Manufacturing growth in Colorado

Manufacturing growth in Colorado will pivot on the supply chain, and prospects are mixed

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Two weeks ago, the Denver Business Journal reported Gold Star Sausage Company was moving manufacturing operations to Nebraska to be “closer to its suppliers,” as president Rick Rue described it. For the DBJ, the news was a real estate story, understandable given the high anxiety around Denver’s commercial sector. Today there’s probably more interest in the resale value of Gold Star’s building than interest in why a manufacturer would transform its supply chain. At least for the DBJ.

We’ll speculate though and guess that for a sausage and hot dog maker, much is to be gained from moving manufacturing operations closer to its source of raw materials. For Gold Star that probably means the farms and ag operations in the midwest providing beef and pork. It’s a good bet that Gold’s volume business will be well-served by reducing what must be substantial shipping and handling fees required to move perishable materials from there to here. In short, it’s about supply chain efficiency.

Gold Star is a good example of how much manufacturing growth in Colorado will pivot on supply chain development. And here, some sectors are better served than others. It’s why manufacturing is developing unevenly across industries and why the economy will be well-served by efforts to shore up resources that will drive Colorado’s unique mix of manufacturing businesses.

Colorado agriculture is generally a good partner to food and beverage manufacturers here, if not ideal, apparently, for a company like Gold Star. Colorado’s the 10th largest cattle producer among U.S. states, its top ag product, followed by dairy products and corn. Nebraska ranks in the top ten for both hog and cattle production.

Colorado’s no stranger to the national ‘top ten’ list in ag commodities. If you’re a manufacturer utilizing any of the following raw materials supply is generally not an issue:

But is Colorado ag aligned with trends shaping the new food and beverage manufacturing opportunity?

Yes, if you’re one of the state’s innovative food makers utilizing organic millet, lamb, beef and barley. The supply of naturally raised meat is growing with increased demand. And while Colorado peach and apple growers can’t match the volume of states with longer seasons, Western Slope farmers are providing a steady stream of fruit to small and mid-sized makers, including craft brewers who prize local produce that’s consistent with the brand-related objectives of the sector.

But Colorado’s natural and organic food manufacturing sector is nationally renowned and as companies continue to relocate or launch here to be part of the scene, many will source elsewhere for the products necessary to drive volume businesses. The reality is that a short growing season and extreme weather limit availability. Hops, grapes, peppers, tomatoes — natural and organic ingredients of many types and flavor — often must be sourced elsewhere. It means that companies in the state’s hot food and beverage sector must be, like Gold Star, adept at managing the supply chain.

With companies seeking more integrated operations this can be a challenge. This week’s profile of Utah’s Black Diamond, and Colorado’s global powerhouse Woodward, provide examples of how companies are seeking supply chain efficiencies by locating research and development, manufacturing, testing and shipping under one roof – or as much of the ‘value chain’ as possible.

Clearly not every business or sector will be able to fully ‘vertically integrate’ operations. Woodward relies on precision foundries in the midwest, an expertise developed over generations that will never be replicated here. But it can manage its supply of talent and deploy technology in support of global operations, with supply chain partners adept at providing those resources.

Colorado and other states pursuing manufacturing opportunity will do well to help align supply chain resources with unique manufacturing opportunities.

We’ll look at how supply chain issues are transforming other sectors in future editions.

Colorado craft’s grocery conundrum

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Colorado craft beer makers are a collegial bunch. As heady and competitive the market has become, the cooperative vibe that its first-movers established has endured and been a catalyst for growth.

And so has Colorado liquor law, making it no surprise the sector is unified against a development many view as an existential threat to the industry: the prospect that grocery stores will be able to sell full-strength beer and wine. Many crafters believe grocery (and convenience store) sales will devastate local liquor stores and in turn do irreparable harm to the sector.

There’s reason to worry. The current system has been equal parts sales channel and industry incubator. Assured of a protected network of specialized retailers, craft entrepreneurs have been free to take risks, innovate, and experiment. The results have been breathtaking. Colorado now boasts more craft breweries per capita than any state in the nation, alongside a thriving specialized retail channel that serves local interests by preserving choice and promoting local industry.

Others argue that grocery sales would not hurt the industry but help build it by improving availability and convenience. The pesky reality is that today, consumers might agree. As a result advocates for expanded sales stand a better chance than ever of landing the issue on a statewide ballot and winning.

How good a chance? Numbers give the “convenience” vote a boost. Craft products comprise about 20 percent of total beer and wine purchases here, meaning that for most Colorado consumers, buying any full-strength beer at the same location where groceries and other consumer goods are purchased is a plus. Voters may also look to California and Oregon, thriving craft markets where full-strength beer and wine are sold alongside groceries, and assume Colorado’s robust industry would evolve and adjust.

That’s certainly the case. But at what cost?

For John Carlson, executive director of the Colorado Brewers Guild, access to market, for one. “Should the current regulatory structure change, smaller brewers will have a more difficult time getting their packaged beer on the shelf,” Carlson says. “Larger packaging brewers will likely see less of their portfolio make it to the shelf of a large out-of-state corporate grocer due to limited space.”

Kevin DeLange, co-owner of Dry Dock Brewing, agrees. “Smaller breweries who are just now starting to distribute will be significantly hindered growing their business because they won’t have access to market. Many of them are already curtailing capital investment and growth due to the uncertainty.” For a sector that’s grown up ensuring the next entrepreneur in line enjoys the freedom to innovate, with assurance that consumers can buy, it’s a big deal.

Not all small craft brewers agree. “I’m 100 percent in support of full strength beer sales in grocery stores across Colorado,” says Trinity Brewing’s creative founder Jason Yester. “Although some brewers oppose it, as a boutique brewer I see a huge opportunity with the continually increasing number of natural grocers opening and operating in our state.”

Dry Dock’s DeLange sees breweries like Trinity suffering most, with grocers tilting to volume beers from larger craft brands. “Larger breweries who are already in multiple states know how the system will change and already have relationships with the chain stores and will have less damage control to do,” he says.

For their part the Guild isn’t convinced a ballot measure is inevitable and seem only to have begun the fight. They’re part of a relatively new coalition called Keep Colorado Local, business leaders intent on winning the argument before an election, in part as a means to dissuade the opposition from spending big.

As a practical matter though, what steps could be taken to mitigate impact on small craft makers and the retail outlets that have long supported them, if advocates for expanded sales succeed?

Trinity’s Yester hints at one direction. “States like Oregon are selling full strength craft beer at all grocery and convenience stores and doing so with great success. Portland is the only city in America where over 50 percent of total pours are craft beer. It’s structures like this that prove availability drives both education and sales. This is something we all want.”

Using wider distribution as a springboard to educate consumers could drive overall market share for a sector that believes it has an unlimited ceiling.

Much also depends on what an actual election decides. A constitutional amendment, as we’ve seen, leaves much to be decided. Can industry and the voices who support them in this fight, like the Colorado Licensed Beverage Association, preempt an electoral battle and work with the “grocery lobby” to agree on a framework that’s also favored by lawmakers? Consensus seems a long way off.

What’s certain is that whoever decides to take on Colorado’s craft industry should be fully prepared. Collaboration Fest, a new Guild event inviting craft brewers to work together to conceive and pour new varieties, drew over 2,500 attendees last week at Sports Authority Field at Mile High.

Tugging on superman’s cape can be risky business.

Manufacturer’s Edge Department of Commerce grant the latest win for Colorado manufacturing

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Last week, Colorado Senator Michael Bennet announced that Manufacturer’s Edge (formerly Colorado Association of Manufacturing and Technology) is the recipient of a five-year, $8.34 million grant from the U.S. Department of Commerce’s (DOC) National Institute of Standards and Technology (NIST). As Bennet’s release outlined, “Manufacturer’s Edge was one of 10 state MEP centers selected for funding in a nationwide competition. NIST awarded a total of $130 million in funding to help MEP centers increase their services and customer base. The new cooperative agreements are for five years, subject to availability of funding and successful annual reviews.”

I asked Tom Bugnitz, CEO of Manufacturer’s Edge (ME) and occasional columnist for CompanyWeek, to elaborate on the award and assess Colorado’s manufacturing landscape.

Q: Tom, congratulations on the $8.34 million Department of Commerce grant. In announcing the award Senator Bennet said, “These additional resources will allow the organization to expand their current services, reach new customers, and continue their great work in Colorado.” To be clear, are these additional funds or does the money comprise ME’s annual operating budget?

A: Thank you, Bart, and thanks for the opportunity to talk about this. As you can imagine we’re excited about being selected as the MEP center of the next five years.

The short answer to your question is that NIST has increased our funding by two and a half times.

Since the local Manufacturing Extension Partnership center (MEP) was established in Colorado, NIST has provided $665,201 per year to support the center, subject to our finding a 2:1 match of those funds, or $1.3 million. (We did that by selling consulting and training services each year.) This award increases that annual amount by over a million dollars per year, and reduces the match to 1:1. Not only will there be more money coming into Colorado to help manufacturers, they have made it easier for us to use that money.

Q: Explain the process: ME was asked to prove its worth in a lengthy process last fall known as a ‘re-compete’ to qualify for the federal funds. Who were you competing with, and is this process common across the country?

Being chosen as a state’s MEP center is the result of a competitive process in which any nonprofit organization, university, community college, or state agency can apply to be the center. The result of that competition is a contract and financial award to operate as the state’s MEP center and receive NIST funding. Currently there are 60 MEP centers in the U.S., with at least one in each state and Puerto Rico.

As part of a larger review of the national MEP system, the MEP centers in all 50 states and Puerto Rico will be opened up for re-competition over a 4 year period, which started with a first round in August of 2014. During that round 10 MEP centers, including Colorado, were opened for competition.

Our previous contract was in its third year of five when we agreed to open up the MEP contract for an open competition with any other organization in the state. By doing this, we guaranteed the $1 million increase in federal funding to Colorado, regardless of who was ultimately awarded the contract.

We don’t know how many other proposals were received by NIST or who the proposers were, and NIST will likely not reveal that information.

Q: The federal government is focused on manufacturing. In addition to ME’s grant, Colorado and other states have been the beneficiary of significant financial support, awards designed to shore up U.S manufacturing. Can you provide some national context to ME’s award?

The Obama administration has consistently focused on building, re-building, and advancing manufacturing and manufacturing methods. The MEP system represent the “boots on the ground” of that effort, and funding for the system as a whole has remained stable or increased in the last few years, going against the trend of most federal programs. Overall the MEP system is a $140 million program.

The 800-pound gorilla in federal and state manufacturing efforts is the federal government’s National Network for Manufacturing Innovation Institutes. In 2013 the President proposed $1 billion be invested in 15 Innovation Institutes. To date, five have been started (with initial investments of $120 million and expected investments this year of another $150 milliob), including three in which Colorado participates: Digital Manufacturing and Design, Lightweight Metals and Materials Manufacturing, and Advanced Composites Innovation.

Q: A notable difference that you reference in Senator Bennet’s release is ME’s broad charter, to provide resources and assistance to manufacturers across industry sectors. How does ME’s charter differ from or complement other federal or regional efforts?

The main difference is our singular focus on helping individual companies grow and create jobs. As I mentioned before, we are the boots on the ground, applying resources directly to companies based on their needs and particular circumstances. We’re out every day with manufacturers listening to their concerns and developing programs to address them.

That said, there are a large number of programs aimed at manufacturers in Colorado. We look at all of those programs and ask one question: How can we use our resources to leverage those programs and create better results for manufacturers?

As an MEP center, NIST allows wide latitude about what programs or services we offer, but also expects us to not only respond to the direct needs of Colorado manufacturers but also support state initiatives that help manufacturers over the longer term. As examples, we have used the Colorado Blueprint as part of our plans, and have supported the SMART initiative from OEDIT since day one.

If a program helps manufacturers, we want to help that program.

Q: You’ve written in CompanyWeek about the need to get resources directly to manufacturers. Describe the state of Colorado manufacturing?

To be as blunt and direct as possible, Colorado manufacturing is diverse, it’s strong, and it’s growing. But not all manufacturing sectors are sharing in the growth. Some industry sectors and individual manufacturers that are hurting, and the workforce shortage is constraining manufacturers all across the state.

We can describe Colorado manufacturing by numbers that tell part of the story. There are roughly 5,600 manufacturing companies in Colorado employing about 133,000 workers in 21 different manufacturing sectors. 64 percent of those companies employ less than 10 people, and only 10 percent employ over 50 people.

That means we must do things that directly help small manufacturers hire new people, find new markets, and develop new products and capabilities. Right now, manufacturers across the state are creating regional organizations to help define the regional needs that companies like MEP can address and to create formal and informal networks of suppliers and customers within the state to grow local businesses. Individual companies are standing up and leading the charge for workforce development and capital access. We have the potential and foundation to do much more, and people all over the state are beginning to act on that potential.

We have a chance to do great things in manufacturing in the next 10-20 years, and we can establish Colorado as a leader in manufacturing technology and innovation.

Reach Tom Bugnitz at tbugnitz@manufacturersedge.com.

Big Beer has lost the Craft War. What’s Next?

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No doubt the executives at Anheuser-Busch Inc. who greenlighted the now-infamous craft-beer-bashing ad hope they’ve heard the last of it. But if history is a guide, the ad was only the start of what may become a very public retreat for Big Beer’s most influential brands.

Successful companies reach a point where high-profile, public attacks seem a good approach to redress competitive shifts the market appears to be making. Many choose, wisely, to abandon the idea. Others can’t help themselves, and in many cases we can look back on the decision as beginning of the end an era of success, a brand or corporation.

I witnessed it firsthand in the technology space. Executives at both IBM and Sun Microsystems decided to deal with Microsoft’s upstart business operating system, Windows NT, by publicly trashing it. Sun’s CEO at the time, Scott McNealy, was especially vitriolic, taking shots at NT but also disparaging Bill Gates personally. It became an ugly, recurring spectacle. McNealy’s protests only emboldened a generation of IT professionals to embrace Microsoft. Sun didn’t see it yet, but the game was over.

Amazingly, the lessons were lost on Microsoft executives. A few years later Steve Ballmer could be heard throwing water on a list of Apple innovations from Macintosh to iPod and — most famously — the iPhone. Ballmer raged at Jobs and Apple publicly. We look back and realize the war had already been lost.

ABI’s antics are similar, and its public cheap shots directed at the upstart craft sector seem a sure sign that Big Beer has already lost the Craft War.

The question for beer’s big brands is how to regain momentum in the market, incorporating lessons from the craft boom. ABI makes a lot of beer in Colorado, but — given the historic connection to the state — it’s perhaps more interesting to speculate about the future of Coors. (Plus, I’m a Banquet guy.)

Coors certainly values the attributes of the craft sector. Its namesake, Adolph, was the first crafter in Colorado. But the company seems miles away from any meaningful connection to the crafting ethos. Foremost, Coors values profits. It’s lost a meaningful connection to place. And the company’s public pronouncements can leave an aloof, big-company impression that’s actually at odds with the affable, approachable nature of Peter Coors, who’s often quoted.

Coors said the following last month in announcing the retirement of the company’s CEO, Tom Long, while also acknowledging falling sales for its flagship Coors and Miller brands. “Under Tom’s leadership, the company consistently delivered profit growth, pricing growth and cost savings, while dramatically improving capabilities in key areas like innovation, chain sales, revenue management, learning and development, and beer knowledge and appreciation.” Whatever that is.

To be fair, Coors would probably argue that, while the craft sector is nice, it’s entirely separate from the brand strategies driving Miller, Molson, and Coors products.

But should it be? Selling 25 million barrels of Coors Light every year (and falling) makes it easy to say no, that in the foreseeable future the modern Coors mission remains with mass-produced beer.

Consider the possibilities of a complementary plan that seeks to rediscover the brand’s historic connection to people and place, as a way of recapturing its craft heritage. Establish an annual award that funds a craft startup. Reconnect Coors executives with the local beer scene. Generally, reconnect with local industry. Make the Coors brand relevant again as a force for change that supports local makers.

The great people at Coors will remind me all this being done in some fashion. The market disagrees.

While Anheuser-Busch is busy with its own messaging, consider an alternative. A resurgent Coors would be a win for everyone.

American Nations: an emerging ‘Far West’ economic zone a boon to manufacturing?

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Next week Utah hosts its second-annual Outdoor Recreation Summit, a celebration and discussion of the state’s outdoor brand. I’ve written how Brad Peterson, the first director of the Outdoor Recreation Office, is smartly using Utah’s lifestyle attributes to attract companies who make lifestyle products, and the Summit will in part explore Utah’s future as a regional center for lifestyle manufacturing. Executives from ENVE, 4FRNT, Lifetime Products, and Chums will lead a discussion.

Each is committed to making things in the U.S. as are others in Utah, in Colorado, in Montana, and in Arizona. Across the West, we’ll see more locally made outdoor equipment and more locally made healthy and organic food and beverages, much of it fueled by cutting-edge technology that’s transforming manufacturing

The opportunities are regionwide, and though business is thriving more in some areas than others, similarities throughout the intermountain West ensure everyone’s in the game. Research universities dot the landscape. Climate and topography are a magnet. And shared opportunities in other sectors like aerospace provide incentive to cooperate.

As a result it’s easy to view the West as a distinct and unique economic zone. I’m not the first to see the West this way; Colin Woodward’s analysis of regional views on gun violence led him to a more profound conclusion, but his American Nations Today still neatly captures the concept of a unified West – or in Woodward’s case, a Far West.

He describes the Far West as:

‘The other “second-generation” nation, the Far West occupies the one part of the continent shaped more by environmental factors than ethnographic ones. High, dry, and remote, the Far West stopped migrating easterners in their tracks, and most of it could be made habitable only with the deployment of vast industrial resources: railroads, heavy mining equipment, ore smelters, dams, and irrigation systems. As a result, settlement was largely directed by corporations headquartered in distant New York, Boston, Chicago, or San Francisco, or by the federal government, which controlled much of the land. The Far West’s people are often resentful of their dependent status, feeling that they have been exploited as an internal colony for the benefit of the seaboard nations. Their senators led the fight against trusts in the mid-twentieth century. Of late, Far Westerners have focused their anger on the federal government, rather than their corporate masters.’

Of course, our views on things like government are evolving. A healthy skepticism for the federal government hasn’t stopped Colorado residents from embracing local government; in fact, it’s the state’s number one employer. Or using elections to control the social agenda.

But economic opportunities like outdoor recreation provide a compelling and more modern lens to view the Far West’s collective opportunities, as will regional responses to development challenges once local actors understand the upside of moving collaboratively.

Including calculated efforts to support the growth of maker and manufacturing business well-matched to regional attributes and assets – -like lifestyle. Join us next week to hear how several companies are doing just that.

Reach Bart Taylor at btaylor@companyweek.com.

Game changer? VOORMI’s new performance fabric garners national attention in run up to SIA

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The Rocky Mountain region is home to a growing sector of lifestyle manufacturers, companies innovating in categories like cycling, outdoor gear and apparel.

In the run up to the SnowSports Industries America national convention in Denver this week, Outside magazine featured Pagosa Springs-based VOORMI, and a potential game-changing fabric the company is promoting. We’ve also written about VOORMI; their commitment to ‘place’ and product innovation has set them apart since the company’s founding in 2011.

We caught up with VOORMI marketing director Timm Smith, literally on his way to SIA, to talk shop.

Q: Is Core Construction fabric a bigger story because of its performance attributes or how it may impact future development of outdoor apparel? It seems you’re confident it can do both.

Actually, both. CORE CONSTRUCTION(TM) Technology is what we refer to as a fabric technology platform. That is, it is a new process technology that we believe has the capability to enable a wide range of products over time (vs. a single product innovation). The foundational concept, that of introducing a functional core inside of a single layer textile, we believe is a “reset button” in the world of performance composites.

Q: Wool is a brand of its own — it’s perceived a certain way by consumers. What’s more important for VOORMI, that a raw material like wool can be sourced locally or its performance attributes?

Soft, comfortable, and thermally regulating, wool is truly nature’s super-fiber. That said, since its resurgence in outdoor apparel over a decade ago, its use has primary been restricted to the realm of socks and underwear due to its inherent lack of strength and abrasion resistance in “outer facing” applications. Our goal was to change that reality, to build the next generation of textiles, leveraging all of the inherent benefits of wool, but with the performance and durability needed to face the outside world.

Q: Why has the apparel sector been so short on game-changing ideas? It’s often said Gore-Tex was the last significant innovation — in 1969.

As is the case with most “stagnant” industries, we think it ultimately boils down to impact of consolidation and the protection of existing revenue streams. With a large majority of the outdoor/technical apparel sold in the U.S. coming from only a handful of [overseas] factories with the equipment/know-how to build product, differentiation these days is driven primarily by brand and channel. We believe this upside-down reality fosters an environment where the incentive is not to “change” — but rather to keep the “efficient supply engine” running and avoid the upsetting effects of disruption. Our goal at VOORMI is to change that reality. To BE that disruptive force. Like our favorite microbrewers who took on the big beer giants one batch at a time, we’re looking to change every aspect of how apparel is built.

Q: VOORMI’s a bit of an outlier in apparel. You source materials locally, manufacture in the U.S., and choose to headquarter in Pagosa Springs. It says a lot about the company, but is it enough to compete with global brands focused on marketing and sales?

Had you asked us this question 10 years ago, we might have said no. But we believe we’re at an inflection point for our industry driven by a new type of consumer. One who cares not only about what a product is, but more importantly how it got there and who was standing behind it along the way. What we do is build authentic products that we know really work (because we use them everyday in San Juan National Forest out our back door) and support our local economy by building them right here in the U.S. We innovate faster than we ever could if we were encumbered by large organizational issues and complex supply chains. We believe THIS is the future of competition in our industry.

Q: VOORMI’s building a rapid prototyping facility in Pagosa Springs, the first of its kind in Colorado. What’s the motivation behind the project?

The trajectory for most of the companies in our industry is based on the concept of “growing out” . . . that is, start local and small, and as you grow — expand overseas to meet the demand. We’re working on a different model, that of “growing in.” For us, the Pagosa project is about proof of concept — production doesn’t have to look like the past; that trying to build 300,000-square-foot factories full of sewing lines is a fundamentally flawed model in today’s world. Rather, we believe in building 100 3,000-square-foot factories spread across America, each representing a microbrewery of apparel construction — building innovative, high quality products with the local pride that comes from working in small teams. That’s the journey we’re embarking on!

Q: Who are VOORMI’s CO-LAB partners and how do you end up working with certain brands?

VOORMI CO-LAB(tm) for us is an engine for collaboration. It’s about knowing what you do well, and appreciating others for the same, brands that are passionate about what they do, and wake up thinking about how to do it better; brands that believe in the integrity of standing behind everything they make. As we look at potential partners, we’re looking for a lot of the same things — great cultural fit, and the desire to truly push the boundaries.

Award-winning KOTA Longboards is only one bright spot in Denver’s promising urban MFG landscape

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KOTA Longboard’s Mike Maloney doesn’t lack for confidence. Winner of the JP Morgan Chase Main Street Grant and $150,000, Maloney told me in September 2013, “We offer a product of high performance and high value, and I am living proof you can start a manufacturing company in the United States.”

It was music to my ears. We featured KOTA in just our second issue, and finding Mike was not only a revelation — my kids ride KOTA — but an affirmation. He’s in the leading edge of a tidal wave of inspired and modern manufacturing reshaping our economy. He’s a poster child for CompanyWeek.

The wave isn’t lost on city officials in Denver, who deservedly were included in the Denver Post story about KOTA’s award. Not only was Paul Washington’s industry team supportive of KOTA from the beginning — I saw — they’re proving to understand the opportunity of light manufacturing in the city’s future.

Denver’s already the beneficiary of one high-profile lifestyle-manufacturing boom – its craft beer scene is nationally renowned. The Post mentioned a new initiative from the City called “Create Active Denver,” conceived to lure ‘sports action lifestyle’ companies to the city. Denver co-hosted the inaugural Colorado Apparel Manufacturing Summit this past fall (with CompanyWeek). Denver’s industry pros also work hand-in-hand with groups like Manufacturers Edge, to host other events like Beers-and-Gears.

Lifestyle’s only one of a several high-potential manufacturing opportunities for the city. Another may be the technology-fueled Supply Chain — small design and tech-shops armed with tools to enable prototyping and small-batch manufacturing. Growth here should not only inspire start-ups but also fuel a new era of big-company engagement with local suppliers and contract manufacturers.

It’s an exciting prospect for Denver — and others increasingly tuning in: an urban economy profoundly changed by its city producers.

If there’s a quibble with Denver’s approach, it’s that its gaze may not yet extend far enough. In the future, it’s easy to see the City (and State of Colorado for that matter) inviting all manufacturing into a ‘key’ economic sector, to better align resources and promote the community. The numbers convey the breadth of opportunity. As CU’s Brian Lewandowski writes, in the second half of 2014, “Colorado ranked 3rd for manufacturing employment growth; over the past three years Colorado ranked 7th; and over the past five years, Colorado ranked 8th, even though Colorado ranks 30th overall for manufacturing jobs.” The entire sector’s booming. And Denver’s in the middle of it.

But for now it’s easy to celebrate the accomplishments of one of manufacturing’s inspirational leaders and a community of supporters who’ve helped get him and the KOTA team this far. There’s a journey ahead for everyone.

SMART for Dummies: Details on Colorado’s $6.6M ‘defense industry adjustment program’

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Last fall, Colorado economic development officials celebrated a significant win. The Department of Defense had awarded the Office of Economic Development and International Trade (OEDIT) nearly $6.6 million to “provide immediate and sustained assistance to Colorado firms and employees impacted by reduced Department of Defense procurement . . . and to coordinate assistance to the Colorado jurisdictions where these firms and individuals are located.”

The grant — the “Colorado defense industry adjustment program” — provides help for manufacturers, primarily in Colorado Springs and Denver, hurt by reduced defense spending.

It also breathed life into a concept stalled in OEDIT. SMART, or Strengthening Manufacturing by Accelerating Research and Technology, envisioned resources and a network of facilities to support advanced manufacturing but enjoyed lukewarm support. With the DoD grant, SMART was reimagined. OEDIT selected CAMA, the Colorado Advanced Manufacturing Alliance, to implement the grant and today CAMA manages and sustains ‘SMART Colorado,’ the official name for the ‘defense industry adjustment program.’

The Statement of Work issued to CAMA outlines nine “Projects” in SMART, each with specific dollar amounts earmarked from the $6.6M total, and deadlines for completion: (here’s the full SOW)

  1. Colorado Advanced Industries Supply Chain Initiative (Budget: $900,000). Outcome: ‘Contractor will create (digital and online) tools that map Colorado defense industry supply chain assets and show and build market diversity for defense suppliers within Colorado.’ Deadline: 9/30/2015.
  2. SMART Colorado Executive Team & Strategic Operational Plan (Budget: $45,000). Outcome: ‘The Contractor will use this strategy as a mechanism through which the Contractor will make recommendations for diversification of defense-dependent sectors of Colorado industries.’ Deadline: 12/31/14.
  3. Colorado Digital Manufacturing Commons Planning (Budget: $27,000). Description: ‘This will require seminars and programs to educate manufacturers on the opportunities as well as promote the software and system development to lead to effective implementation. Digital manufacturing provides an opportunity for firms in the defense aerospace sector to diversify their market offerings as well as a way to reduce R&D costs.’ Deadline: 12/31/2014.
  4. Regional SMART Center Team Development (Budget: $27,000): Outcome: ‘Host a two-day session of industry leaders, academic leaders, and government leaders and generate a report on the state of advanced manufacturing and future strategies for success.’ Deadline: 6/30/2015.
  5. Regional Defense Diversification and SMART Center Planning (Budget: $180,000). Description: ‘The Contractor will plan and facilitate the engagement of city and county partners for each of the four regional SMART Centers and their anticipated contracting with consultant(s) to conduct a defense diversification study that builds upon the aerospace sector.’ Deadline: 9/30/2015.
  6. Supply Chain Direct Assistance Proposal (Budget: $270,000). Description: ‘As companies are identified in the supply chain mapping efforts, CAMA will provide direct assistance to up to 30 firms (up to 10 for each region), which work under this Contract has identified as having been negatively affected by or currently being particularly susceptible to changes in defense procurement.’ Deadline: 3/31/2016.
  7. Startup Work and Development of a Southern and a Central Colorado SMART Center (Budget: $3,835,000). Outcomes: ‘No later than 60 days before the end date of the Contract, two physical locations will be in operation and servicing the needs of the regional industry community based on the feedback of the regional subcommittees.’ Deadline: 7/31/2016.
  8. Innovation Assistance Proposal (Budget: $180,00). Outcomes: ‘As part of the long-term sustainability of the SMART Centers, each center will develop a fee for service component of funding.’ Deadline: 7/31/2016.
  9. Southern Colorado SMART Center Workforce Development Services (Budget: $1,080,000). Outcomes: ‘The Contractor will develop and deliver to OEDIT a strategic plan for integrating advanced manufacturing into Colorado’s workforce development and educational system. The plan will incorporate input from relevant institutions such workforce investments boards, community colleges and industry.’ Deadline: 12/31/2015.

On paper, the grant reads like money well spent: Find those companies impacted by reduced DoD spending, provide tools including new facilities to reposition them for success, and leave behind assets and awareness to support more advanced manufacturing in Colorado. Simple, and very positive.

The timeline is short, though, and may already be proving a challenge. Two deadlines have passed, and it’s unclear whether a SMART Colorado executive team or a Digital Manufacturing Commons Plan has been finalized. (CAMA leadership was unavailable to be interviewed for this article, though a website is planned.) And two SMART Center locations, one each in Colorado Springs and Denver, are to be opened soon — in late summer of 2016.

The outline also prescribes work and money in areas that may duplicate or compete with current efforts. For example, Manufacturer’s Edge leads a loose consortium of partners already developing Manufacturer’s Connect, a digital supply-chain ‘map’ and recent beneficiary of a $250,000 federal grant. (The SMART statement of work budgets $900,000 to map the supply chain.) It’s also not clear how SMART-funded resources can, or should, be applied to other Colorado manufacturing industries.

As more information is released, we’ll track progress and dig deeper into how SMART Colorado — the ‘defense industry adjustment program’ — can be a win for the state.

Stay tuned.

NAM’s love/hate relationship with President Obama reflects industry in transition

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It seems Jay Timmons was born to lead NAM, the National Association of Manufacturers. He’s from America’s rust belt, Chillicothe, Ohio, with generations of manufacturing in his blood and a determined, buttoned down all-American comportment that feels a natural fit atop NAM’s 14,000-strong membership. Conjure an image for a spokesperson for U.S. industry, for its proud manufacturing base. You’ll get Jay Timmons.

What you also get today from Timmons’ is a manufacturing policy message in transition, that like industry, is taking stock of recent success but searching, at times awkwardly, for footing in a new and complex manufacturing economy. For Timmons and NAM, this translates into a modern love/hate relationship with President Obama and his administration’s policies.

Timmons was in Colorado last week on a 12-city national State of Manufacturing tour, speaking at Ball Corporation’s Broomfield facility. CACI, the Colorado Association of Commerce and Industry, a manufacturing advocate and state affiliate for NAM, organized the gathering.

What’s changing about his message is the support NAM summons for policies that strike a somewhat unprecedented ideological balance for this venerable organization. It made for an entertaining presentation that swung from open hostility to begrudging support for the president, even as its historic and resolute opposition to the traditionally Democratic staples of more regulation and higher taxes remains the foundation of its pro-business rubric.

For Timmons, “manufacturing faces a disproportionate share of the burden of government regulation,” and he was openly contemptuous of the EPA and administration’s support of more stringent air quality standards.

“The administration’s regulatory agenda and regulation of greenhouses gasses would limit fuel choices, increase energy prices and make power less reliable,” he argued. “The development of next-generation power-plant technologies is a prime example. Today coal generates about 40 percent of the nation’s electricity and we have decades worth of coal reserves. The rules would eliminate this abundant resource from our energy mix.”

But in the next breath, Timmons’ confirmed that “America has an unprecedented and incredible global advantage in reliable and affordable energy — who would ever thought this ten years ago? — and that’s what’s driving manufacturing’s resurgence.” Further, he acknowledged that “manufacturing’s carbon emissions are down 13 percent percent since 2005, while manufacturer’s value-add to the economy has grown 19 percent over that same time period, because we’re building more efficient power plants,” adding that the “U.S. has made significant progress we need in an ‘all of the above’ energy strategy.”

On tax strategy, he decried America’s “highest corporate tax rate in the world — a problem we need to fix,” advocating, of course, tax reform. With no movement from Congress yet on this issue or legislation reaching the President’s desk, Timmons held his fire. Not so on immigration reform, where he offered a full-throated defense of Obama’s push for comprehensive immigration reform and clear path to citizenship for immigrants working here illegally.

On net neutrality, Timmons was equally unequivocal. “The Internet of Things has the potential to reshape our industry or nation and our world, all of the is progress begs the question: Why should we be turning back the clock back 80 years? That’s exactly what President Obama wants to do by regulating the internet with a 80-year old law that was enacted during the era of rotary telephones. It will curtail investment in our broadband infrasture, hinder the creation of game changing technologies on our shop floors and yield little benefit for consumers.”

The statement is as uncertain as it is bold, though, and his embrace for the administration’s cybersecurity initiative softened the blow. “I have to say the president is taking the right steps in calling for more real time cyber-threat information sharing in the private and public sector and targeting liability protection. This is a promising start for sure.”

Timmons also voiced his support for Obama on free trade. “We need to be where overseas consumers are buying: International trade supports more than 700,000 jobs in Colorado; its companies trade with customer in over 200 countries. A smart trade policy is the difference between growing business and shutting their doors. Free and fair trade including trade promotion for the President of the United States will give us greater access to the foreign markets we need.” It’s not a unanimous sentiment in the manufacturing community.

Taken as a whole, this well-intentioned if somewhat confusing policy evolution reflects an industry in transition. Manufacturing is changing. It’s tech-driven – digital; it’s agile, small business; it’s young and lifestyle-driven to suit trends and changing consumer preferences; it’s beer and organic food at the same time it’s steel and paper, fabricating and welding.

It’s changing and NAM and Timmons are trying hard to adapt — however confusing and disruptive the journey may be.

U.S. industrial output is at an all-time high, MFG GDP an all-time low. Decline or revival?

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Writers and analysts like Forbes‘ Tim Worstall view manufacturing as a sector neither in decline nor resurgent, but one simply changing with the times. For Worstall and others, manufacturing’s time has has come — and gone — and speculation about the health of the sector misses the broader point that U.S. manufacturing is alive and well but resigned to second-tier status in today’s technology-and-healthcare-centric service economy.

His argument is not without merit: as manufacturing GDP and employment have declined to historic lows, U.S. productivity has continued to rise, driven by technology and the evolution to machine-made goods.

Worstall cites the Federal Reserve’s Index of Industrial Productivity as proof that the decline of American manufacturing is a misnomer. Indeed, as manufacturing GDP has fallen to around 13 percent of the economy, U.S. industrial output is today at an alltime high, recently surpassing the 2007 peak that preceded the Great Recession:

It’s a popular view, that structural changes will permanently diminish manufacturing’s importance even as the nation continues to produce more.

There are signs that it may not play out that way. For one, that implications of offshoring a manufacturing generation is even today slowing industry’s ability to keep up with demand, to find talent.

But whatever the jobs and economic equilibrium, it’s easy to take a more bullish view. Manufacturing’s has long been the engine of American R&D, and given improving economics of ‘Made in the USA’, the prospects for sustained national investment in research – in manufacturing – are good.

Moreover, many high-flying U.S. multinationals are manufacturers – they just don’t make a lot of stuff here. For now. Apple’s a tech company, Nike a giant in consumer goods. We celebrate design and engineering, management and retail innovation. At the end of day, they’re manufacturers. If making here is more economical, and increasingly it is, more will do so. That’s not a decline.

Manufacturing’s halcyon days, of 24% GDP, may be gone. But the U.S. economy will continue to be shaped by makers, maybe even more so in the future. Trends point in that direction.

Employment and GDP growth may folliow. Call it what you will.