Is There Really Free Career Technical Training?

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?

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 »

Deadly Food Products Coming to a Store Near You?

October 29th, 2013

For the last several years, there has been one story after another about tainted or even deadly food or ingredients to human and pet food coming from China. The two latest stories were  the jerky treats that caused hundreds of pet deaths and the laundering of honey coming from China by a German importer. However, the majority of Americans are blissfully ignorant of the origin of many of the food products stocked in their neighborhood stores. If they really knew the source of many of the products they buy, they would be horrified. The public outcry would be sufficient to put enough pressure on our elected officials to remedy the situation rapidly.

More than a hundred years ago, there was an exposé of the Chicago meat packing industry in Upton Sinclair’s The Jungle, followed by many other articles in the Progressive Era publications of the day. There was a huge public outcry. As a result, President Theodore Roosevelt sent labor commissioner Charles P. Neill and social worker James Bronson Reynolds to Chicago to make surprise visits to meat packing facilities. Although the meat packers were tipped off in advance about their visits, they saw enough revolting conditions at the meat packing plants to corroborate the claims of the many articles and submitted a report to the president and Congress.

As a result, the Federal Meat Inspection Act of 1906 (FMIA) was passed by Congress and signed by President Theodore Roosevelt to prevent adulterated or misbranded meat and meat products from being sold as food and to ensure that meat and meat products are slaughtered and processed under sanitary conditions. All labels on any type of food had to be accurate (although not all ingredients were provided on the label). Even though all harmful food was banned, there were still few warnings provided on the container. USDA inspection of poultry was added by the Poultry Products Inspection Act of 1957.

Also in 1906, President Theodore Roosevelt signed into law the Pure Food and Drug Act, under which the Food and Drug Administration (FDA or USFDA) was formed as an agency of the United States Department of Health and Human Services. The Federal Food, Drug, and Cosmetic Act (abbreviated as FFDCA, FDCA, or FD&C) was passed by Congress in 1938 to replace the earlier Pure Food and Drug Act of 1906 and gave authority to the USFDA to oversee the safety of food, drugs, and cosmetics. This Act has been expanded to include food coloring, food additives, bottled water, homeopathic products, and foods produced by genetic engineering and natural sources. Genetically modified food is regarded as containing a “food additive” and is subject to pre-market approval by the FDA if the protein added to the food by the genetic engineering process is not “generally recognized as safe.” On May 28, 1976, the FD&C Act was amended to include regulation for medical devices. The amendment required that all medical devices be classified into one of three classes.

The FDA is now responsible for protecting and promoting public health through the regulation and supervision of food safety, tobacco products, dietary supplements, prescription and over-the-counter pharmaceutical drugs (medications), vaccines, cosmetics, biopharmaceuticals, blood transfusions, medical devices, electromagnetic radiation emitting devices (ERED), and veterinary products.

Six years ago, there was the biggest pet food recall in history when a Chinese producer contaminated dog and cat food with melamine, a compound used in plastics, causing the deaths of animals across the United States. The public outcry helped lead to the inclusion of animal food in the Food Safety and Modernization Act, a landmark food safety bill passed in 2010 that was the first major overhaul of the Food and Drug Administration’s food safety laws since the 1930s. It gave the USFDA more control over food imports as well as broad new powers to set standards to prevent contamination of produce and processed food.

After the latest scandal regarding jerky treats for pets imported from China, the Food and Drug Administration published a proposed regulation on October 29th that would govern the production of pet food and farm animal feed for the first time. This would help prevent food-borne illness in both animals and people.

The problem with passing more regulations for the USFDA to handle is that it is grossly understaffed and underfunded for its complex and growing regulatory mission. The 2012 budget was only $4.36 billion, and the budget request for 2013 was $4.5 billion. About 45%, or $2 billion of the 2012 budget, is generated by user fees. Pharmaceutical firms pay the majority of these fees, which are used to expedite drug reviews.

The USFDA regulates more than 80% of America’s food supply and $1 trillion worth of consumer goods. Much of the expenditures are for goods imported into the United States. While the USFDA is responsible for monitoring a third of all imports, it only inspects less than 1% of food imports at the ports of entry. Many foreign countries such as China don’t have the same or any standards for source inspections that are required for food manufactured in the United States. They don’t have the same regulations against harmful pesticides and environmental pollution. Thus, importers are bypassing all of these inspections and regulations so can sell their products cheaper. This means that when you eat imported foods, you are playing the Chinese food version of “Russian roulette.”

We need to increase funding for the USFDA, and one simple way would be to require importers to pay a fee for screening of imports  to the USFDA for imports that are under its jurisdiction. This would enable the USFDA to add more staff to expand their inspection of imported goods, especially food imports.

You may be thinking that the U. S. Consumer Protection Agency is recalling food products that are determined by the USFDA to be contaminated or toxic, but you won’t find any food products listed if you go to their site to see the list of the products recalled for the month. This agency recalls manufactured products such as appliances, electrical goods, and toys, etc. The USFDA website lists all of the food, drug, and cosmetic recalls. No country of origin information is listed on the USFDA website. The Consumer Protection agency website has been revamped this year to make it more difficult to find out where a product is manufactured. Previously, you would see the list of products recalled, and the country of manufacture would be listed with the description of the product and why it was recalled. Now, it is a two-step process. On the first page, you see an image of the product and the reason why it was recalled, but no country is listed. You have to select finding products by country of manufacture to get the list for a particular country, such as China. Now, it would be more difficult to come up with how many products are coming from China compared to other countries.

The best solution for this problem would be for Congress to pass a law requiring country-of-origin labels for all human and pet food products similar to the nutritional information labels now required on packaged food products so consumers can see where their food is coming from. San Diego entrepreneur and businessman, Alan Uke has proposed what he calls a “Transparent Label.” in his book, Buying America Back:  A Real-Deal Blueprint for Restoring American Prosperity. He wants such a label for all manufactured products, which would include food for humans and pets. 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.” In the case of food, it should include country-of-origin for all of the major ingredients so that consumers would be able to make decisions on whether or not they want to buy a product based on the origin of the major ingredients.  Mr. Uke also recommends that consumers be provided the country of origin information they need at the point of sale whether at a store or online.

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.” We desperately need to have such a “Truth in Origin” label.

Hundreds of American pets have been poisoned and died by tainted food products from China. American children have already been harmed by dangerous levels of lead and cadmium in toys. How many Americans must die from tainted Chinese products before Congress acts?

Posted in Environment, Taxes/Regulations, Trade Policy | 1 Comment »

Decline in Capital Investment is Threat to American Innovation

October 22nd, 2013

In early October, the Information Technology and Innovation Foundation released a report titled “Restoring America’s Lagging Investment in Capital Goods,” by Luke A. Steward and Robert D. Atkinson. The report analyzes trends in private sector investment in capital goods over the last three decades, investigates the causes of the current decline, and proposes policy reforms designed to spur increased investment growth. The authors warn that this serious decline in capital investment over the last decade is a key threat to economic growth.

The authors state, “Private capital investment is the primary means through which innovation, the key driver of economic growth, diffuses throughout the economy.” Business investment in equipment, software and structures grew by only 0.5 percent from 2000 and 2011 compared to an average of 2.7 percent between 1980 and 1989 and 5.2 percent per year between 1990 and 1999.

The authors make a strong case about why capital investment matters in developed, knowledge-based economies like the United States. While innovation powers long-run economic growth, the mere act of innovating is not sufficient to grow an economy. Innovation must diffuse through the economy by being adopted by other companies that seek to improve productivity or the quality of products or services. It is the purchase of machinery, equipment, and software by companies that is capital investment that spreads the innovation throughout the economy.

“Capital investment acts as a diffuser of innovation because innovation is embedded in new investment”  Industrial equipment such as engines, metalworking machinery, and materials handling equipment; transportation equipment like trucks and aircraft; construction machinery, agricultural or mining equipment are now “infused with highly advanced technologies, and each new generation is better than the last.”

After a comparison of neoclassical economies and neo-Keynesian economies with innovation economies such as the United States, they conclude that innovation economies require high rates of capital investment in order to be utilized. This innovation economy is also referred to as “the new growth theory, in which investment in new machinery, equipment and software spreads innovation. By high rates of investment, they do not mean a high amount of equipment, software and structures. They “mean that the capital stock is refreshed and replaced with newer and more productive machinery, equipment and software.” They write, “The value of investment is not in acquiring more machinery and equipment; it is in acquiring newer and more productive equipment… A high rate of investment enables innovations to swiftly spread through the economy, bestowing their economic benefits upon their users.”

The authors show that a second reason why “capital investment matters is that it has substantial ‘spillover’ benefits—that is, benefits not just for the firm making the investment, but also for the rest of society…Many economists acknowledge that investments in the production of innovation (such as R&D) have spillovers, and that this is why policies like the R&D tax credit are important. But fewer recognize that investments in new machines, equipment and software also have spillovers.”

The report continues with an analysis of capital investment trends, focusing on information processing equipment and software (IPES). While IPES assets grew at the very rapid rate of 681 percent compared to the next highest, transportation, at 69 percent from 1980 to 2011, the growth rate of even IPES stagnated in the decade of the 2000s.

The authors conclude: “This stagnation means that business investment rates are actually falling relative to the size of the economy…As a share of GDP, fixed investment was higher in the early 1980s—around 13 percent of GDP—than in any subsequent year. In 2011, fixed investment accounted for less than 10 percent of GDP. Given that it is investment that drives productivity growth, these statistics are sobering. Out of all the fundamental components of GDP—consumption, investment, government, and net exports—a fall in the relative magnitude of investment is the most worrying in terms of future economic performance.”

While equipment investment is far more important than investment in structures (buildings), in 2011, “the number of new manufacturing structures is no longer keeping pace with the depreciation of existing manufacturing structures, which, in turn, means that the real quantity of manufacturing facilities in the United States is shrinking…Between 2001 and 2011, the net stock of manufacturing structures fell by more than nine percent, a fall which, given investment’s continued decline, will also undoubtedly continue.”

A decline in value of manufacturing structures in the United States is only a symptom, not a driver, of a decline in the international competitiveness of the U.S. manufacturing sector. The decline of “investment equipment and software investment is more of a driver of competitiveness, and thus its decline is far more ominous.”

Total business investment in equipment and software grew in the 1980s, boomed in the 1990s, and then stagnated in the 2000s. Between 1980 and 1991, equipment and software investment increased by 37 percent compared to just 2 percent between 2000 and 2011. This means that investment in equipment and software is falling relative to the size of the economy just like total investment.

The picture looks even worse when the IPES assets are removed from total equipment assets, leaving only assets such as industrial machinery and transportation equipment. “Instead of merely stagnant growth, non-IPES investment has declined over eight percent since 2000.”

The next section of the report compares investment in equipment and software by industry, showing that “the composition of investment went from being spread over a broad base of sectors, especially in the 1990s, to being concentrated in a few select sectors in the 2000s.” Industries such as trade and transportation, health, and management and professional services expanded slightly. “Manufacturing led in the 1980s and 1990s but was displaced in the 2000s by finance and real estate, much of that made in the ramp up to the financial collapse of 2008.”

Not only did business investment stagnate in the 2000s, but investment is “now much more concentrated in a few select domestic-serving services industries, and industries that once powered U.S. investment growth and global competitiveness are now falling behind,” such as computers and chemical products.

The investment trends in the computer and electronic products industry are even worse than other manufacturing sectors:  “a 36 percent decline in equipment and software investment since 2000.”

The authors propose two possible reasons for the causes of investment stagnation:

  1. Decline in the competiveness of U.S. traded-sector businesses on the global market that has been occurring, particularly over at least the past decade
  2. “Short-termism”—the obsession with the upcoming financial report rather than long-range planning—that pervades publicly traded businesses facing stockholder pressures

Numerous other reports have described the U.S. competitive decline over the past decade so this report just summarizes a few of the key points that have been made in other reports and previous articles I have written. The end result is that the United States has lost its attractiveness as a production location for manufacturing, and when those businesses move offshore to other countries, they take their investment along with them. In addition, fewer foreign firms are making investments here in the United States. Thus, investment declines in one industry sector after another.

With regard to “short-termism,” the authors mean “the pressure on companies by Wall Street to achieve short-term profits has all too often come at the expense of long-term investment.” In other words, executives are willing to “delay new investment projects in order to meet short-term earnings targets, even if it meant sacrifices in value creation.”

Atkinson and Steward urge policymakers to put in place new policies to encourage the private sector to restore investment rates and stem the decline and stimulate new investment and productivity growth. They recognize that the first step to addressing market short-termism is for Congress and the Obama administration to acknowledge and take the problem seriously, and the next step is to begin a detailed analysis of the problem. They recommend the following actions:

Establish a Task Force to Study Market Short-Termism and Recommend Policies to Ameliorate It ?  The White House should establish a task force, led by the National Economic Council, bringing together members of the Council of Economic Advisers and the Treasury Department, to study the causes and nature of short-termism and draft a set of recommendations to ameliorate it. “The task force should analyze all potential options for reigning in market short-termism, ranging from changes to tax law to corporate governance solutions to encouraging changes in the U.S. corporate cultures within business schools, corporate boardrooms and ‘Wall Street.’”

Establish a Tax Credit for Investing in Equipment and Software ?  Congress should enact an investment tax credit (ITC) to provide a 35 percent credit on all capital expenditures made above 75 percent of a base amount. The ITC would be modeled on the Alternative Simplified Research and Experimentation Tax Credit (ASC).

This report proves that as investment declines, economic growth declines, and as economic growth declines, the capital available for investment and demand for new investment declines. If this trend continues, innovation will slow, competitiveness will continue to decline, and productivity growth will weaken. I agree with the authors that “it is essential that policymakers make challenging this problem a top priority. The authors’ policy recommendations may not be the only solutions to the problem, but “many countries have similar policies in place already—they will at least put the United States on a more equal f

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Posted in Innovation, National security, Taxes/Regulations | 2 Comments »

Fall Trade Shows Provide Nearsourcing and Reshoring Opportunities

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

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

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

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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“Death by China” Film Shows where all the Jobs Have Gone

August 27th, 2013

Are you wondering where all the good jobs have gone? Why do we have less tax revenues creating an out-of-control Federal budget deficit? Why are you working harder for less money than you did in the 1990s?

Death by China, based on the book by Peter Navarro and Greg Autry, shows how the world’s most populous nation and soon-to-be largest economy is rapidly turning into the planet’s most efficient assassin through its shoddy and even poisonous products and environmental pollution. China’s perverse form of capitalism combines illegal mercantilist and protectionist weapons to pick off American industries, job by job. Meanwhile, America’s executives, politicians, and even academia remain silent about the looming threat. To read my full review of the book, click here.

Director Peter Navarro is an internationally acclaimed expert on U.S.-China relations, a regular contributor on CNN, CNBC, MSNBC and the Huffington Post, and a professor of economics at the University of California, Irvine. Greg Autry is an entrepreneur, writer, and educator. He has published extensively on business, economics, trade policy, China and space. Greg serves as Senior Economist for the American Jobs Alliance and economist for the Coalition for a Prosperous America. Both Navarro and Autry have testified to the U.S. Congress on China issues.

To Navarro and Autry, the success of the film will be measured by the ability of the public to spur politicians to finally recognize that “the best jobs program for America is trade reform with China – not more empty fiscal and monetary stimulus.”

The film review on “rottentomatoes” states, “Death by China pointedly confronts the most urgent problem facing America today – its increasingly destructive economic trade relationship with a rapidly rising China. Since China began flooding U.S. markets with illegally subsidized products in 2001, over 50,000 American factories have disappeared, more than 25 million Americans can’t find a decent job, and America now owes more than 3 trillion dollars to the world’s largest totalitarian nation. Through compelling interviews with voices across the political spectrum, Death by China exposes that the U.S.-China relationship is broken and must be fixed if the world is going to be a place of peace and prosperity.

The New York Times review states, “The film, based on a book by Peter Navarro and Greg Autry and directed by Mr. Navarro, is blunt as can be in working the premise that the admission of China to the World Trade Organization in 2001 has been catastrophic for the American economy. The influx of Chinese goods has left American manufacturers unable to compete, the film says, and Chinese leaders have been brashly ignoring rules about things like currency manipulation to make sure that their country’s products remain artificially cheap.”

In this review article, Daniel M. Slane of the United States-China Economic and Security Review Commission said, “American companies cannot compete because they’re not competing with Chinese companies, they’re competing with the Chinese government.”

The New York Post review states, “Narrated by Martin Sheen, the film looks at what it calls America’s increasingly destructive trade relationship with China — we owe them $3 trillion — which goes back to the Asian nation’s entry into the World Trade Organization in 2001. We hear claims that instead of helping both lands, as President Clinton promised at the time, the deal has resulted in the loss of millions of American jobs and the influx here of shoddy, even deadly Chinese products. Death by China gives that nation a black eye for currency manipulation, intellectual-property theft, political persecution and serious environmental pollution.”

Paste Magazine’s review states, “With his Harvard pedigree and his acclaimed credentials, Navarro is an authority on the subject of the U.S.-China trade relationship. Death by China features him along with several geopolitical experts and activists spelling out exactly how and why this nation’s corporate-political nexus sold out the American worker and consumer to the tune of thousands of factories, millions of jobs and trillions in debt owed to the Chinese.

And who’re the losers in this scenario? Interviews with out-of-work factory workers, college graduates and with both Democratic and Republican legislators paint a picture of widespread blight as unemployment destroys communities and consumers find themselves without any choice but to buy Chinese-made goods.”

Navarro commented: “My goal in creating the film is to draw attention to the urgent need for trade reform with China, and to ensure that it becomes a top priority for legislators. We hope to give the highest possible visibility to an issue that is all too often ignored by politicians, journalists and consumers alike – the incredibly corrosive loss of America’s once formidable manufacturing base to a cheating China. The fact that our government has turned a blind eye to China’s deceitful policies has had an enormously negative impact on the American economy and the standard of living of millions of Americans.”

Francesca McCaffery of Blackbook Magazine said, “A truly life-changing, mouth-dropping documentary film…Peter Navarro’s ‘Death by China’ grabs you by the throat and never lets go…But watch this movie, and you will, in turn, start glowing with a newfound, hit-on-your-head awareness.”

The Hollywood Report review points out that “Narrator Martin Sheen warns upfront that it’s important to “distinguish clearly between the good and hard-working people of China, and their repressive Communist government victimizing American and Chinese citizens alike.”

Death by China made its theatrical debut in Los Angeles and New York in June of 2012 and played theatrically in over 50 cities across the U.S. including key manufacturing cities such as Akron, Chicago, Dayton, Detroit, Cincinnati, Columbus, Detroit, Milwaukee, Pittsburgh, Toledo, Youngstown and many more.

This was opposite of the typical course of documentary films being shown at festivals first and then in theaters. Navarro and Autry wanted to open the film in theaters throughout the swing states during the 2012 presidential election to draw attention to the issue China’s exploitation of our economy.

After the election, Death by China made a series of festival appearances through the end of June 2013. All total, the film was shown at more than 25 festivals – from Beaufort, South Carolina; Macon, Georgia; and New York City to Green Bay, Wisconsin; Sedona, Arizona; and San Luis Obispo, California.

As part of its festival activity, the film garnered three best documentary awards from festivals in Beverly Hills, Durango, and Studio City. “It was a Best Doc nominee at the Cape Fear Independent Film Festival, was first runner up at the Myrtle Beach festival, and received a Golden Ace award from the Las Vegas Film Festival.”

Don’t miss the following opportunity to see this film. If you are not located in the region, please check the Death by China website for other screenings. If you or your organization would like to sponsor a screening, please contact Peter Navarro.  Of course, you can also order the DVD to watch on your own TV.

The Coalition for a Prosperous America presents:  A Screening of Death by China, A Documentary Film by Peter Navarro and Greg Autry

When: Wednesday, September 18th, 2013, Doors open 6:00 PM, event starts at

6:30 PM.

Where: AMN Healthcare, 12400 High Bluff Drive, San Diego, CA 92130 (exit Carmel Valley Road off Int. 5)

Cost: $10.00 (refreshments served)

Agenda

Introduction: Michele Nash-Hoff, Chair, California chapter of the Coalition for a Prosperous America

Film: “Death by China”, directed by Peter Navarro and produced by Greg Autry, CPA Economist

Discussion/Q and A: Greg Autry, Producer, Death by China, Economist, Coalition for a Prosperous America

Following the film there will be a discussion and Q and A to talk about how the Coalition for a Prosperous America is working to build a smart trade policy that will counter China’s, and other nation’s, trade cheating and move manufacturing back to America.

Register today at the CPA site: prosperousamerica.org

For more information, please contact Sara Haimowitz (sara@prosperousamerica.org,)

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

Reshoring is Answer to Corporations Cutting U. S. Jobs and Adding Jobs Offshore

August 20th, 2013

As originally reported in a Wall Street Journal article in April 2011, U. S. Department of Commerce data shows that major U. S. corporations cut their work forces in the U. S. by 2.9 million jobs during the 2000s while increasing their employment overseas by 2.4 million.

This trend continues according to data revealed by Trade Assistance Adjustment (TAA) filings made to the U. D. Department of Labor in a recent article in Manufacturing & Technology News. TAA provides benefits and training to workers displaced by trade and sifting manufacturing offshore. The article lists 50 companies that laid off workers in the first three weeks of July, about 80% of which were manufacturing jobs. Other types of jobs displaced were customer service, technical support, information technology, data processing, and even engineering design. TPA assistance is like putting a bandage on after your arm was cut off.

While over 25 companies were shifting manufacturing offshore to China or India, it was surprising to see that Mexico was the next highest location to which manufacturing was being shifted. The reason for this is that new data produced by the Bank of America shows that labor rates in Mexico could be lower than China by as much as 20%, quite a change from 10 years ago when Mexican labor rates were 188 percent higher than China.

Other reasons for this switch to Mexico are lower transportation costs, faster delivery, higher productivity from automation, more reliable quality, and better payment terms than from China. As a resident of the border region of California and Mexico, I have seen this first hand. “Nearsourcing” to Mexico is occurring when reshoring to the U. S. is not economically justifiable at the present time.

Our major regional organization, CONNECT, has a Nearsourcing Initiative focused on matching San Diego companies in need of outsourcing with the region’s local manufacturers. “The program includes workshops that educate the 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 a matchmaking program that helps San Diego innovation companies in need of outsourcing to Innovate Locally, Grow Globally – to connect and contract with qualified San Diego production resources.” Educational workshops and networking meetings have been held over the past two years, and manufacturers are encouraged to seek local vendors or even be matched with regional vendors by using the www.connectory.com database of primary industries, developed by the East County Economic Development Council, and the CONNECT Resource Guide.

CONNECT’s SME (Small-Medium Enterprises) Operations Roundtable group has also taken the lead in educating San Diego’s regional manufacturers on how to use the Total Cost of Ownership EstimatorTM developed by Harry Moser of the Reshoring Initiative, by means of a presentation I gave with a local contract manufacturer in February as an authorized speaker on behalf of the Reshoring Initiative.

It is crucial for American companies that do not have offshore plants to be trained on how to do a true Total Cost of Ownership Analysis using the TCO Estimator as a counter to the continuing trend of offshoring manufacturing jobs by multinational corporations that have facilities all over the world. For multinational corporations, the U. S. market represents a smaller piece of a bigger whole in the global economy. While offshoring may no longer be a relentless search for the lowest wages, many corporations go to Brazil, to China, to India, and other countries because that is where their customers are located.

I believe that training people performing two particular job functions is one of the keys to facilitating more reshoring ? supply chain personnel and Chief Financial Officers (CFOs). I have had the pleasure in the past year of speaking to three regional APICS’ chapters and a four-state regional conference last weekend. APICS is composed of supply chain/logistics people. I learned that in the 13th edition of APICS’ dictionary, the definition of Total Cost of Ownership is:  “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.” This is a good definition, not as complete as mine, but good. If supply chain personnel had utilized this definition in the past decade, a great deal of offshoring would never have occurred.

My question to conference attendees was what prevented the utilization of this good definition. One answer was:  We were not allowed to consider anything but the piece price and sometimes transportation costs in making the decision to select domestic vs. offshore vendors. Another answer was:  We were being mandated by upper management to outsource to China to save money. Others thought that their managers were doing what everyone else was doing; i.e., going to China to save money. In other words, they were following the “herd mentality” like buffalo were driven off a cliff by American Indians in our past history.

Another problem mentioned was that in the cost accounting systems used by most corporations,  transportation costs, travel costs to vendors, rework costs of defective parts, cost of inventory, etc. are in separate accounting categories and there wasn’t any software available to do a true Total Cost of Ownership analysis until Harry Moser developed his TCO estimator. This is why I believe that CFOs are critical in turning the tide towards reshoring vs. offshoring.

 

Yes, I believe that as wages continue to rise offshore, especially in China, transportation costs continue to increase, and risk factors such as political instability, intellectual property theft, and counterfeit parts take their toll, more and more companies will see the economic advantage and wisdom of reshoring.

 

However, we can accelerate reshoring if we can expand the reach of our education and training on understanding and using a true Total Cost of Ownership analysis to CFOs and other C level management. Harry Moser and I are no longer the only persons singing the “reshoring” tune. Consultants at the Manufacturing Extension Programs nationwide, such as California Manufacturing Technology Consulting (CMTC) and Manex are being trained in how to use the Reshoring Initiative’s Total Cost of Ownership EstimatorTM. I have even met former “offshoring” consultants who are rebranding themselves to be reshoring consultants. I urge everyone to do what you can to promote reshoring if you want to help create jobs and save American manufacturing.

 

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Posted in Jobs, Manufacturing, Outsourcing, Reshoring | 1 Comment »

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