Archive for July, 2014

STEM Education Matters to our National Security, Innovation and World Leadership

Tuesday, July 22nd, 2014

Over the last 230 years, the United States became a global leader, in large part, through the genius and hard work of its scientists, engineers and innovators. Today, a little over 4% of the workforce is employed directly in science, engineering, and technology. Yet, this small group of workers is critical to economic innovation and productivity.

Science, technology, engineering, and mathematics (STEM) are widely regarded as critical to be competitive in the global economy. A growing shortage of science-based talent in our workplaces and universities represents a serious problem for our nation. Expanding and developing the STEM workforce is a critical issue for government, industry leaders, and educators. However, comparatively few American students are pursuing educational majors in STEM career paths.

If we want to attract today’s youth to careers in science, engineering, mathematics, and high-tech manufacturing, we need to show them the variety of career opportunities that exist in these industries. We need to change their perceptions about what the manufacturing industry is like and help them realize that manufacturing careers pay 25-50 percent higher than non-manufacturing jobs, so they will choose to be part of modern manufacturing.

As I have written in past articles, we need to reacquaint youth with the process of designing and building products from an early age and provide them with the opportunities to learn in both traditional and non-traditional ways. Experts agree that we need to restore shop classes to our high schools and establish apprenticeship programs to improve the image of manufacturing careers and portray manufacturing careers as fun and exciting.

The SME (formerly Society of Manufacturing Engineers) “Making Manufacturing Cool” program and the National Association of Manufacturers (NAM) “Dream It. Do ItTM” program are helping to expose our youth to the modern manufacturing environment and change the image of manufacturing to one that is “cool” and full of exciting career opportunities.

These new programs are building on the work of the non-profit organization, Project Lead The Way®, which has been working since 1997 to promote STEM curriculum for middle and high school students during the school year, along with the Gateway Academy, which is a one- or two-week day camp for 6th – 8th graders that includes team-building exercises, individual and team projects, and utilizes the latest technology to solve problems.

However, none of the above programs are geared specifically to girls, and it is an even bigger challenge to attract girls and young women to technical careers. Studies have shown that when role models and mentors are provided to girls, they are more likely to follow a similar career path.

Now, there is a new program in development by Invincible Enterprises, ME, Inc., an online and mobile app that provides Role Models, a Game Plan and Mentoring options to encourage teens to create a life of fulfilling rewards by enter thriving careers in STE@M industries. Helping with ME, Inc. are advisors with significant workforce, career development, empowerment, and business expertise. The program incorporates a PLAYBOOK for Teens, created by Cari Lyn Vinci & Carleen MacKay, which is available in print and digital format at Amazon.

In the PLAYBOOK, girls can meet fascinating women in STE@M (the “@” stands for “art”) and follow the “plays” of successful young women to help them create their own “Dream Career.” The PLAYBOOK is dedicated to the smart, talented teenage girls who will become the future business owners and leaders in STE@M industries. It will also provide a tool for organization and corporate partners to use to solve their future talent pool problems.

Permission was granted for me to share the following two role model stories:

Allison Goodman’s story – Allison is a young woman with a talent for stretching her limits. Allison, an electrical and computer engineer at Intel, is a pro at solving new problems by creating new, patentable ideas. She is particularly interested in increasing computer speed to help people connect and share data faster than ever before. To accelerate getting information around the world so it feels instantaneous, Allison creates products that are a combination of writing software programs and electrical components that together try to predict what we want to accomplish with our computer.

Her story began when she started to sort out and prioritize the different things that she found interesting. She tried, but couldn’t find that “one thing” that was most important to her. Allison’s father helped by telling her he would pay for ONE year of school – but only if she studied engineering. Since this was the only deal offered, she accepted it and left home for college.

Allison came to appreciate her father’s wisdom. It helped her become self-reliant. Knowing she had to pay for the balance of college, Allison applied for scholarships and soon discovered that scholarships in engineering were not as difficult to get as she had once thought. While Allison had initially struggled to find the “one thing” she wanted to do, she now realizes that the opportunity to study hands-on engineering opened her eyes to a number of options that she had never considered.

Today, Allison finds challenges and opportunities at Intel. She has been able to change roles every few years and her technical talents have led to positions in project management and customer service. Imagine. Allison has travelled to 22 countries on behalf of Intel, has met interesting and dynamic people, continues to learn about the world, and finds that new opportunities are always around the next corner. Fantastic!

Adrienne Huffman’s story – This story tells the tale of a curious young girl who found that computer engineering and electrical engineering both challenged her curiosity. What to do? She graduated from Florida A&M University with two degrees: a B.S. in Electrical Engineering and a B.S. in Computer Engineering. Then, she topped off her Bachelor’s degrees with an M.S. in Electrical Engineering from Iowa State.

In college, Adrienne was active with the National Society of Black Engineers. They provided encouragement and a venue to develop her leadership skills. Adrienne was inspired by members of Delta Sigma Theta Sorority, an organization she later joined. Adrienne identifies with the motto of Dr. Paulette Walker, the 25th National President of Delta Sigma Theta Sorority, “No one can make you feel inferior without your consent.” Powerful words of inspiration to young women who, in addition to their commitment to academic learning, must develop strong senses of self-worth in order to reach their goals.

Adrienne’s academic interests developed along the way. She, like so many people, began pursuit of a career in computer engineering but found that her interests shifted as she learned. Early influences included her parents who taught her the valuable lessons she lives by today. Notably, they taught her “in order to achieve success, you have to continue to push through hard moments.”

Today, Adrienne is a Hardware Engineer at a Fortune 100 company. Her career has rewarded her with a very comfortable lifestyle even as hard work continues to challenge her. She is very active in community focused, professional organizations, and travels frequently. She takes some time and money for herself and enjoys shopping as a self-directed reward strategy. Many wise people believe that it is this balance of learning, working hard, giving and taking that is the most powerful argument for achieving a life well lived.

At the end of each story, the Playbook Role Models share heart-felt advice for girls to apply to their career path. Then, questions are asked of the reader to help them take the first step to writing their own playbook.

In the “Afterword,” Ms. Vinci and Ms McKay wrote, “Although the young women you read about come from diverse backgrounds and were born with various talents, dreams and personalities, they share several important characteristics. First, they look at life as a year round school. They embrace the role of “student” beyond their formal education. Committed to growth, these ladies are aware and open to the possibilities the world offers. Second, they understand that success is not fast or easy. Failure at the beginning is common and they used early “unsuccessful outcomes” as part of the learning process. They said YES to opportunities and added life experiences to their playbook of skills. Third, these young women took responsibility. They understand, “IT’S UP TO ME TO CREATE THE LIFE I WANT TO LIVE.” Based on a future they dreamed of, they developed the skills necessary to take control and design the lives they want. And, existing resources didn’t determine their success. They succeeded because they believed in themselves. It was their courage, willingness and determination that led them to be exceptional rather than average.”

Utilization of the Playbook for Teens will help teenage girls see that STEM career paths offer enormous opportunities for them to create the life they want to live. Perhaps SME, NAM and Project Lead The Way® would benefit from incorporating the Playbook for Teens into their programs.

Posted in Education, Jobs, Manufacturing, Training | No Comments »

Trade Deficit Would Shrink with Stroke of a Pen

Tuesday, July 15th, 2014

Since NAFTA went into effect in 1994, the U. S. has generated the highest trade deficit in the world and the largest in the world’s recorded history. If you add the annual trade deficit in goods as shown on the Census Bureau website, the total is a staggering figure of -$10.347 trillion.

The United States now has a trade deficit with 88 countries according to data in the book, Buying Back America. Some deficits are small, but some are enormous. Our top six trading partners of Canada, China, Mexico, Japan, Germany, and South Korea represent 64% of our total trade deficit. In 2013, our total trade deficit in goods was $688.4 billion, of which China represented 46% at $318.4 billion. However, our 20-year total trade deficit with China since 1994 is a staggering -$3.287 trillion.

Now, the current Administration wants to cover up the evidence of the damage to our economy by changing the rules of how a manufacturer is defined instead of responding to the American public’s demand to know where products are manufactured so they can have the freedom to choose whether or not to buy “Made in USA” products.

On June 24, 2014, Robert E. Scott, Director of Trade and Manufacturing Policy Research for the Economic Policy Institute, conducted a webinar for the Coalition for a Prosperous America: “The Factoryless Goods Production Controversy (Foreign Goods Production) – How proposed government rule changes would classify foreign goods as U.S.-made.”

He explained that an Economic Policy Classification Committee (ECPC) formed by the Office of Management and Budget is proposing a Factoryless Goods Production (FGP) and Global Value Chain (GVC) rule to artificially inflate manufacturing production and reduce the trade deficit. This change would result in shrinking our trade deficit and growing our manufacturing output with the stroke of a pen, without adding any more real jobs or production.

The ECPC was formed to make recommendations for revising the North American Industrial Classification System (NAICS), created in 1997 as a unified Industrial classification system for the U.S., Mexico and Canada.

Traditionally, all production chain tasks were performed in one factory, in multiple factories of one firm, or by subcontract suppliers to that firm, as is the case for companies like Northrop Grumman that makes Unmanned Aircraft Systems in San Diego.

In the last 20 years, improvements in communications, technology and transportation, as well as global trade agreements and foreign investment in plants haveallowed product design, development, and manufacturing to be performed in different locations, including offshore in China and other Asian countries.

This has enabled a company to control production without directly performing any manufacturing process or transformation task in one of their facilities; e.g. Apple, Nike, AMD, and fabless semiconductor manufacturing. In fact, the top five semiconductor firms in 2013 were fabless companies: Qualcomm, Broadcom, AMD, Mediatek, and Nvidia. These companies focus on innovation, product development, marketing, and sales rather than manufacturing tasks.

There are currently three types of establishment classifications:

Type of Establishment Characteristics  
Integrated Manufacturer (IM)  Performs all the tasks of the production chain
Manufacturing Service Provider (MSP) Performs transformation tasks but does not perform production management tasks (may purchase inputs) 
Factoryless Goods Producer (FGP) Does not perform transformation tasks but performs all production management tasks (may or may not own parts)

These current classifications require the statisticians to choose where to put the FGPs and how to count production. They now have the choice of classifying them as wholesalers, manufacturers, or split based on the location of the transforming company.

Currently, Apple and Nike are classified as wholesalers since they do not perform any manufacturing transformation tasks in the U.S. This accurately reflects the fact that both Apple and Nike have offshored their manufacturing to China.

Under current policy, when a company like Apple ships component parts to China to be assembled in a Chinese factory (e.g. Foxconn) and then sends the product back to the U.S. to be sold here, the value of the imported iPhone minus the value of the exported parts counts as a net U.S. import of manufactured goods.

Under the ECPC proposal, Foxconn, now called a “manufacturing services provider,” would not be described as having manufactured the iPhones but as having provided services to Apple.

An additional concern is that the ECPC proposes to treat some goods exported by foreign factories as U.S. manufactured exports. For example, currently, when Apple ships iPhone parts to China to be assembled by Foxconn and then ships the finished product to another county, Apple’s export of these parts to China counts as the only U.S. export.

But, the ECPC proposed rule would classify the engineering, marketing and profit to Apple as U.S. production. A fully assembled iPhone sale to another country, such as Japan or a European Union country, would count as a “U.S. manufactured goods export,” less the cost of any imported parts.

The justification for this is that while China manufactured and exported the iPhones, they count as U.S. manufactured exports because they were under the control of a U.S. brand. This would create an artificial increase in U.S. manufactured exports and cover up the real U.S. manufacturing trade deficit.

Thus, if a U.S. based company offshores manufacturing work, much of it would be classified as U.S. production. Further, imported products from foreign contract manufacturers hired by a U.S. company will no longer be a “goods import” but rather a “manufacturing services import.” This means that products from Flextronics in Mexico, which makes components in Mexico for U.S. firms that are shipped to the U.S., would no longer be considered a “goods import” but a “services import.”

In addition, the ECPC proposal would result in a miraculous overnight increase in the number of U.S. “manufacturing” jobs. White-collar employees in firms like Apple would be re-branded as “factoryless goods producers” and counted as “manufacturing” workers. The change would also create a false increase in manufacturing wages, as many of the new-to-be-counted “manufacturing” jobs would be designers, programmers and brand managers at “factoryless goods producers” like Apple. As a result, reported manufacturing output would jump, as revenues from firms like Apple would be lumped in with the output of actual U.S. manufacturers.

This proposal would deceptively shrink the size of the reported U.S. manufacturing trade deficit while artificially inflating the number of U.S. manufacturing jobs. It would obscure the erosion of U.S. manufacturing, undermining efforts to improve the trade and economic policies for our country.

This proposal is fraudulent and would distort U.S. trade, labor, and gross domestic product statistics that show the need for a developing a manufacturing strategy in the U.S. The offshoring of U.S. manufacturing under years of bad trade policies should not be undone with a data trick.

The proposal from the Economic Classification Policy Committee (ECPC) to redefine U.S. manufacturing and trade statistics must be stopped. Only manufacturing performed within the U.S. should be considered U.S. goods production. If manufacturing occurs in another country, it simply is not U.S. production.

On May 22, 2014 the Office of Management & Budget solicited comments on these proposed revisions. You also can view the notice for this proposal in the Federal Register. The comment period ends July 21, 2014. You may email your comments today to John.Burns.Murphy@census.gov to keep the “factoryless goods” proposal from becoming a reality. Or, to make taking action even easier, you can click here to customize and submit a pre-drafted comment provided by the Coalition for a Prosperous America.

Posted in Economy, Manufacturing, Outsourcing, Trade | 1 Comment »

Manufacturing Thrives in San Diego’s North County Region

Tuesday, July 8th, 2014

On the morning of July 1st, the San Diego North Economic Development Council (SDNEDC) hosted a North County Manufacturing Executive Roundtable at the City of Vista Civic Center. Over 100 professionals were welcomed by County Supervisor Dave Roberts and Lee Morrison of Bank of America. Bank of America and The Eastridge Group of Staffing Companies sponsored the Roundtable.

In an interview prior to the event, KPBS Morning Edition anchor Deb Welsh spoke to Carl Morgan, CEO of the San Diego North Economic Development Council. Morgan said. “Manufacturing is alive and well in San Diego’s North County.” He said the manufacturing executive roundtable would discuss why companies chose to locate and stay in the region. Ms. Morgan asked him what North County’s six key industry clusters are, and he responded that “the sports and active lifestyle, clean technology, biotechnology and medical and informational technology “are doing very, very well” besides the craft and brew industry.

Reo Carr, executive editor of the San Diego Business Journal, moderated the panel, which also discussed such topics as reshoring of manufacturing, environmental concerns, filling the gap between education and manufacturers’ need for skilled labor, sufficient, accessible transportation, and the economic incentives that are and should be available.

The six panelists were: Clark Crawford, VP Sales and Business Development, Soitec Solar, which manufacturersconcentrated photovoltaic (“CPV”) solar modules; Christine Jensen, special programs coordinator at Mira Costa College, which offers classes in biotechnology, engineering, and machining; Jeffrey McCain, CEO, McCain, Inc, a pioneer of advanced traffic control equipmentas well as a contract manufacturer; Michele Nash-Hoff, President, ElectroFab Sales and Chair, California Chapter of the Coalition for a Prosperous America; Chris Roth, vice president, Lee & Associates, the Nation’s largest broker owned commercial real estate services firm.; and Martin Wood, CEO, Delkin Devices, the largest US memory card manufacturer.

Crawford said that when his company (Soitec Solar Industries headquarted in Grenoble, France) decided to set up another manufacturing plant in the U.S., they were wooed to come to many states, including Texas, but they chose to move to California because California’s GO-Biz worked with them to identify possible site locations around the state and to define all statewide incentives that could be available to their company. GO-Biz participated in several rounds of site selection tours that helped to qualify the final locations, out of which they chose San Diego. They were able to get the former Sony building in Rancho Bernardo before it went on the open market. When fully operational, Soitec will directly employ 450 and indirectly support 1,000 jobs.

The other reason they chose California is that it is the largest market for solar energy, and California offers good financial incentives for residents and business to convert to solar energy.

Crawford mentioned that GO-Biz also worked with the California Employment Training Panel (ETP) staff to help qualify Soitec for training funds to help their company train and prepare employees for the high-skilled jobs at their newly established factory in San Diego. During my subsequent phone interview, Mr. Crawford told me they were awarded $300,000 in training funds by the California ETP, and they provided over 15,000 training hours to their San Diego employees. They completed the training in early April 2014.

When asked why his company stays in California instead of moving to another state, McCain said, “California is currently the 8th largest economy in the world. A tremendous amount of our business, current and future, will come from this economy. Even though it is still difficult to find qualified employees, it is my experience that California is rich in qualified workforce, compared to other states.”

He added, “Our success depends greatly on the advantages of our workforce in Mexico. However, over the last 20 years, I have come to realize the culture in Mexico makes it difficult to do manufacturing that requires ingenuity and innovation. We will typically do our first articles and fixturing and any automation type manufacturing in the U.S. When it comes to labor intense, higher volume products, we can turn it over to the plant in Mexico where they can be very successful producing quality products. That allows the company to compete successfully, not only in the U.S. but also against offshore companies. The operation in Mexico, just over the last two years, has allowed us to grow our U.S. side, which has nearly 200 employees.”

In contrast, Martin Wood, stated, “We are solicited often by other States to move our manufacturing facility and jobs to NV, TX, FL, AZ and others. While it would be disruptive, in all cases, it would be like handing employees and the company a raise. Lower or zero State taxes is a big incentive to move. “

“While previous offers were less appealing, they are becoming more and more sophisticated involving real estate and grants, development and hiring help, and of course, no taxes for an extended period or permanently. Any business that is truly run for profit above all would be foolish to not at least consider these offers. We try not to let it consume us, and only entertain them on an annual basis. Right now, California edges out other states in our analysis, based on a number of support, service availability, and quality of life issues, but the gap is narrowing.”

“People in City, County and State Government should be aware this poaching is going on, and try to find a way to bring advantages to manufacturers in California and incentivize them to stay. We know we bring high paying employment wherever we go, and our customers are based worldwide. I see no reason these offers will not continue and expect them to get more and more appealing. Don’t get me wrong, I love California and my family is firmly entrenched here, but to truly own and manage a manufacturing business, you must make hard decisions and be right most of the time.”

Roth stated “the quality of life here in Southern California is a great incentive for companies to continue operating here even though [manufacturing companies] are not receiving the same type of incentives from the local and state governments.” This was one of the major points made in explaining why manufacturers tend to stay in California, despite the sometimes harsh business environment. Roth also stated that a key decision factor in contemplating company relocation is the difficulty entailed in moving employees and their families.

I commented that a company is more than a product; it is also the people who formed and comprise the existing company, and many times, employees aren’t willing to relocate to another state, and the company loses people key to its success. This is often what happens when an out-of-state company buys a San Diego regional company. Key employees don’t move with the company, and the acquisition becomes “buying a product” rather than “buying a company.” In addition, I pointed out that over 90% of California’s manufacturers are less than 100 people, and their customers are most local obtained through word of mouth and referrals. If they decide to move the company, it would be as if they started a new company from scratch.

When Reo Carr asked the question about reshoring, I explained that it started because of quality issues and expanded because of increases in wages in China over the last few years. I mentioned that China and other Asian nations don’t honor U.S. patent laws, which leads to intellectual property theft, hurting U.S. companies in the long run. The other panelists added their opinions as to why outsourcing manufacturing to China is becoming of a thing of the past (increasing wages, quality control, and logistics problems and problem-resolution) and why America is benefiting from the shift to returning manufacturing to America.

McCain confirmed that the contract manufacturing division of his business is benefitting from regional companies returning manufacturing to America.

In answer to the question about the impact of environmental and other regulations, I pointed out that we have been outsourcing our pollution to China and other Asian countries to escape the costs of regulation here. The consequences of industrialization with environmental regulations has been horrific for China and India, which I described one of the chapters in my book (Can American Manufacturing be Saved? Why we should and how we can) When asked about the environmental regulations that apply to his plant in Mexico, Mr. McCain said that Mexico is quickly catching up with the U. S.

A question from the audience about the shortage of local, trained machinists led into a discussion about two connected issues: workforce training and mass transit. Ms. Jensen shared that colleges are shifting in the programs they are now offering in an effort to meet the needs of employers. Mira Costa has both certificate and Associate degree courses in biotechnology, engineering, and manufacturing skills such as machining. She encouraged the companies to check with their local community colleges to inquire about the various programs available. I shared that there are now four high schools that provide up to two years of training to be a machinist and that for years and years, the San Diego Community College District has provided machining and welding training, as well as other manufacturing skills.

Wood said, “it is hard to find people to fill the positions they need, because most of [the blue collar laborers] live further south, in South County.” Crawford seconded that comment, saying that workers are coming from points south, as well…even from Mexico. McCain added mass transportation needs to improve to deal with the issue of where employees are traveling from to accommodate the job availability.

I pointed out that San Diego doesn’t have a “hub” center of manufacturing where everyone is going to work. The industrial business parks are scattered around the county (mainly in 13 of the 18 cities in San Diego County). Mass transit doesn’t work well for this type of region, and I don’t know how feasible it would ever be for mass transit to get workers coming from across the border to these scattered business parks.

In conclusion, the panelists shared that for the time being, the advantages of doing business in California outweighed the disadvantages. The biggest draw is still the quality of life the region offers, as well as the great weather. I shared that the successful company that stays in San Diego has a high dollar, high value, low to mid volume product, which has proprietary technology and lower labor content. When this type company does a Total Cost Analysis of doing business in San Diego/California, it pencils out positively. Crawford agreed that doing this kind of analysis is what enabled them to make the decision to locate Soitec in San Diego.

While it is hard to compete against the incentives and low or no taxes of some other states, we may have fewer companies making the decision to move out of California if more companies did this type of analysis. Of course, it would be even better if the governor and legislature actually proposed and passed legislation that would benefit manufacturers instead of adding to their costs of doing business in California.

 

Posted in Economic Development, Jobs, Manufacturing, Nearsourcing, Reshoring, Taxes/Regulations, Training | No Comments »