to put the safety protocols required by the state in place before opening back up in May.  We now have about 160 members. Most of our members stuck with us during the shutdown, unless they had to move out of town for a personal reason or job.” 

I told him that I’ve been a board member for the San Diego Inventors Forum and give an annual presentation on how to select the right processes and sources for your new product. I offered to give the presentation in person for his members or record a video that could be watched by his members. He said that sounds like a good idea. 

In conclusion, Maker Spaces are a good idea for any community that wants to accelerate the development of manufacturing businesses in their region. After visiting Maker Spaces in several states, Maketory is one of a very few that have been started by an entrepreneur as a for-profit business. Most Make Spaces have had an economic development agency, chamber of commerce, or community college as their sponsor.  Let’s hope that more successful entrepreneurs will follow the example of Carlos Shteremberg in the future.