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San Diego Manufacturing Trends

Wednesday, January 15th, 2014

From 2000 to 2011, the U. S. lost 5.8 million manufacturing jobs and 57,000 manufacturing firms closed. U.S. Department of Commerce shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”

Over the last three years, we have finally seen a growth of about 526,000 manufacturing jobs nationwide for a 4.59% growth rate, but California has lagged behind the nation at only a 0.63% growth rate for 7,900 jobs gained. Mainly due to the effects of sequestration on our military/defense industry, San Diego continued to lose manufacturing jobsin 2013, losing more than 2,000 jobs from February – November.

Offshoring has been major cause of slow economic growth after Great Recession and the high unemployment has exacerbated local, state and federal budget deficits. This has resulted in a weakened middle-class, declining innovation, and lower sales levels in weakened home market.

“Reshoring”/Resurgence of “Made in USA”

A September 2003 report prepared for the U. S. Congress U. S.–China Committee on Economic and Security Review Commission, by Peter Nolan of the University of Cambridge stated, “A ‘‘herd herd ‘mentality to participate in the ‘‘Chinese miracle’’ developed among global giant corporations… Global corporations now view China as central to their long long-term strategy.”

A Stone Associates interview with Technology Forecasters (10/21/03) corroborated the fact that some companies were following this “herd mentality” in migrating to China even when it didn’t make economic sense:  “There is a herd mentality with OEMs in China China—sometimes it makes sense, sometimes it doesn’t—not always rational decision… People tell their bosses what they want to hear hear—(going to China) gives a boost to the stock valuation, but you really have to do the analysis on a case by case basis.”

Now, the offshore supply chain dynamics are changing:

  • Oil prices – tripled in the last 5 years raising shipping costs
  • Labor rates rose about 15-20% year-over-year for last 5 years in China
  • Component/material prices increasing
  • Automation/robotics in U.S. has increased productivity
  • Political instability in China – Labor riots/strikes
  • Risk of disruption from natural disasters
  • U.S. $ declining

Most companies don’t look beyond quoted unit price to make a decision of which vendor to select. They don’t do a Total Cost of Ownership (TCO) analysis, which simply stated, is an estimate of direct and indirect costs. The 13th edition of the APICS (supply chain organization) dictionary says:  “In supply chain management, the total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream.”

The Reshoring Initiative was founded by Harry Moser, former CEO of GF Agie Charmilles in 2010. The goal is to change the sourcing mindset from “offshored is cheaper” to “local reduces the Total Cost of Ownership” and train OEMs and suppliers on why to source local and how to use TCO Calculator. Free Total Cost of Ownership (TCO) software is provided for OEMs and suppliers/unions.

Sourcing is slowly moving back to the United States. The 2012 MIT Forum for Supply Chain Innovation Reshoring Study revealed:  61% of larger companies surveyed “are considering bringing manufacturing back to the U.S” and 15.3% of U.S. companies stated that they are “definitively” planning to re-shore activities to the U.S. In April 2012 www.mfg.com stated that 40% of contract manufacturers had done reshoring work this year.

Manufacturing Jobs / Year

*Estimated / **Calculated 

The Reshoring Initiative has calculated reshoring’s share of manufacturing job growth since Jan. 2010 is:

Job growth: ?500,000

Reshored jobs: ?80,000

Reshoring % of total: ?15%

Now in 2013, more companies are moving their services and manufacturing operations back to the United States. Nationally, General Electric and Whirlpool have moved some appliance manufacturing back to the U. S. Caterpillar moved operations from China to Mexico and the US. Locally, EcoATM, 451 Degrees, and Solatube have reshored by moving manufacturing back to San Diego County. Some of the parts, assemblies, and products that are not cost effective to come back to the U. S. are going across the border to Baja California, Mexico, and major contract manufacturers in Tijuana, Mexico, such as Sumitronics, are experiencing significant reshoring.

The demand for “Made in USA” goods seems to be increasing and is helping the resurgence of American manufacturing in certain areas, especially true in the apparel industry. Indeed, many consumers like the quality perception boost associated with “Made in USA” labels certifying that these goods were in fact made in America. American made items are also growing in popularity because our production costs are declining while Chinese labor is actually increasing.

Offshore outsourcing will continue indefinitely. The desirable” locations for outsourcing will change over time, and the purely financial benefits of lower cost will erode over time. The challenge is to keep as much as possible within the United States, and if more companies would utilize the TCO estimator worksheet, it would help maintain and return manufacturing to America.

Additive Manufacturing

Additive Manufacturing has been hailed by ‘The Economist’ as the catalyst of ‘the third industrial revolution’ and is projected to have a significant impact on manufacturing in the near future. It has the potential to revolutionize the way we make almost everything. Currently about 28% of the money spent on 3D printing of parts is for final products, but it is predicted to rise to 50% by 2016 and to 80% by 2020.

The major Additive Manufacturing methods are:

  • Stereo lithography
  • 3D printing
  • Laser sintering
  • high powered laser fuses powered metals into fully dense 3D objects, layer by layer
  • Fused-deposition modeling
  • A plastic or metal wire is unwound from a coil, supplying material to an extrusion nozzle to form success layers

San Diego is blessed with hundreds of design engineering and product development companies, many of which have one or more types of Additive Manufacturing equipment. There is also a service bureau for Additive Manufacturing in Poway, Solid Concepts, which has all of the types of equipment. A few of the engineering design/product development companies with which we are familiar are:

A Squared Technologies

Clarity Design

DD Studio

D&K Engineering

Dynapac Design Group

Expertise Engineering

Fallbrook Engineering

Flex Partners

Leardon Solutions

Koncept Design

Redpoint Engineering

Triaxial Design

In addition, there is the MakerPlace in San Diego, which inventors and entrepreneurs can think of it as their “dream” garage shop for developing and producing their own products. It is a place where they can use a variety of fabrication equipment & tools to work on projects:  Woodworking, metalworking, electronics, embroidery, sewing and specialty tools such as 3D printers, laser cutters and engravers. There are even

“incubator” offices upstairs for businesses to operate out of the same building as the fab shop.

Training to meet Manufacturing Skills Gap

In 2011, the U.S. Bureau of Labor statistics estimated that 2.8 million, nearly a quarter of all U.S. manufacturing workers, were 55 or older. The improvement of the manufacturing industry has been a mixed blessing because as more skilled workers are needed, the supply is limited because baby boomers are retiring or getting close to retirement. “The oldest baby boomers turned 65 on Jan. 1, 2011, and every day thereafter for about the next 19 years, some 10,000 more will reach the traditional retirement age, according to the Pew Research Center.” What makes the situation worse is that there are not enough new ones to replace them because the subsequent generations were smaller and fewer chose manufacturing as a career.

This has resulted in an insufficient number of workers trained for advanced manufacturing jobs. Modern manufacturing is highly technical and requires understanding and proficiency in a wide variety of competencies. In the past 15 years, the manufacturing industry has evolved from needing low-skilled production-type assembly workers to being highly technology-infused. Thus, it is more of a skills gap in the specific skills needed by today’s manufacturers than a shortage of skilled workers.

A key component has been the development of the (National Association of Manufacturers) NAM-Endorsed Manufacturing Skills Certification System—a system of stackable credentials applicable to all sectors in the manufacturing industry. In June 2011, President Obama announced that the Skills Certification System was the national talent solution for closing the skills gap and addressing this key issue for American manufacturers. The Society of Manufacturing Engineers (SME) Education Foundation leads in encouraging youth to get involved in manufacturing technologies through STEM-related activities in the K–12 levels, as well as supporting and advancing the Certification System for manufacturing skills.

San Diego is fortunate to have more opportunities for training in manufacturing skills than many other regions as shown below:

  • San Diego City College – AA degree in Manufacturing Technology, Machining Certificate
  • SDCCD Continuing Education Center – metal fab, welding, plasma cutting
  • Miramar College – biotech/biomedical lab technicians
  • Mira Costa College – Machining Certificate
  • San Pasqual High School – two year machining program
  • Chaparell High School (Charter) – two year machining program
  • Quality Controlled Manufacturing Inc. – machining training and apprenticeship
  • Workshops for Warriors (non-profit) – machining, sheet metal fab, welding, programming

Licensing vs. starting a company

As a member of the steering committee for the San Diego Inventors Forum (SDIF), I have noticed that in the last two years, more inventors are planning to license their technology vs. starting a company (probably about 70%) compared to about 50% previously). However, this trend doesn’t hold true for CONNECT’s Springboard program for entrepreneurs according to Ruprecht von Butlar. In an interview, he said, “The demand for the Springboard program has stayed consistent over the past few years, but the composition has changed ? more technology, biotech/biomedical, and life science. All of the entrepreneurs in their program have either already formed companies or plan to form companies rather than licensing their technology.”

I also interviewed Dr. Rosibel Ochoa, Executive Director of the UCSD Jacobs School of Engineering von Liebig Entrepreneurism Center, and she said they have 30 teams in their program, and all of them plan to start companies rather than licensing their technology.” The Center serves UCSD professors, graduate students, undergraduate students, and alumni. The professors are the only persons more interested in licensing their technology rather than leaving UCSD to be part of a team to start a company.

The difference between the Inventors Forum and the other two programs may be the fact that most of the inventors coming to our meeting in the past two years have been in the “Baby Boom” generation, now between the ages of 48 – 68, and they may realize by now that they don’t have the entrepreneurial skills to found and develop a company. Also, many of them are serial inventors, who enjoy the technical part of inventing a new product, and then want to go on to working on their next invention. Many of the under 40 inventors seem to be more interested in starting a company.

Outlook for 2014

Positives:

–     Reshoring is creating more manufacturing jobs and generating more regional GDP

–     Additive manufacturing is accelerating development of new products

–     Broad access to skills training is available in San Diego

Negatives:

–     Unknown economic impact of Obamacare for manufacturers because of employer mandate

–     Possibility of full sequestration being restored to pay for extending unemployment benefits

If the current military/defense budget remains in effect without the restoration of full sequestration that affected San Diego adversely last year, this year should be better than 2013 for local manufacturers. All of us in San Diego’s manufacturing industry certainly hope so.

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Posted in Economy, Jobs, Manufacturing, Reshoring, Training | No Comments »

We Must Stop Fast Track Trade Authority from Being Granted!

Tuesday, January 7th, 2014

President Obama had hoped to be able to announce that he had been granted Fast Track Authority before the Asia-Pacific Economic Cooperation (APEC) meeting in Bali, Indonesia on October 8, 2013, but due to budget issues and the government shutdown, the bill wasn’t introduced and approved in the fall. He had also hoped to complete negotiations for the Trans-Pacific Partnership (TPP) Agreement at this meeting, but no agreement was reached by the countries involved. For the last three years, the Obama administration has conducted negotiations behind closed doors through the offices of U.S. Trade Representative Ron Kirk without any involvement with Congress.

Eleven nations have participated in the negotiations: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan announced its intention to join the agreement last spring. Because the TPP is intended as a “docking agreement,” other Pacific Rim countries could join over time, and the Philippines, Thailand, Colombia, and others have expressed interest. China could join the TPP at a later date without suffering any disadvantage even though this would negate the original reason for the TPP as a counter to China’s hegemony in the Pacific.

Reliable sources have revealed that a bill to grant the president Fast Track Authority under the Trade Promotion Authority will be introduced on January 8th in the Senate Finance Committee and the House Ways and Means Committee. It appears that there is sufficient support to pass these bills out of the committees for a vote on the floor.

Earlier this year, I published three blog articles on the dangers of the Trans-Pacific Partnership agreement and granting the president Fast Track Authority:  “The Trans-Pacific Partnership Would Destroy our National Sovereignty;” “Why the Trans Pacific Partnership Would Hurt American Manufacturers;” and “The Trans Pacific Partnership Trade Agreement Would Harm our Environment.”

In my first article, I commented on the many articles that Lori Wallach of Public Citizen had written about the Trans-Pacific Partnership:  “Ms. Wallach opines that U.S. multinational corporations have the goal of imposing on more countries a set of extreme foreign investor privileges and rights and their private enforcement through the notorious “investor-state” system. ‘ This system elevates individual corporations and investors to equal standing with each TPP signatory country’s government- and above all of us citizens.’ This would enable ‘foreign investors to skirt domestic courts and laws, and sue governments directly before tribunals of three private sector lawyers operating under World Bank and UN rules to demand taxpayer compensation for any domestic law that investors believe will diminish their ‘expected future profits.’”

With regard to “Buy American” laws in my second article, I wrote, “What this means is that the TPP’s procurement chapter would require that all companies operating in any country signing the agreement be provided access equal to domestic firms to U.S. government procurement contracts over a certain dollar threshold. To meet this requirement, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries.”

I also noted that as far back as May 3, 2012, a letter from Rep. Donna Edwards (D-Md.) and 68 other Congressional Reps to President Obama stated in part, “We are concerned about proposals we understand are under consideration in the Trans-Pacific Partnership (TPP) agreement negotiations that could significantly limit Buy American provisions and as a result adversely impact American jobs, workers, and manufacturers…We do not believe this approach is in the best interest of U.S. manufacturers and U.S. workers. Of special concern is the prospect that firms established in TPP countries, such as the many Chinese firms in Vietnam, could obtain waivers from Buy American policies. This could result in larger sums of U.S. tax dollars being invested to strengthen other countries’ manufacturing sectors, rather than our own.”

In a commentary article on October 15, 2013, Lt. Col (Retired) Allen West wrote, “TPP would subject the U.S. to the jurisdiction of foreign tribunals under the authority of the World Bank and United Nations. These unelected, unaccountable panels would constitute a judicial authority higher than the U.S. Supreme Court. They would have the power to overrule federal court rulings and order payment of U.S. tax dollars to enforce the special privileges granted to foreign firms that would be exempt from EPA and other regulations that strangle American firms.”

He added, “We’re also told TPP shows our Asian allies we’re serious about confronting China. But it would actually weaken the U.S. As the Chinese People’s Liberation Army uses every means possible to infiltrate our command and control systems, TPP bans Buy American policies that require crucial equipment for our troops be produced in the U.S. We don’t need TPP to stop China’s military expansion – we need to tell the same crowd pushing TPP to stop transferring their capital and technology to that communist dictatorship.”

In a commentary on the Economy in Crisis website, economist Pat Choate outlined the reasons why we should oppose President Obama being granted Fast Track Authority:

  • Allows the President to select countries with which to enter into trade agreements, set the substance of the talks and then sign those pacts without prior Congressional approval.
  • Allows the President to negotiate and include in these trade agreements not only tariffs and quotas, but also changes in federal, state and local laws on taxes, food and health safety, patents, copyrights, trademarks, immigration, Environment, Labor standards, and Buy America provisions, among many other issues.
  • Creates a Presidential advisory system, comprising 700 industry representatives appointed by the President. These advisors have access to confidential negotiating documents that are kept secret from most members of Congress and the public.
  • Empowers the President to draft the agreements to implement legislation without Congressional input.
  • Requires House and Senate Leaders to introduce the President’s bill on the first legislative day following the President’s submission.
  • Requires that the legislation be discharged from Committee 45 days after submission.
  • Requires a floor vote 15 days after the bill is discharged from Committees.
  • Allows only 20 hours of debate in each House.
  • Prohibits any amendments either in Committee or during the floor debate.
  • Eliminates several floor procedures, including Senate unanimous consent, normal debate and cloture rules, and the ability to amend the legislation.
  • Prevents a Senate filibuster.
  • Requires only a simple majority vote in each House for enactment.

In conclusion Mr. Choate states, “These trade pacts will have the effect of a treaty, though the Constitution requires a two thirds majority vote by the Senate for the United States to enter into a treaty.”

It is precisely this sort of amassing of powers that defines a dictatorship. Our Founding Fathers wisely chose to keep governmental power separated in a system of checks and balances, but by utilizing the Fast Track Authority, our Constitutional system of checks and balances would be destroyed and our national sovereignty would be given to foreign nations and multinational corporations in the name of “free trade.”

A letter addressed to President Obama, signed by 24 Republican Representatives in the House, stated, “Under Fast Track, the executive branch is empowered to sign trade agreements before Congress has an opportunity to vote on them, and then unilaterally write legislation making the pacts’ terms U.S. federal law. Fast Track allows the president to send these executive branch-authored bills directly to the floor for a vote under rules forbidding all floor amendments and limiting debate. And by requiring the House to vote on the bill within a preset period of time, it takes the floor schedule out of the hands of the House majority and gives it to the president.

Given these factors, we do not agree to cede our constitutional authority to the executive through an approval of a request for “Fast Track Trade Promotion Authority.”

The signatories were:  Jones, Bachmann, Joyce, Gohmert, Cook, McKinley, Jimmy Duncan, Stockman, LoBiondo, R. Bishop, C. Collins, C. Smith, Rohrabacher, Bentivolio, Grimm, Mica, Broun, Brooks, D. Young, Jeff Duncan, Gibson, Denham, Hunter and Fitzpatrick.

On the Democrat side of the aisle, Representatives Rosa DeLauro (D-CT) and George Miller (D-CA) took the lead in getting a total of 151 Democrats in the House to oppose the use of “Fast Track” procedures that usurp Congress’s authority over trade matters. Their opposition stands for both the Trans-Pacific Partnership (TPP) agreement and any future trade agreements. The letter in part states, “Congress, not the Executive Branch, must determine when an agreement meets the objectives Congress sets in the exercise of its Article I-8 exclusive constitutional authority to set the terms of trade. For instance, an agreement that does not specifically meet congressional negotiating objectives must not receive preferential consideration in Congress. A new trade agreement negotiation and approval process that restores a robust role for Congress is essential to achieving U.S. trade agreements that can secure prosperity for the greatest number of Americans, while preserving the vital tenets of American democracy in the era of globalization.”

If Fast Track Authority is approved, it would allow President Obama to essentially have dictatorial control over the country in many respects. Fast Track Authority gives the executive branch legislative powers, something expressly forbidden by the Constitution. We must deny the President Fast Track Authority. If this is granted, it will be even more difficult to stop the Trans-Pacific Partnership from being approved.

It would be the final nail in the coffin for U.S. sovereignty. Contact your Congressional representative and urge them to oppose the Fast Track Authority and forward this article to your friends and ask them to do the same!

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Posted in Jobs, Manufacturing, National security, Trade, Trade Policy | No Comments »

Coalition for a Prosperous America’s California Chapter Celebrates the Outlook for the Future

Tuesday, December 17th, 2013

The California Chapter of the Coalition for a Prosperous America (CPA) held their annual dinner in San Diego on January 11th at the Del Mar Hilton to look back on this year’s work and ahead to the coming year, as well as honor those who have helped make that work successful. Nearly 80 attendees joined me in showing our appreciation to Senator Mark Wyland for being the co-host of the well-attended “Manufacturing in the Golden State–Making California Thrive” economic summit last February. Unfortunately, co-host Assemblymember Toni Atkins was unable to be present. Assemblyman Tim Donnelly and County Supervisor Dave Roberts attended along with staff representing Congresswoman Susan Davis, Congressman Darrell Issa, Assemblyman Brian Jones, and Assemblyman Rocky Chavez.

I shared how I became involved with CPA, which is a non-profit, non-partisan membership organization established in 2007 as a coalition of manufacturing, farming, ranching, and labor to fix the U.S. trade deficit and the economy. CPA uniquely joins these distinct groups and focuses on both grass roots and Washington, D. C. lobbying efforts. CPA educates business, organization and political leaders about the economic harm caused by the trade deficit, methods to correct the deficit, and the need to develop and implement a national strategy to produce more in the U.S. so jobs and the taxes they create stay in the U. S.

When I was researching and writing the chapter “What is being done now to save American manufacturing?” for the first edition of my book in 2008, I found many trade and professional organizations that were focused on a particular issue important to their industry or profession, but there didn’t seem to be any collaboration between the organizations to support or oppose issues that affected American manufacturers. The two most powerful organizations, the National Association of Manufacturers and the U. S. Chamber of Congress seemed to be controlled by the large multinational corporations whose position on various issues were at odds with those of smaller American-only manufacturing corporations.

After my book was published in 2009, I met Ian Fletcher, author of Free Trade Doesn’t Work:  What should replace it and why, and he introduced me to CPA when he became their Sr. Economist in early 2011. I realized this was just the kind of organization I had been looking for and started participating in their member-at-large monthly conference calls to share what we were each doing to work on issues adversely affecting American manufacturing.

I volunteered to help CPA put on a Smart Trade Conference on March 28, 2012, and one of the people that attended was Donna Cleary, Field Rep for State Senator Mark Wyland. She asked CPA to facilitate putting on a manufacturing summit in the fall. Because of the national election, we postponed the summit to February 2013, which gave us more time to solicit partners and sponsors. Our partner list became the “who’s who” of organizations in San Diego, and the summit was very successful. In addition to being a bi-partisan event, what made it different was that we broke into small groups after the main presentations and conducted “pair wise” voting on issues to come up with the top two issues: California regulations and the need for a national manufacturing strategy.

We formed a Manufacturing Task Force and produced a report that we disseminated to all of the attendees and subsequently presented to our Congressional delegation. We also presented CPA position papers on the trade deficit, currency manipulation, County of Origin labeling, Border Adjustable Taxes, and “Fast Track” Authority for the proposed Trans-Pacific Partnership Agreement (a trade and global governance agreement being negotiated by the U.S. with eleven Pacific Rim nations).

We sponsored a viewing of the film “Death by China” in September, which clearly shows that we are in a trade war with China that we are losing, and American companies aren’t competing against Chinese companies, but the Chinese government itself.

The next speaker was Mike Dolan, Legislative Representative for the Teamsters, who said, “If CPA didn’t exist, we’d have to invent it.” His basic point was that, based on his long experience working on the Hill and in the field for Fair Trade (fighting expansion of the flawed and failed NAFTA/WTO model), we can win the current battles of the Trans-Pacific Partnership and Fast Track if and only if we build and maintain a strong bipartisan mobilization. He called the TPP “NAFTA on steroids.” He doesn’t see a path to victory next year on sensible trade policy without the Coalition for a Prosperous America and the constituencies it represents — small business, particularly in industries that are sensitive to trade fluctuations, family farmers and ranchers, working families and “trade patriot” activists including the Tea Party cadres.

Bill Bullard, CEO of R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) was the next speaker. He said they joined the Coalition because their industry was being unfavorably impacted by current U. S. trade policies and unfair trade practices by our trading partners. He said, “The number of privately owned cattle and sheep ranches has been going down dramatically since 1994 when NAFTA went into effect and accelerated after China became part of the World Trade Organization (WTO) in 2000. The size of the beef and sheep herd has been decreasing every year, while imports of beef, lamb, and mutton have been increasing.” Shockingly, he revealed that fast food restaurants are not required to disclose the origins of their beef and even when restaurants say the beef is “U.S. Inspected,” it is as likely as not to be imported. Their industry especially needs the government to provide consumer package labeling to show where meat and livestock was born, raised and slaughtered and to reverse the current policy of lowering U.S. health and safety standards just to facilitate more imported meat.

CPA President Michael Stumo presentation was “A Prosperity Strategy for America,” in which he stated:  “We are convincing Congress that we need “net exports,” not merely more exports, to be a successful trading and producing nation. In 2011, our trade deficit shaved an astounding 4% from overall U. S. GDP. We should have a national goal to grow manufacturing back up to 20% of GDP rather than 11%.

Supply chains are the lifeblood of our economy, and all tiers of suppliers to the OEMs are important. They produce the jobs, the job multipliers, the wealth, the innovation, and the intellectual property of a successful developed economy. Those in Washington who are pushing “global supply chains” are really pushing offshoring of our supply chain. We need a strategy of acquiring, keeping, and growing “domestic supply chains” for a strong America.

We need to stop offshoring our manufacturing jobs and the taxes they create to safeguard our economic strength, our democracy and our constitutional republic. The globalization agreements like the Trans-Pacific Partnership are only 15% about tariffs and quotas and 85% about non-trade topics. These other topics include financial regulation, taxes, food and product safety, product labeling, government procurement of domestic supplies, and other matters. These globalization deals transfer the authority of Congress and states over these domestic policy issues to unelected international tribunals of foreign trade lawyers.

The old way of manufacturing and labor working separately for their interests no longer works. These issues are a macro problem for our country and affect all Americans. That’s why manufacturers, farmers, ranchers and workers must work together.

It is working. A large part of Congress signed a letter opposing Fast Track trade authority because of sovereignty and economic issues. Leadership on important committees is talking about net exports rather gross exports. A majority of the House and Senate signed a letter calling for effective protections against foreign currency manipulation in future international agreements. We need to win. Vince Lombardi said ‘winning isn’t everything… it’s the only thing.’ We can win these issues by expanding our membership of individuals, companies, and organizations and expanding from eight state chapters to at least 25 chapters.”

In the wrap-up presentation, Dave Frengel, Director of Government Relations, Penn United Technologies, a precision tool making company, said, “We have 600 employees today, but if our government had been standing up for us against China’s unfair trade practices, we would have 1200 employees, most in family-sustaining jobs with good benefits. Unfair trade affects the entire U.S. supply-chain, not just our company. Our government has been turning its back on production of food and manufactured goods. Our precision tooling and manufacturing industry, which is critical to America’s industrial economy, is a third of what it was before this era of bad U.S. trade policy began. The resulting loss of jobs is huge.”

He continued, “When I was asked by my boss to “fix trade” 11 years ago, we tried working within the National Association of Manufacturers, but our voice and that of other American-only manufactures was ignored. We realized that we needed to join not only with manufacturers and concerned citizens, but with farmers, ranchers and workers to win. We realized that the mission would not be accomplished through existing organizations – we needed a new organization to get the job done. That is why we were a founding member of CPA.

For nearly seven years now, CPA has been holding events all over the nation to raise awareness and mobilize local leaders around trade reform issues. CPA members and staff made over 200 legislative visits this past year. The credibility and influence of CPA is growing and our trade reform message is becoming more convincing as we continue to have crucial conversations with a growing circle of trade policy leaders in Washington, D. C.

We are opening new doors with trade negotiators inside the Obama Administration, the House Ways and Means Committee, and the Senate Finance Committee. Our efforts helped gain massive Congressional opposition to Fast Track trade authority and in support of our constitution. Our efforts helped gain a majority of Senate and House support for effective currency manipulation provisions in all future trade deals.

The Chinese will negotiate forever without changing their predatory trade strategies. We need protection from those who cheat us, which requires strong enforcement of international trade rules by our government. We can compete against foreign companies, but not against foreign governments that rig markets to cheat us out of our share of markets. The Coalition for a Prosperous America works for trade reform that delivers prosperity and security to America, its citizens, factories, farms, and working people. The solutions that CPA focuses on will benefit those who make and grow things here.”

In conclusion, he stated, “We are gaining more GOP support, more Democrat support, more Tea Party support, more citizen support, and more producer support. This year, we’re starting to win – because of the growth in size and influence of the Coalition for a Prosperous America. We need to get stronger. We need you to consider joining CPA as an individual or a company member or to make a tax deductible donation to the CPA Education Fund.”

Bad U. S. trade policy is a major cause of California’s economic crisis. Offshoring has cost California hundreds of thousands of its manufacturing jobs. Family members lost good jobs; communities declined; property values plummeted. We Californians know that we need a smarter U.S. trade strategy.

As a fledgling chapter, we are already influencing the trade policy positions of San Diego’s Congressional delegation, but need to grow to influence the other 48 Representatives and our two Senators to support better trade deals that will grow our economy. This is not a Republican issue nor a Democratic issue, but an American issue, and they must vote right to properly represent California. We need to get stronger and grow to accomplish our goals. We need your involvement and financial support to make a difference. Please contact me at michele@savingusmanufacturing.com to participate in the California Chapter.

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Posted in General, Manufacturing, Outsourcing, Trade Policy | No Comments »

Innovation Thrives in San Diego

Tuesday, December 10th, 2013

At a time when some pundits are saying that innovation is lagging in the United States, the annual CONNECT Most Innovative Product Awards luncheon on Friday, December 6th demonstrated that innovation is thriving in San Diego, California. More than 700 attended the awards ceremony to recognize cutting-edge local innovations.

This “red carpet” event is CONNECT’s largest and most prestigious event, attracting more than 700 of the region’s top business leaders, researchers and capital providers. CONNECT honors   San Diego’s world-renowned celebrities of innovation along with the groundbreaking new products launched in the last year. The MIP Awards is to San Diego’s technology industry what the Academy Awards™ is to the movie industry. More than 100 San Diego based companies competed in the rigorous judging process representing a broad range of companies across nine categories.

“The success of the MIP Awards continues to be driven by the impressive and growing number of innovative technology and life sciences companies based here in San Diego County,” said Tyler Orion, interim president, CONNECT. “In the 26 years CONNECT has been spearheading the MIP Awards, we’ve never seen such a well-qualified group of nominees – it’s always a difficult decision to select the most innovative products of the year, and we congratulate all of the winners on their noteworthy achievements.”

CONNECT was founded in 1985 as a regional program of the University of California, San Diego (UCSD) to catalyze the creation of innovative technology and life sciences products in San Diego County by linking inventors and entrepreneurs with the resources they need for success. In 1986 UCSD Diego hired Bill Otterson, Chairman of Lexocorp, to head CONNECT. Over the following 13 years, Otterson and Mary Walshok, Associate Vice Chancellor of Extended Studies and Public Programs at UCSD built CONNECT into an internationally renowned program.

To better serve the entire research community, CONNECT spun-out of UCSD in 2005 and formed the CONNECT Association, a 501c6 trade organization, and CONNECT Foundation, a 501c3 charitable foundation. As a result of spinning-out from UCSD, CONNECT has been able to broaden its mandate to include public advocacy work on behalf of its members through the trade organization.

Since 1985, CONNECT has assisted in the formation and development of more than 3,000 companies that have attracted more than $2 billion in investment capital through its “flagship” Springboard program. Springboard is a free program that is open for enrollment to innovation companies in the Southern California region. Springboard assists companies in proving their business model and developing a compelling commercialization strategy.

Companies accepted into the program are assigned expert business advisors who coach the company throughout the process which includes feedback from financial, marketing, legal and commercialization experts, as well advice from industry executives and the opportunity to dry run presentations and pitches.

After completing Springboard, companies that are considered suitable and ready for investment by angels, venture capital and/or corporate investors, move on to participate in the Springboard Capital Competition.

The winners of the 2013 MIP Award contest are:

Aerospace and Security Technologies

Cubic Defense Applications for One Shot

One Shot is a breakthrough in long-range targeting accuracy that automatically measures and corrects for all aiming errors including-for the first time ever-downrange crosswind speed and direction. It gives our warfighters a decisive battlefield advantage. Cubic is the world’s leading provider of realistic air and ground combat training systems for national military and security forces. Infantry troops, aircrews, and security forces all draw upon the realism gained from using our training systems to help them effectively perform their mission.

Communications and IT

iboss Network Security for iboss Cloud Web Security with Device Management

iboss Cloud Web Security with Device Management provides SaaS mobile device web security and management enabling organizations to safely integrate mobile technology. Utilizing the cloud, MobileEther secures company data, protects against web threats and ensures industry compliance seamlessly within minutes.

Hardware and General Technology

Nextivity, Inc. for Cel-Fi RS2

Cel-Fi is a smart signal booster that maximizes a user’s indoor wireless experience by eliminating in-building dead zones. Cel-Fi increases wireless data speeds and eliminates dropped calls for wireless subscribers by boosting signal strength from one bar to five bars.

“We are incredibly proud that Cel-Fi has received San Diego’s most prestigious honor for innovation,” says Werner Sievers, CEO of Nextivity. “The award is testament to the exceptional design and world-class engineering that goes in to developing the world’s only all-digital, one hundred percent wireless smart signal booster. Our team continues to push the boundaries in design excellence, ensuring Cel-Fi meets the stringent testing criteria laid out by carriers worldwide to solve indoor coverage issues for wireless subscribers.”

Life Sciences-Diagnostics and Research Tools

Life Technologies for Ion AmpliSeq Exome

Ion AmpliSeq Exome Kit isolates key regions of the genome with unparalleled ease and speed, leveraging PCR, a routine lab technique. Taking six hours instead of several days, this provides the simplest, fastest exome sequencing solution for researchers studying disease.

Life Sciences-Medical Products

Isis Pharmaceuticals, Inc. for KYNAMRO

KYNAMRO is the first FDA-approved, systemically delivered, antisense drug and a product of Isis’ drug discovery technology platform. KYNAMRO is designed to inhibit LDL-cholesterol formation and is marketed to treat patients with HoFH, a genetic disease characterized by severely high LDL-cholesterol.

Mobile Apps

OneHealth Solutions, Inc. for OneHealth

OneHealth is the leading HIPAA-compliant mobile application combining social technology, game mechanics and clinical principles to support chronic condition and behavioral health patients. Through real-time peer support, OneHealth Experts and evidence-based clinical resources, patients actively manage their conditions anytime, anywhere.

“OneHealth is a pioneer in delivering an integrated web and mobile-based health service that provides users with the tools and real-time support they need to better manage their health goals and lead healthier lives,” said Bruce Springer, CEO of OneHealth. “Our mobile app includes best-practices from nearly five years of implementing our web-based platform, bringing a “healthy support in your pocket” approach to encourage healthy living, drive patient compliance and reduce risk to ensure better health outcomes. This award is an honored recognition of our goal to make healthier living more accessible for everyone when they need it most.”

Software

Emotient for FACET

Emotient is the leading authority in facial expression recognition. Emotient’s flagship product is FACET, a software development kit for automatic emotion detection. Emotient’s technology translates facial expressions into actionable information, enabling companies to develop emotion-aware technologies and create new levels of customer engagement.

“We are honored that FACET received such prestigious recognition from CONNECT,” said Ken Denman, CEO, Emotient. “Emotient’s scientific co-founders are widely regarded as pioneers in applying machine learning, computer vision and cognitive science to facial expression analysis. We look forward to seeing our FACET emotion recognition technology deployed for broad consumer, marketing, healthcare and business use.”

Sport & Active Lifestyle Technologies

Hookit for Hookit Athlete Index

Marketers invest $12B in athlete endorsements every year to capture a piece of $1T plus they impact in consumer spending. Hookit has created the first ever tool to track and monetize athletes’ real-time influence in today’s complex world of digital media.

Sustainability

Achates Power, Inc. for Achates Power Opposed-Piston, Two-Stroke Engine

Achates Power has developed radically improved internal combustion engines that increase fuel efficiency, reduce greenhouse gas emissions and are lower cost. These engines meet the U.S. military’s stringent requirements for power density, fuel efficiency, heat rejection and multi-fuel capabilities.

In my interview, David Johnson, President and CEO, stated, “We were thrilled to win the CONNECT MIP award. Since our 2004 founding, we have worked hard to perfect the opposed-piston engine architecture and our technology is extremely well suited to the needs of the military—providing superior fuel efficiency, high power density and low heat rejection. This is what sets us apart from the competition including, in this case, the incumbent technology.”

Distinguished Contribution Award

In addition to the nine companies honored for their outstanding new products, the Distinguished Contribution Award for Life Sciences and Technology Innovation was awarded posthumously to former Chief Executive Officer, Duane Roth, who passed away in August. Duane’s brother Ted accepted the award, followed by an inspiring tribute video honoring all that Duane did for the San Diego region. The Distinguished Contribution Award for Life Sciences and Technology Innovation is bestowed annually to honor individuals in San Diego who, through business activities and community involvement, have encouraged innovation, diversity of thought and the advancement of local entrepreneurs. A lover of innovation and technology and a true community cultivator, Roth was beloved in the community for serving as an inspiration, a leader, a mentor, a role model, an advocate and friend. Roth’s many contributions to local entrepreneurs and the San Diego innovation economy coupled with his infectious spirit will live on as the award will be renamed in his honor as the Duane Roth Distinguished Contribution Award for Life Sciences and Technology Innovation.

California has a bad rap for an unfavorable business climate with regard to taxes and regulations, but entrepreneurs are still choosing California as the location for starting and growing their technology based companies. San Diego has a great deal to offer these companies to help them succeed and grow starting with the San Diego Inventors Forum (about which I have written previously), CONNECT’s various programs, the CommNexus EvoNexus incubator, and the large pool of angel investors that comprise the TechCoast Angels. San Diego continues to grow more companies than it loses to other states. However, when a company grows to the point that it is acquired by an out-of-state public company, it is often moved to another state by the new parent company. Governor Brown and our state legislators could remedy this situation by improving California’s overall business climate.

Posted in Innovation, Manufacturing | No Comments »

Is There Really Free Career Technical Training?

Tuesday, November 19th, 2013

Yes, there is, at least in California. I was recently given a tour of the San Diego Continuing Education headquarters facility by Dean Jane Signaigo-Cox and Vice President Brian Ellison. Continuing Education is the new name for what we used to call Adult Education where you could go back to school to get your high school diploma or take enrichment classes in art, cooking, foreign languages, sewing, etc.

While these types of classes are still being offered to adults over the age of 18, it is now possible to get technical job training and even certification in a variety of careers, such as automotive, computers, electronics, graphics, upholstery, pipe fitting, and welding. Unbelievably, these classes are free in California.

In 2006, then Governor Schwarzenegger identified workforce skills development, referred to as Career Technical Education (CTE), as a state priority. The passage of an education bond provided $500 million for CTE initially, and subsequent budgets have continued to fund the program. The plan was approved by the California State Board of Education on March 12, 2008 and approved by the U.S. Department of Education on July 1. CTE is delivered primarily through K-12 schools, adult-education programs, and community-college programs. CTE programs are closely linked with those of workforce and economic development agencies and industry and rely on the participation of community-based organizations. The programs are as follows:

California K-12/Adult Programs

  • Elementary school awareness and middle school introductory CTE programs.
  • High school CTE, offered through 1,165 high schools in single courses, in course sequences or through over 300 integrated “learning communities.”
  • Career pathways and programs through 74 regional occupational centers and programs.
  • Adult education offered through 361 adult schools and more than 1,000 sites.
  • Apprenticeship offered through more than 200 apprenticeship program and adult schools

The Continuing Education Center I visited is under the jurisdiction of the San Diego Community College District, but all of the California Community Colleges throughout the county and state offer the following programs. 

  • Occupational programs at 109 colleges, leading to certificates, associate degrees, and transfers to four-year universities.
  • Noncredit instruction for short-term CTE programs offered by 58 colleges.
  • More than 160 apprenticeship programs at 39 colleges.
  • Middle College High Schools (13) and Early College High Schools (19).
  • Tech Prep programs delivered through 80 Tech Prep consortia, comprising 109 colleges and their feeder high schools.
  • Contract education provided to organizations for their employees.

San Diego’s Continuing Education program has been making history since 1914, when it started providing job training for returning military veterans from WWI. Year after year, more than 74,000 students are served annually by the seven Continuing Education campuses and many offsite community locations throughout the city of San Diego.In 2013, more than 3,600 students received Certificates of Completion for programs through San Diego Continuing Education (accreditation through the Western Association of Schools and Colleges, the highest level of accreditation a California school or college can receive.)

According to Jane Signaigo-Cox, who oversees many of these career technical programs, “more than 1800 of the certificates awarded were for these Career Technical Education job training programs. Since students spend an average of 65 to 70 percent of course time using hands on tools and technology to learn relevant skills for today’s jobs, they are prepared for an entry level position in their field after completing these courses.”

The Little Hoover commission, a non-partisan legislative agency, named San Diego Continuing Education as a top model program for efficiency and effectiveness in California. The Commission produced an in-depth, well-documented report, “Serving Students, Serving California:  Updating the California Community Colleges to Meet Evolving Demands.” The report was presented to the California governor and legislature and includes several recommendations that suggest how programs could and should function in today’s world.

San Diego’s Continuing Education is the largest adult educational institute of its kind in the nation and has been invited to join 45 academic institutions in the Global Corporate College Network. The Global Corporate College was founded by leaders of entrepreneurial colleges and universities and leverages the best learning industry practices with the resources of accredited academic institutions.  The organization is committed to helping employers realize the full potential of their workforce by providing training opportunities for corporations and organizations throughout the U. S. and Europe and currently services 17 industry sectors. In San Diego, this type contract education is provided through the Employee Training Institute, which offers online training, classroom training, and on-the-job-site training for a fee. Hundreds of customized training options are available to San Diego businesses. Contact the Director of ETI at 619-388-1282 to learn more.

Since I am aware of the shortage of skilled workers in the manufacturing sector, I was particularly interested in the type of career technical training available to address this need. My tour of the Educational Cultural Complex campus included the pipe fitting and welding training department. I was amazed at the number of Miller Electric welding stations they had to teach students in both MIG and TIG welding techniques. They even had one of the newer Lincoln Electric welding simulators that I got to try out at the FABTECH show in Las Vegas in 2012. Because of budget cuts for staff, there is currently only one daytime welding class of about 25 students and one evening class this fall.

After certification, entry-level pipe fitters can earn $17/hour and welders can earn $19/hour, which is a very good entry-level wage in San Diego. Journeymen welders can make double this wage. These are no easy programs:  both require 1,200 hours of training, completed in 48 to 52 weeks. The Continuing Education program provides Career Development Services (CDS) that helps students with resume preparation, interview tips, and specific information about companies that are looking for certain skills.  Regular job fairs are hosted at various campuses. Students also have the opportunity to meet with a career counselor who can help with identifying and setting goals that will keep students on the right track toward employment.

Most of the career technical training requiring specific equipment is only available at the Educational Cultural Complex, but electronic technician training is only provided at the mid-city campus. Training for machinists is only available at the San Diego City College campus as a for-credit college class.

Even after losing more than a half million manufacturing jobs since 2008, “California is by far the number one state for manufacturing jobs, firms and output – accounting for 11.7 percent of the total output, and employing 9 percent of the workforce. CA manufacturing generates $229.9 billion, more than any other state.”

Manufacturing’s tarnished image has caused Gen X and Millennials to not even think of manufacturing as a career. As Sr. Editor, Patricia Panchak of Industry Week, wrote in her November 7th article, “Manufacturer’s Agenda: Toward a New Skilled Workforce Shortage Solution,”, “too many people viewed manufacturing jobs as low-paying, “dumb, dirty, dangerous and disappearing.”

This is certainly not true in San Diego and other parts of California. The majority of manufacturing plants in California are clean and high-tech compared to the heavy industry of the mid-west and so-called “Rust Belt.” Manufacturing jobs provide the opportunity to make higher wages according to many past Industry Week articles that have highlighted“statistics showing that manufacturing jobs on average pay higher salaries than jobs in other sectors.”

If you are in a low-paying or dead-end job, you may want to consider getting the technical training you need to obtain a higher paying job in manufacturing through your local community college or continuing education program.

If you are a company owner or member of the management team of a manufacturing company, you may want to contact your local community college or continuing education center to provide job offers to graduates of their certification programs or get your existing employees trained in new skills.

If you don’t live in California, then try a search using “career technical training” in your state to see what you can find. It may change your life or help you find the skilled workers your company needs.

 

 

 

 

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Posted in Education, Jobs, Manufacturing, Training | 1 Comment »

What is a Secret to the Success of Indiana Manufacturers?

Tuesday, November 5th, 2013

Many companies in Northern Indiana were hit hard by the recession and the dramatic downturn in the auto industry, but some manufacturers were able to weather the storm, recover rapidly, and resume good growth well before the rest of the country. Manufacturing in the U.S. is undergoing a renaissance, and Indiana ranks as the top state where manufacturing contributes the most to the nation’s total economic output. For example, Northeast Indiana’s medical device companies control 34 percent of the worldwide orthopedic market, translating into $12 billion in revenues. They are market share leaders in the $37 billion orthopedic and biologics industry, and combined together, they control 60 percent of the worldwide hip replacement market and 64 percent of the worldwide knee replacement market. Three companies shared their stories with me in recent interviews.

Micropulse Incorporated

I interviewed Brian Emerick, CEO, who founded Micropulse in 1988 and is the sole owner of the company. The company now manufactures from a state-of-the-art 100,000 square foot facility with over 200 employees next to the farmhouse where it was originally started.

Micropulse prototypes and manufactures the most demanding instruments and implants in the medical device industry. They don’t have their own product line and make custom parts for OEMs. They are a contract manufacturer selling to the orthopedic industry. About 50% of their business is spine related, and the rest is a mix of hip, knee, and other joint implants.

Their employees have been trained in “Lean manufacturing” principles and tools using the local Manufacturing Extension Program and courses at the local community colleges. They have several Black Belts now on staff, and they do regular Kaizen events and utilize Six Sigma practices and tools. Their quality system is certified to ISO 13485.

Brian said, “We started being impacted by competition from offshore, especially China about 10 years ago, but business is coming back. Some of our bigger customers like Johnson & Johnson and Zimmer set up plants in China. We do more work with smaller companies that don’t have their own plants in China because the quality requirements for implants are too stringent to use Chinese contract manufacturers.”

They were flat in 2009 during the recession, but the orthopedic industry as a whole was down about 25%. They have great customers and started growing again in 2010. Their growth since has been about 10% per year. They recovered by not buying much and cutting expenses.

They spend about $2 million per year buying new equipment and updating software systems. They are considering adding another 60,000 sq. ft. within the next 18 months.

Brian said, “The secret to our success is the employees that make up our team. We have a solid workforce with very low turnover and have quality customers.”

C&A Tool

Richard Conrow founded C&A Tool in 1969 in a garage in Churubusco, Indiana as a tool and die operation with 10 employees. C&A Tool is a poster child for the manufacturing revival in the U.S. As a privately held company, C&A Tool has continued to add jobs, machinery and square footage each year. Having sustained 44 years of economic ups and downs, the company has grown to employ more than 530 people with 750,000 square feet of manufacturing space.

I interviewed Rob Marr, V. P., who said, “Our services are contract machining and high precision grinding. We don’t have our own products, but do a lot of prototype and development for our customers.” They bought Direct Laser Sintering equipment to be able to do Additive Manufacturing, also known as 3D printing, which utilizes 3D CAD data to produce a part. In the case of C&A Tool, the parts are metal, not plastic, made by Direct Laser Sintering. This technology produces metal prototypes and production parts in a matter of hours.

Their main markets are:  orthopedics for instruments and implants, automotive, electric motors, fuel systems, and aerospace. The company currently has four facilities and has invested in new capabilities, adding new equipment to support jet engine, power generation and industrial markets. This market mix means that they are ISO 9001:2008 certified, as well as TS949, AS 9100, and ISO 13485 certified.

Training the next generation of manufacturers is critical for the future. Rob is passionate about educating the manufacturing workforce, the general public, and his local community that manufacturing is not the dark and dingy days of our forefathers. For the past 36 years, C&A Tool has partnered with the local high schools to offer part time jobs to more than 60 students during the school day that allow them to have on the job training and transition from the classroom to the workplace more seamlessly. In addition to training high school students, the company brings in math teachers to show them the real world of manufacturing.

They have been impacted by competition from offshore, especially China, but have been getting business back for a couple of years. They compete more with Europe than China because of their high precision machining and grinding.

They were impacted by the recession, particularly their automotive business. During part of 2009, their business was down by 40%. New development was down, but they didn’t lay off any one and even bought another facility in 2009. They did not do anything special to recover, just continued their business culture.

They focus on investing heavily in capital equipment and software every year, even during the recession. They buy new equipment as their motto is “to maintain an excess capacity of square footage and equipment, even if it doesn’t have the customer base to support the investment at the moment to be able to take advantage of new opportunities.”

Rob said, “The secret to our success is that our founder laid a foundation for the company with the right people and equipment. We have evolved over the years. It really comes down to the people and allowing them to succeed and learn from their mistakes. We do what’s right by investing in people and equipment so our employees can take pride in their work and we elevate the industry.”

Forest River Inc.

Forest River was founded in 1996 by Peter Liegl. He foresaw an RV company dedicated to helping people experience the joy of the outdoors by building better recreational vehicles. After purchasing certain assets of Cobra Industries, the company started manufacturing pop-up tent campers, travel trailers fifth wheels and park models.

Continually growing, Forest River now operates multiple manufacturing facilities throughout the Midwest and West coast producing motorized Class A, B and C vehicles, travel trailers, fifth wheels, pop-up tent campers, park model trailers, destination trailers, cargo trailers, commercial vehicles, buses, pontoons, restroom trailers and mobile offices.

They were acquired in 2005 by Berkshire Hathaway, but Mr. Liegl has remained the CEO. Forest River shares 80-81% of the industry with two other companies, leading with a 35% market share.

Doug Baeddert, GM of 14 operating units, said “We don’t sell direct to the public; we sell through dealers focused on their main markets of recreation, commercial businesses for vehicles, pontoons, and mobile offices, and municipalities for buses and restroom trailers.”

Their plants are non-union, and 85% of all production occurs in Indiana. The industry is an assembly-based industry not a vertical industry. They rely on their suppliers and are basically an “assembler” of parts, components, and assemblies that are manufactured by their vendors. For example, many of their wood assemblies are made by small Amish wood shops that are located in Northern Indiana.

They have not been impacted by offshore competition for their products, but over the last 15 years, the imported content of their vehicles has grown. It reached a peak a couple of years ago and is leveling off now.

Doug said, “In 2008-2009, there was a 33-34% reduction of manufacturing of RVs industry-wide. The consolidation of companies has been healthy and good for the financial stability of our industry. There has also been a consolidation of dealers so there are about one-third fewer dealers than prior to the recession.”

During the recession, they didn’t cut any salaried or sales personnel because they weren’t top heavy. They downsized some of the production workforce, but not significantly. They haven’t noticed any effect from sequestration nationwide, and their growth is up 40% this year.

They don’t have a formal budget for investing, but they are continually doing new product design and improving their existing products. Each division is autonomous in product development and is very entrepreneurial, innovative, creative, and visionary in their design work for new products. They can make minor changes from concept to prototype in as little as three days. However, a major technology change, particularly vehicles, can take up to a year.

Doug said, “The secret to our success is the right leadership of our founder, Pete, our people, our products, and our processes. We give enough rope to our people to succeed or fail and have a very low turnover.”

In answer to my question about their secret to success, they all said their core competency as a company is the talent and expertise of their people from management on down the line, not just their equipment or facilities. My own experience in business and as a writer has convinced me that it is the team of people that make up a company that is the key to its success or failure. These stories are examples of achieving the American dream of being a successful entrepreneur.

 

Posted in Economy, Manufacturing, Reshoring, Training | No Comments »

Fall Trade Shows Provide Nearsourcing and Reshoring Opportunities

Tuesday, October 1st, 2013

Since there is no IMTS show being held in the United States this fall, and FABTECH, to be held November 18-21, 2013 at McCormick Place in Chicago, IL is a long way from southern California, the best opportunities to attend a manufacturing trade show for southern Californians are:

Design-2-Part Show – October 9-10, 2013 – Pasadena Convention Center

WESTEC – October 15-17, 2013 – Los Angeles Convention Center

The Southern California Design-2-Part Show attracts thousands of design engineers, manufacturing engineers, managers, and buyers to meet local and national job shops and contract manufacturers to source custom parts, components, and services. With over 175 exhibiting companies, this year’s show will be D2P’s largest show ever in Pasadena.
The show in Pasadena is one of eleven Design-2-Part Shows owned by the Job Shop Company that either have or will take place in 2013 in major manufacturing hubs within the United States. The show policy since inception over 38 years ago has been to exclusively feature job shops and contract manufacturers with manufacturing operations in the United States. Companies that do not have facilities in the U.S. are not permitted to exhibit.
I will be presenting a seminar titled “Returning Manufacturing to America Using Total Cost Analysis,” on October 10, 2013 at 11:30 am at the show. The one-hour session is free to all show attendees of the Southern California Design-2-Part Show.

The Job Shop Company’s press release states:  “Ms. Nash-Hoff’s presentation will cover how supply chain dynamics, labor costs and fuel costs are changing the status quo. She will present a true understanding of the “Total Cost of Ownership” (TCO) concept including what most executives miss when analyzing TCO. The highlight of the presentation will be several real case success stories of companies that have returned work to the U.S. from offshore suppliers and the lessons that are learned from these real world practitioners.”

“Having Michele Nash-Hoff speak at our design and contract manufacturing show is a perfect fit,” said Jerry Schmidt, President of the Design-2-Part Shows. “Attendees can hear Michele justify bringing work back to the states and then they can walk the show floor and find the high-quality U.S. suppliers they need to solve their challenges.”

“Michele Nash-Hoff is President of ElectroFab Sales, a manufacturers rep agency, and author of Can American Manufacturing Be Saved—Why We Should and How We Can. Her blog articles appear on the Huffington Post and Industry Week magazine’s blog.” For the past two years, “Ms. Nash-Hoff has been speaking on behalf of The Reshoring Initiative, a nonprofit, industry-led organization dedicated to bringing work back to the U.S. from overseas. The Initiative is achieving its goals by helping manufacturers recognize that local production or sourcing may actually reduce their TCO (Total Cost of Ownership) of purchased parts and tooling. The Reshoring Initiative was founded by Mr. Harry Moser who was named to Industry Week magazine’s Manufacturing Hall of Fame in 2010 for this work.

Admission to the Southern California Design-2-Part Show is free to qualified industry professionals. For more information or to register for the show, visit www.D2P.com.

If you don’t live in southern California, don’t miss one of the other regional Design-2 Part shows still coming up. The rest of the fall schedule is:

Marlborough, MA            October 30-31

Covington, KY                November 20-21

WESTEC 2013 – October 15-17, 2013 – Los Angeles Convention Center

WESTEC is produced by SME (formerly the Society of Manufacturing Engineering.) Now, SME connects all those who are passionate about making things that improve our world. As a nonprofit organization, SME has served practitioners, companies, educators, government and communities across the manufacturing spectrum for more than 80 years. Through its strategic areas of events, media, membership, training and development, and the SME Education Foundation, SME shares knowledge to advance manufacturing. SME works together to make the future through exciting, interactive face-to-face events such as tradeshows and conferences, SME events serve as the manufacturing industry’s vital conduit. SME creates opportunities for people to showcase innovation, share knowledge, grow their businesses and build relationships

WESTEC has always been the West Coast’s “can’t miss” event, a technology showcase that helped generations of manufacturers grow their businesses. WESTEC is the region’s definitive manufacturing event and returns to the Los Angeles Convention Center Fall 2013 redefined and with renewed commitment to area industry.

The show is a true manufacturer’s think tank where creativity, vision, and strategy join forces to spotlight the promise of groundbreaking products for vital global markets. This is where you can meet experts who can help apply cutting-edge equipment, make sense of lean methods, and manufacture with composites, titanium, or other advanced materials.

WESTEC is where collaboration starts – a place to network, form relationships, and build partnerships. It is where technology takes center-stage, putting new developments, integration, and solutions right into your hands.

WESTEC is a showcase for the latest innovations from the leaders in manufacturing and where you can experience the people, technology and innovation that are redefining the future of manufacturing. Many technology breakthroughs of recent decades were unveiled at WESTEC.

The very latest technologies – from software, cutting tools to multi-tasking machines will be on display from top international equipment manufacturers. Plan to participate in WESTEC by registering at westeconline.com.

Another opportunity for manufacturers in the San Diego region to find local vendors is provided by CONNECT’s Nearsourcing Initiative, which focuses on assisting San Diego companies in need of outsourcing to take a closer look at our region’s local outsourcing cluster. The program includes workshops that educate our region’s innovation entrepreneurs on the benefits of contracting with local manufacturers, including reduced time to market, increased innovation and reduced risk and costs; and to assist San Diego innovation companies in need of outsourcing to Innovate Locally, Grow Globally – to connect and contract with qualified San Diego production resources.

The program ensures that business is not offshored unless necessary and keeps economic growth and job creation in our local region—which can be found in these case studies. The program also includes initiatives to market San Diego’s production capabilities and help local supply chains network, innovate and compete internationally. You can find more details on the program as well as access to the San Diego outsourcing community through The Connectory and the CONNECT Resource Guide.

The CONNECT Nearsourcing Initiative is led by a Steering Committee of Production Cluster leaders including Sharp HealthCare, D&K Engineering, Althea Technologies, Pharmatek Laboratories, Invetech, DD Studio, Leardon Solutions, BioLaurus, Solekai Systems, Clarity Design, the East County Economic Development Council, which owns and operates the Connectory – a database of 5,600 local production companies, the San Diego Regional Economic Development Corporation and intellectual property experts from Sheppard Mullin and Sughrue Mion.

There will be a Nearsourcing trade show in conjunction with the Connect with CONNECT networking event on October 30, 2013 from 3:00 pm – 5:00 pm at the offices of Knobbe Martens Olsen & Bear, 12790 El Camino Real, San Diego, CA 92130. You may register at http://connect.org/events/

I urge you to take the time to attend one of these events this fall if you are in the San Diego/southern California region. Now is the time to get on the bandwagon early to find local sources to “nearsource” or “reshore” by bringing back manufacturing to America. Hope to see many of you at one of these events!

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Second Annual Manufacturing Day Celebrates American Knowhow

Tuesday, September 24th, 2013

The mission of Manufacturing Day 2013 on Friday, October 4th is to highlight the importance of manufacturing to the nation’s economy, address common misperceptions about manufacturing by giving manufacturers an opportunity to open their doors, and show what manufacturing is — and what it isn’t.

Manufacturing Day has become an annual national event after its inaugural year in 2012 that is executed at the local level supporting hundreds of manufacturers across the nation that host students, teachers, parents, job seekers and other local community members at open houses designed to showcase modern manufacturing technology and careers.

In its first year, more than 240 events were held in manufacturing facilities in 37 states and more than 7,000 people participated. This year’s celebration will feature open houses, public tours, career workshops and other activities to increase public awareness of modern manufacturing. Events also will introduce manufacturers to business improvement resources and services delivered through the MEP’s network of hundreds of affiliated centers across the country.

By working together during and after Manufacturing Day, manufacturers will begin to address the skilled labor shortage they face, connect with future generations, take charge of the public image of manufacturing, draw attention to the many rewarding high-skill jobs available in manufacturing fields, and ensure the ongoing prosperity of the whole industry.

This year’s Manufacturing Day is being co-produced by the Fabricators & Manufacturers Association, International (FMA), the National Association of Manufacturers (NAM), the National Institute of Standards and Technology’s (NIST) Hollings Manufacturing Extension Partnership (MEP), Industrial Strength Marketing which is a leading industrial B2B marketing agency, and the Manufacturing Institute. The national media partner for the event is the Science Channel.

“Manufacturing Day is a great opportunity to shift Americans’ perception that it is not our grandfather’s manufacturing anymore and to showcase the tremendous career opportunities manufacturing has to offer,” said NAM President and CEO Jay Timmons. “This day is an engaging way to attract young people and get them excited about pursuing a career in a technology-driven, innovative environment that will also provide a good-paying job. We encourage all manufacturers and manufacturing associations to get involved and share what we already know—manufacturing makes us strong.”

A long list of trade associations and private companies have joined the effort as sponsors that includes Shell and the Alliance for American Manufacturing at the Gold level, The Association of Manufacturing Excellence, Precision Metalforming Association, SME Education Foundation, Association for Manufacturing Excellence, the Plastics Industry Trade Association, and IHS GlobalSpec at the Silver level, as well as many others at the Bronze level. The long list of endorsers on the website includes my own www.savingusmanufacturing.com organization.

“We’re honored to be a part of Manufacturing Day this year and look forward to helping make it a success,” said Scott Paul, president of AAM. “An innovative and growing manufacturing base is vital to America’s economic and national security, as well as to providing good jobs for future generations.”

“The co-producers could not be more pleased that these organizations and companies, which work on such an integral level with all sectors of the manufacturing industry, are putting their full support behind Manufacturing Day,” said Ed Youdell, president and CEO of the Fabricators & Manufacturers Association. “Their reputation and their reach to professionals in the industry, as well as educators and students, will help generate participation in Manufacturing Day events across the nation.”

The SME Education Foundation sees this is an opportunity for educators and parents to visit local employers with children, particularly those in middle school, to get them excited about the career opportunities available for those who have critically important STEM (science, technology, engineering and mathematics) skills.

“The SME Education Foundation is dedicated to opening multiple pathways for young people to find fulfilling, high paying careers in manufacturing.  Manufacturing Day is an opportunity to highlight manufacturing as vital to our economy and a career path that helps to growing wealth for the individual and for our nation,” said Bart A. Aslin, CEO, SME Education Foundation.  “Positive national media attention can help to dispel misconceptions about industries that provide safe, clean work environments while manufacturing products that improve standards of living in our global economy.”

Supported by this group of co-producers and industry sponsors, Manufacturing Day is designed to amplify the voice of individual manufacturers and coordinate a collective chorus of manufacturers with common concerns and challenges. The rallying point for a growing mass movement, Manufacturing Day empowers manufacturers to come together to address their collective challenges so they can help their communities and future generations thrive.

From now until Manufacturing Day, October 4th, enter the Manufacturing Day Sweepstakes to win a trip for two to a 2014 race of your choice, courtesy of Shell Lubricants. Eligible races include any of the Sprint Cup Series or Nationwide Series races during the 2014 season. The winner will be selected on October 7, 2013 and will be contacted shortly thereafter to claim their prize. Click here to enter today!

According to the 2012 Public Perception of Manufacturing report by the nonprofit Manufacturing Institute, 80 percent of Americans believe manufacturing is important to our economic prosperity, standard of living and national security. Yet, only 30 percent would encourage their children to go into manufacturing as a career. The hope is that by providing media, educators, parents, and kids with an inside look at the high-tech world of manufacturing this percentage will begin to grow.

With the gap growing each year between the skills students learn in school and those they will need on the job, it is increasingly difficult for manufacturers to find and hire qualified employees. By promoting Manufacturing Day, manufacturing associations and other organizations led by NIST MEP centers and the FMA said they want to remove some of the myths surrounding manufacturing. For example, manufacturing is a solid, long-term career choice for qualified candidates—including the young people who will form the workforce of tomorrow.

Here is a summary of a few reasons why we should acknowledge the importance of manufacturing by observing October 4th as Manufacturing Day that are outlined in greater detail in the chapter on “Why we should save American Manufacturing” from my book Can American Manufacturing be Saved? Why we should and how we can:

  • Manufacturing is the foundation of the American economy, and high-paying manufacturing jobs spurred a robust and growing economy and improved our quality of life. Manufacturing jobs were responsible for the lower working class rising into the middle class the last century.
  • Manufacturing is critical to our national defense because American manufacturers supply the military with the essential needed to defend our country. Without a strong manufacturing industry, America could lose future wars.
  • Manufacturing wages and benefits are 25-50 percent higher than non-manufacturing jobs. Only 16 percent of today’s workers earn the $20/hour ? down 60 percent since 1979.
  • United States is the world’s third largest exporter after China & Germany. Manufactured goods make up more than 60percent of U. S. exports, and high-tech products are largest export sector – four times as much as agriculture.
  • Manufacturing supports states’ economies through the taxes they pay. Manufacturing is the largest sector in 10 states, second largest in 9 states, and third largest in 21 states. Losing the critical mass of manufacturing will result in larger state and federal budget deficits. Over 90 percent of all manufacturers are small businesses of less than 100 people.

In my home town of San Diego, Manufacturing Day is being promoted by the California Governor’s Office of Business and Economic Development, the County of San Diego, the City of San Diego, the San Diego Regional Economic Development Corporation, the East County EDC, the San Diego North County EDC, CONNECT, California Manufacturing Technology Consulting (CMTC), the Tijuana EDC, and D&K Engineering. The day starts off with:

8 a.m.  Breakfast and Networking
8:30 – 10 a.m. Program
San Diego City College, Corporate Ed Center
1551 C Street, San Diego, CA 92101

Moderator: Mark Cafferty, President & CEO, San Diego Regional EDC

Panelists joining the conversation are:
Stephan Aarstol, Founder & CEO, Tower Paddle Boards
Alex Kunczynski, President, D&K Engineering

Rick Urban, COO/CFO, Quality Controlled Manufacturing Inc.

Chris Wellons, Vice President of Manufacturing, Taylor Guitars

Unfortunately, this event is already sold out, but you can add your name to the wait list at www.october4mfgday.eventbrite.com.

Tours:  Following this Kick-off breakfast, you are invited to tour various local manufacturers who have agreed to open their doors to the community. Further information and registration to attend the tours can be found at www.MFGDay.com. Click on “Attend an Event” to find a tour near you.

To learn more about Manufacturing Day or to sign up to host or participate in one of the events, log on to www.mfgday. Organizations that wish to become involved as official sponsors of this program may email info@mfgday.com.

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Protecting Intellectual Property is Critical to our Economy

Tuesday, September 10th, 2013

The U. S. economy has been the innovator of virtually all major technologies developed since World War II. The innovative technologies that American inventors and entrepreneurs have invented and developed have benefitted Americans in all aspects of their lives. American manufacturers have been responsible for more than two-thirds of all private sector R&D that led to these innovative new technologies. More than 90 percent of new patents derive from the manufacturing sector and the closely integrated engineering and technology-intensive services.

Innovation is the hallmark of U. S. manufacturing, and it requires a certain mass of interconnected activities, which like a snowball rolling downhill grows in size as it proceeds towards end users. Substantial R&D is required to keep the innovation ball rolling to ensure more successes than failures.

Manufacturing is an incubator for technology and science, so it is important that R&D be conducted in close proximity to manufacturing plants where innovative ideas can be tested and worker feedback can fuel product innovation.

Innovation and production are intertwined. You need to know how to make a product in order to make it better. “Most innovation does not come from some disembodied laboratory,” said Stephen S. Cohen, co-director of the Berkeley roundtable on the International Economy at the University of California, Berkeley. “In order to innovate in what you make, you have to be pretty good at making – and we are losing that ability.

In his book Great Again:  Revitalizing America’s Entrepreneurial Leadership, Hank Nothhaft, retired CEO of Tessera Technologies, writes that “In our arrogance and our own naiveté, we told ourselves that so long as America did the ‘creative’ work, the inventing, we could let other nations do the ‘grunt’ work – the manufacturing. We did not yet understand that a nation that no longer makes things will eventually forget how to invent them.”

Most cutting edge or break-through technologies are not generated by established, larger companies. They come from the creative innovations of entrepreneurs starting up companies. However, most of these entrepreneurs don’t startup their companies in a vacuum; they are most often started by people who have gained knowledge and experience at existing companies in a technology/product field and leave the company to develop their own innovative new product in that same field.

These entrepreneurs need to have protection for the intellectual property of their new technologies via the patent system in order to raise the investor funds they need to move forward in developing the technology into a marketable, producible end product. Angel investors and venture capital investors invest their monies in a combination of the entrepreneurial team and the innovative, even disruptive technology. If the intellectual property is not secured through a “patent pending” or issued patent, there is nothing in which to invest.

Economist Pat Choate, author of Saving Capitalism: Keeping America Strong, emphasized how important the protection of Intellectual Property is to the future of American manufacturing at the “Making California Thrive” Manufacturing summit last February facilitated by the Coalition for a Prosperous America. He said that the U. S. is the most innovative country in the world and issues more patents than any other country. However, the recent passage of the America Invents Act converting the U. S. from a “first-to-invent” to “first-to-file” is hurting our innovation. Most growth comes from “disruptive” technology developed by inventors/entrepreneurs of small companies, and the “first-to-file” favors large companies that can file a challenge against these small companies in the hopes of bankrupting them to avoid disruptive technology from harming their business.

In the last two decades, the competitive status of U. S. manufacturing has been increasingly challenged by the state-of-the-art technologies being developed by established nations such as Japan, Germany, Korea, and Taiwan. While emerging economies, such as China, are acquiring advanced manufacturing capability through R&D tax incentives and incentives for direct foreign investment, they still rely heavily on counterfeiting, pirating, and theft of American intellectual property to compete unfairly.

In the July 12th article in The Hill, Stephen Ezell, a senior analyst with the Information Technology and Innovation Foundation, wrote “IP-intensive industries are foundational to the U.S. economy. They contribute over $5.1 trillion in U.S. economic output, accounting for nearly 35 percent of U.S. GDP in 2010, as the U.S. Department of Commerce found in its report Intellectual Property and the U.S. Economy: Industries in Focus. At the same time, IP-intensive industries exported more than $1 trillion worth of goods and services in 2011, accounting for approximately 74 percent of total U.S. exports that year, and supported at least 40 million jobs, or 20 percent of all U.S. private sector employment.”
He criticized the testimony that the Government Accountability Office (GAO) provided to the House Committee on Energy and Commerce Subcommittee on Oversight and Investigations regarding Insights Gained from Efforts to Quantify the Effects of Counterfeit and Pirated Goods in the U.S. Economy because it ignored previous reports of the International Trade Commission and the IP Commission.

Instead of providing new data, the GAO report laments the fact that “quantifying the economic impact of counterfeit and pirated goods on the U.S. economy is challenging primarily because of the lack of available data on the extent and value of counterfeit trade.”

He pointed out that the ITC report, “China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy, estimated that in 2009 alone Chinese theft or infringement of U.S. intellectual property cost almost one million U.S. jobs and caused $48.2 billion in U.S. economic losses due to lost sales, royalties, or license fees. The report found that, ‘Of the $48.2 billion in total reported losses in 2009, approximately $36.6 billion (75.9 percent) was attributable to lost sales, while the remaining $11.6 billion was attributable to a combination of lost royalty and license payments.’”

He added that the more recent “IP Commission Report, a report from the Commission on the Theft of American Intellectual Property, found that the impact of international IP theft on the U.S. economy exceeds $320 billion annually, comparable to the level of U.S. exports to Asia.”

On June 20, 2013, the White House released the 92-page 2013 Joint Strategic Plan on Intellectual Property Enforcement. The press release states, “Since the first Joint Strategic Plan was released in 2010, the Administration has made tremendous progress in intellectual property enforcement. Coordination and efficiency of the Federal agencies has improved; U.S law enforcement has increased significantly and we have successfully worked with Congress to improve our legislation. We have increased our focus on trade secret theft and economic espionage that give foreign governments and companies an unfair competitive advantage by stealing our technology. We have pressed our trading partners to do more to improve enforcement of all types of intellectual property.”

It’s outrageous that the plan takes 92 pages to describe actions that are either the same as actions in the 2010 plan or are so ridiculously vague or redundant that they are virtually worthless, such as:

  • Support small and medium-size enterprises in foreign markets.
  • Coordinate international capacity-building and training.
  • Improve transparency in intellectual property policymaking.
  • Examine labor conditions.
  • Assess the economic impact of intellectual property-intensive industries.
  • Use legal software.
  • Educate authors on “fair use” copyright doctrine

What inventors and entrepreneurs need most is enforcement of current laws. Thus, the most useful actions in the new plan are:

  • Improve IPR enforcement efficacy by leveraging advanced technology and expertise.
  • Increase focus on counterfeits shipped through international mail and work with express carriers.
  • Evaluate the enforcement process of exclusion orders issued by the U.S. International Trade Commission (ITC).
  • Promote Enforcement of U.S. Intellectual Property Rights through Trade Policy Tools

I seriously question whether this plan will enhance protecting America’s Intellectual Property. In addition, how will we know if it is successful if we don’t have current data on the extent of Intellectual Property theft and the damage it is causing to the American economy?

I agree with Mr. Ezell that the above plan “must be effectively implemented and the federal government needs to make it clear that it will no longer tolerate foreign entities counterfeiting or pirating U.S. goods, stealing trade secrets, copying digital content, or otherwise taking U.S. property without paying for it.”

Since innovation and creativity are part of the foundation of our country’s economy, we need to have effective enforcement of intellectual property rights to promote economic growth, ensure our global competitiveness, and protect the health and safety of our citizens. If we want to remain at the cutting edge of technology and innovation and maintain the critical mass of our manufacturing industry, we also need to protect the key to our future security as a nation and keep the R&D that fuels innovation and the subsequent manufacture of products within the United States.

 

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Why it is Important to Know Where Products are Manufactured

Tuesday, September 3rd, 2013

At a time when more consumers are paying attention to where products are made and expressing greater interest in buying “Made in USA” products even if they cost more, there are changes proposed that could impact consumers being able to make decisions on the products they buy.

The first reason we need to know where products are manufactured is to have a clear picture of whether the nearly six million manufacturing jobs we have lost since 2000 have been mainly the result of technologic advances and higher productivity in the U. S. or whether outsourcing to foreign countries like China has been the main cause.

For decades, there have been companies referred to as manufacturers that I called “virtual manufacturers.” in my book. These companies have no manufacturing capability in-house. Sometimes they don’t even have the personnel to design the product. The founders of the company may have a concept of the new product they wish to develop and market, but they don’t have the technical expertise to do the design and development themselves. They hire outside consultants to design and develop the product or subcontract the design, development, and prototyping to a company specializing in these services. At the extreme end, they subcontract out everything from start to finish, including engineering design, procurement of parts and materials, assembly, test, inspection, and shipping to the end customer. They may handle marketing and customer service themselves, but sometimes they even subcontract these functions to marketing and customer service firms. There was no real impact on U. S. manufacturing data as long as these U. S. companies outsourced their manufacturing to other domestic manufacturers.

However, in the past 20 years, these virtual manufacturers have increasingly outsourced most or all of their manufacturing offshore. This resulted in U. S. federal agencies involved in economic data labeling them as “factoryless goods producers” and classifying them as “wholesale traders,” if they didn’t do any domestic manufacturing themselves. Apple, Nike, and Cisco are some of the more well known “factoryless goods producers” because of having their manufacturing outsourced offshore.

Now, U.S. federal agencies involved in economic data want to change the way they classify companies that have outsourced their U.S. production to foreign manufacturing companies. They are proposing to reclassify these “wholesale traders” as “domestic manufacturers.” This means that their sales would be counted as U.S. production and their products that are made offshore and imported into the U. S. for sale would no longer be counted as imports.

As reported in the August 20th issue of Manufacturing & Technology News, the purpose of this change is supposedly “to determine how much products are been offshored and to pinpoint the number of American companies that are linked to manufacturing, even though they don’t make the products they design and sell.”

For the past decade, “U.S. statistical agencies found that the North American Industry Classification System (NAICS) did not provide a clear definition of companies that outsourced their production overseas, but that still owned the design and controlled the production and sale of goods from that foreign production.” A Manufacturing Transformation Outsourcing Subcommittee was formed in 2008 by the Economic Classification Policy Committee “to define outsourcing and identify “characteristics of establishments that outsource manufacturing transformation activities.” The committee was made up of representatives from the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau and the White House Office of Management and Budget.

“The committee decided that all factoryless goods producers should be classified in manufacturing, the specific industry classification based on the transformation production process used by the contractor”  and recommended that the classification changes be implemented in the 2017 North America Industry Classification System.

There is disagreement on whether this change would be beneficial as it would impact a dozen major government statistical series, such as industrial production, producer price indexes, and industrial productivity.

In my opinion this change would result in data that is misleading and wouldn’t be giving a true picture of American manufacturing. We would not be able to know how much is actually being produced in the United States if we count imports from offshore as if they are domestic production. This change could radically increase U.S. production statistics and reduce our import statistics making our trade balance artificially look better.

A better way to find the answer to this question has been provided by San Diego entrepreneur and businessman, Alan Uke in his book, Buying America Back:  A Real-Deal Blueprint for Restoring American Prosperity. Mr. Uke writes, “Our future as a nation and as individuals is being threatened. Since our spending habits as consumers have contributed to this situation, we can change our spending habits to reverse it… in order for a change to happen, consumers must demand to be more honestly and completely informed about what they are buying and where their money goes. To this end, we are starting a consumer movement to bring this to the attention of Congress…The goal of this movement and of this book are to encourage people to change their buying habits toward purchasing things that help the U. S. economy and job situation.”

He points out that the current information provided on country of origin labels is “misleading, incomplete, inaccessible, or all of these…In order to support our economy and American industries, we must have easily accessible, clearly communicated, and truthful information about a product’s entire origins.”

Mr. Uke recommends that consumers be provided the country of origin information they need at the point of sale whether at a store or online and presents a proposal for the U. S. government to require detailed country-of-origin labels for all manufactured products similar to the nutritional information labels now required on packaged food products. He feels that it is important for consumers to “see the last place where the product was manufactured” and “to discern what portion of its components came from other places” by use of what he calls a “Transparent Label.” It would include the cost by country of origin by both percentage and trade ratio, as well as the location of the company’s headquarters. The percentage is the total cost of the product that is produced or transformed in a particular country. The trade ratio describes the amount of exports vs. imports for a country in relation to the United States. This label would enable consumers to make better decisions when they buy manufactured goods.

The second reason we need to know where products are manufactured is to protect ourselves from unsafe, defective, toxic, and counterfeit products. The U. S. Consumer Protection Safety Commission’s website provides a monthly list of products that have been recalled, and month after month, more than 90% are made in China.

A label similar to Mr. Uke’s recommendation would help companies comply with the new product safety standard (ISO 10377) recently released by the International Standards Organization (ISO):  The “Consumer Product Safety — Guidelines for Suppliers” standard (ISO 10377). The summary written by Dr. Elizabeth Nielsen, Chair of ISO/PC 243, Consumer product safety and a Canadian government Scientist, Regulator and Policy Analyst, states, “Regardless of company structure and organization, ISO 10377 will affect all suppliers irrespective of their role in the supply chain and all types of products whatever the origin.”

“Products should be traceable and carry a unique identifier that is labelled, marked or tagged at the source. This also goes for raw materials, components and subassemblies. Suppliers should insist on properly identified products from vendors and be able to trace products back to their direct source and identify the next direct recipient of the product in the supply chain.”

This standard has a different purpose for labeling than Mr. Uke’s label:  to protect consumers from unsafe, defective, toxic, and counterfeit products. “Products are safer when they carry documentation about the product, its design, its production and its management in the market…Suppliers should be able to recognize a product’s development through its documentation and trace its design, risk assessment, hazard analysis and testing decisions back to its conception.”

ISO 10377 is “aimed at small and medium sized enterprises (SMEs) as well as larger firms and offers risk assessment and management techniques for safer consumer products. This standard will allow retailers and OEMs to trace every part and component of a product through the supply chain to determine exactly where a defect or a counterfeit has occurred.” The standard is divided into four main sections outlining general principles that promote a product safety culture in a company, safety in design, safety in production and safety in the retail marketplace.

Either Mr. Uke’s “Transparent Label” or the label required by ISO 10377 would satisfy both reasons for wanting to know where products are manufactured. This type of label would provide protection for consumers from unsafe, defective, toxic, and counterfeit products and would help us to recognize the main cause of the loss of manufacturing jobs in the United States. We need to face up to the true cause of the loss of manufacturing jobs before we can get any consensus of what to do about it by means of our national policies. We need to oppose reclassifying “wholesale traders” as domestic manufacturers and support “country of origin” labeling by contacting our Congressional representatives.

 

 

 

 

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