There’s ample reason to be optimistic about manufacturing in America these days. Output has been steadily increasing, with the biggest jump—1%—in April, marking the fastest rate of growth since 2014, according to the Federal Reserve. At 75.9%, capacity utilization is up to a 20-month high.
“These numbers resonate in a state that’s so heavily dependent upon manufacturing investments,” Ian Steff, executive vice president and chief innovation officer at the Indiana Economic Development Corp., told participants gathered at the Chief Executive’s Smart Manufacturing Summit for a roundtable discussion. “Manufacturing is thriving.”
Workforce quality, increased efficiencies, a stable regulatory framework and access to a large domestic market are among the factors driving this rebirth. Patriotism has also helped, according to CEOs who have had success winning market share by bringing production back from overseas.
For example, Stanley Black & Decker’s decision to move toward making at least 50% of its products in the U.S. paid off—despite higher manufacturing costs. Customers reacted with enthusiasm when the company announced it was moving 20% of over $1 billion of global power tool production to facilities in Indiana and North Carolina, said former CEO John Lundgren.
“Depending on exchange rates, initially we were between 5% and 7% higher on delivered product cost, and that was after [accounting for] savings on transportation costs and time on the water,” he said, noting that the company couldn’t recoup the bump by raising prices. “We ate that. Our customers—Home Depot, Lowe’s, Walmart—weren’t going to pay more for a product.”
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Stanley Black & Decker anticipated favorable publicity, but the reaction of its target market far surpassed expectations. “It turned out to be a grand slam home run,” reported Lundgren. “My target group is 18- to 24-year-old males who build houses and bridges and things. And 35% of the professional contractors building in the U.S. are of Hispanic descent and very proud to be American or to be working in America. It really resonated with them. We expected it to be moderately positive, but we got an incredible lift in market share.”
For some companies, however, expanding production in the U.S. remains challenging, particularly when making products that are bought and sold on price alone. For safety sign manufacturer Accuform, having a 10,000-piece component molded in the U.S. costs 10 times what it would in China. “I would love to have larger orders like that made locally, but I just can’t afford it,” said Dave Johnson, president of the company, which fulfills smaller and less complex orders at its manufacturing facilities in the U.S.
Cost gaps like that may narrow over time, suggested Mark Osmanski, CEO of Atek Companies, who added that in the meantime, American manufacturers are competing on trip time, quality and reliability. “There are buyers that really value the close connection to the complex engineered products we supply, and then there are customers who are value buyers,” he noted. “[The latter] are buying mostly from China because parts are coming here [at cost]. There’s no way China is making money doing that. There are subsidies floating through the supply chain, which I think is something that will eventually end.”
For other companies, moving toward Made in the USA is hampered by the lack of a labor pool. “We are looking to increase the percentage of parts and components we make in America, but one of the concerns I’ve had in the past is having enough people,” explained Alejandro Centurion, president of global manufacturing operations at The Greenbrier Companies, who reports that the rail car company’s skilled workers are often poached by employers with deeper pockets. “In one of our shops in Texas, and in other states, we have problems with our people leaving to go to other companies that can pay more than our manufacturing company. Recruiting and retaining people has been a challenge,” he said.
“I would love to have larger orders like that made locally, but I just can’t afford it.”
Attracting talent may well be the biggest hurdle American manufacturing faces, agreed Jim Ver Woert, enterprise solution executive with the manufacturing training company Tooling U-SME, who pointed to two factors driving the recruiting and retention challenge. “The first is what I call the Silver Tsunami,” he said. “More than half of the Fortune 100 companies I talk to say that half of their workforce or more is getting ready to retire within five years or less. So that’s decades worth of knowledge skill and ability walking out the door.”
The younger generation’s penchant for changing employers ranks a close second, he added. “Most millennials decide after one day on the job whether they will stay long term or not,” Ver Woert said. “And the reason they make that decision to leave is that the employer doesn’t have a plan for progression, doesn’t have support training. They want to see that an employer is going to invest in them.”
Companies like Cicoil are seeking to address that issue by changing the way they approach recruitment. “We needed to bring in millennials to replace employees who have been here 30 years and are now getting near retirement,” explained John Palahnuk, vice president of operations at the flat cable manufacturing company. “So we recruited by offering [college students] a good working environment and a future. We tell them ahead of time, you give us this and we will give you a path to the next position. This is what you can be.”
Manufacturers must also overcome antiquated ideas about working in a factory that are pervasive among both younger generation workers and their parents. “Kids don’t realize that they can make a good living in these jobs,” said Jim Schellinger, Indiana’s secretary of commerce. “A starting welder makes $80,000; a starting architect does not make $80,000. There’s an awareness issue in getting people to understand what great jobs these can be.”
MAKING MANUFACTURING COOL AGAIN
Educating young people—and their parents—early on can go a long way toward addressing that issue, several roundtable participants pointed out. “When I visit automobile manufacturers in Japan, every single one of them has school buses parked out front because they’re touring young kids around the plant, because this is not the plant of the old days,” said Schellinger. “This is a high-tech laboratory, and they get those kids in there at a young age to start to inspire and educate them about what this really is about.”
Taking steps to connect with high school students and their parents is a key element of changing perceptions about a career in manufacturing, agreed Chris Bopp, COO of Standard Textile. “It’s going to take getting involved in the community, bringing the parents in to see that this is a viable alternative for their child,” he noted. “We spend a lot time in the local community doing that.”
Some companies are participating in progressive programs that not only promote manufacturing careers to graduating high school students, but give those incoming workers a head start. Indiana’s Batesville Tool & Die, for example, partnered with four other companies and the local school system to develop a co-op program to give high school students technical training and exposure to real world manufacturing work.
“We actually put an Ivy Tech Community College facility in the town, and the high school kids participating in the program spend about 60% of their time at the high school, 20% of their time at Ivy Tech and the other 20% rotating through each of the businesses,” says Jody Fledderman, CEO of the precision metal stamping company. “So they are actually getting paid, getting their GED from high school and getting trained technically. By the time they graduate, they’re one semester short of an associate’s technical degree and it didn’t cost them a nickel.”
“By the time they graduate, they’re one semester short of an associate’s technical degree and it didn’t cost them a nickel.”
Dated facilities and equipment can also be a hurdle, noted Paul Boris, COO of Vuzix, a supplier of smart glasses, virtual reality technologies and products. “They want to come into a role where they’re [using] new technology,” he said. “But there’s no technology on the plant floor. They come in and are told, you can’t take that technology you’re comfortable with onto the plant floor. You’ve got to pick up a binder with dust all over it and flip through it.”
“It used to be that people wanted to change their plants so they could bring clients in to show off their new stuff,” said Jeff Sanders, EVP of the Hill & Wilkinson construction company. “Now it’s, ‘I want to [update] so I can bring recruits here. The technicians’ work space at the Bugatti dealership we built is nicer than the lobby. Their ROI is greater on retaining those technicians than it is on the next client. That’s a big shift.”
The good news? Investments in painting a more accurate picture of working in today’s high-tech world of manufacturing are paying off. “You have to change the perceptions, because right now it’s ‘college equals success,’ and that’s just not true,” noted Schellinger. “In Indiana, we’re seeing that change. We’ve gotten kids in high school excited again about vocational and tech education.”
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