As we look back this week at a great 2019, it’s also time to forecast the storylines shaping 2020 manufacturing in Colorado and the region.
1. Food’s undersized brand gets a lift
Before publishing last week’s manufacturing employment report, I asked a handful of respected manufacturing executives and development officials to name Colorado’s largest manufacturing industry employer. One got it right.
Colorado’s food sector may be underappreciated, but its success can’t be taken for granted. For example world-class growers along the Arkansas River plains, in verdant Western Slope enclaves, and emerging cannabis plays across the state would benefit from a more cohesive and robust production ecosystem and supply chain widely available along the Front Range.
Developing a Colorado food brand that fuels interest and collaboration statewide seems a priority. Do we even know how to do that?
2. Technology’s oversized reputation gets an overhaul
Here’s a stunning factoid from the Wall Street Journal about the U.S. technology sector that also puts Colorado’s manufacturing opportunity in perspective.
Just five metropolitan areas—Boston; San Diego; San Francisco; Seattle; and San Jose, Calif.—accounted for 90% of all U.S. high-tech job growth between 2005 to 2017, according to the research by think-tank scholars Mark Muro and Jacob Whiton of the Brookings Institution and Rob Atkinson of the Information Technology and Innovation Foundation.
The report also mentions technology’s next tier. No Colorado city is part of that group, either. Boise, Idaho; Provo, Utah; and Madison, Wisconsin, are, and while they may be up and coming tech outposts, they sure ain’t Denver when it comes to overall economic heft.
Colorado’s tech ecosystem may be worth the considerable hype and attention we seem to shower on it. But tech-informed manufacturing is a blue ocean opportunity that technology isn’t. Ergo:
3. Will Colorado’s global manufacturing brands engage more locally?
Big companies comprise a small percentage of manufacturing here, but also lead the industry in technology and automation. But for every Woodward, RK, and OtterBox, big manufacturers investing in growing the local production ecosystem, many others seem uninterested.
Colorado could be an epicenter for outdoor industry manufacturing. A new technology-inspired production paradigm is waiting to be championed by any of a dozen global brands that call the Rocky Mountains home. Innovation percolates in small companies — ask Molson Coors or any number of industrial food brands investing in Colorado startups — but manufacturing needs its bellwether brands to reach down and engage with best practices, experience, and talent.
4. Industrial cannabis is here. Like, right here.
In the second half of 2019 we profiled three cannabis manufacturing companies that combined, employed 400 people — Folium Biosciences (220), Mile High Labs (140), and Paragon Processing (40). Include Colorado’s largest self-manufacturing brands like incredibles and Wana Brands and dozens more that employ thousands, and it’s clear that cannabis is a workforce tsunami.
Manufacturers and the associations that support them have been unenthusiastic or downright hostile to cannabis industry. We hope this changes in 2020. For one, the kids working at Colorado’s cannabis companies would benefit from understanding a career pathway that would keep them in manufacturing when they’re ready to move on if not up.
Last year at this time I wrote that manufacturing is codependent, that manufacturers must come together to solve their challenges. I also said that collaboration is “a work in progress.” Let’s ensure the epicenter of industrial cannabis, and the human capital that’s catalyzed growth, stays here.
5. It won’t always be this easy.
America’s longest peacetime expansion will end, if not in 2020, then sometime soon. What happens when a growth economy normalizes?
For starters, business development becomes mission-critical. In the race for new business, Colorado’s top industries are highly competitive nationally:
Top Gainers (% employment gain in 2018, excludes sectors with less than 50 jobs):
Chemical manufacturing +10.7% (6th fastest-growing sector nationally)
Primary metal manufacturing +5.46% (12th nationally)
Machinery manufacturing +4.5% (19th nationally)
Beverage manufacturing + 4.1% (31st nationally)
Food manufacturing +2.2% (13th nationally)
Our collective challenge is to ensure these industries remain best-in-class as companies work harder to land new contracts when the going gets tougher.
Good luck in 2020!
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
After 10 years of expansion, is U.S. (and Colorado) manufacturing’s improbable comeback story finally over?
/in General/by Bart TaylorThe answer is no, the party’s not over. But as we begin the decade, I think factors have aligned to create some stiff barriers. Manufacturing will have to work harder for its gains.
Here’s why 2020 is shaping up to be a tough year:
A trade deal will still leave manufacturing investment lacking
Last week’s report from the Federal Reserve confirmed that tariffs have been a net drag on manufacturing.
As positive a new new deal will be for some, like U.S. farmers, it still leaves us where we were before, lacking a grand strategy to rebuild American manufacturing. Until manufacturers have more options and incentive to make things here, and consumers and businesses are rewarded for buying products made in America where they wouldn’t have before, a China deal alone won’t change manufacturing’s prospects.
America needs an enhanced manufacturing supply chain. We’re focused on the wrong tactics.
Cutting the corporate tax rate emboldened manufacturers, sort of. What’s left in the quiver?
President Trump’s most decisive move in support of manufacturing was cutting the corporate tax rate. But it’s unclear whether enthusiasm for improved balance sheets and stock prices has translated into investments in long-term competitiveness.
Consumers are powering this phase of the expansion. Business needs to do its part. But new trade and monetary tactics that would inspire confidence the way tax relief did, don’t seem to be on the horizon.
Besides, manufacturers and farmers want a fair playing field and the tools to compete, not handouts.
Manufacturing’s vision vacuum
Who’s providing a compelling vision for manufacturing’s next phase?
It would be reassuring if we could agree on what constitutes success and failure. We can’t. Each year the Center for Business and Economic Research at Ball State University publishes an annual Manufacturing Scorecard, and each year, as we’ve reported, the Report rewards states with high per-capita manufacturing employment. That’s not a measure of prosperity.
Ball State’s home state of Indiana received an A for overall health (as it does every year), despite losing nearly 6,000 manufacturing jobs year-over-year for the first time since 2009.
Indiana Governor Eric Holcomb pointed to a changing economy. “Older manufacturing jobs are becoming advanced manufacturing jobs . . . but also where we’re excelling is we’re attracting more life sciences and more high tech, more IT jobs,” Holcomb said. Huh?
Manufacturing’s future indeed lies in technology — but also in industries powering net job growth in other states. Jobs lost to automation are being replaced with jobs from manufacturing’s new industry mix. As his state earns the nation’s highest manufacturing grade every year, the governor should have an airtight explanation as to why that’s not happening in Indiana.
Manufacturing’s leadership vacuum
As China pursues its national manufacturing and industrial strategy — Made in China 2025 — manufacturers in the U.S. are left to assemble workable supply chains wherever they can find them.
The tactics to rehabilitate American manufacturing aren’t a mystery. States and regions must be cognizant of those industries suited to place and people; manufacturers must be transparent about what they do and who they work with to fuel collaboration and new domestic orders; and policymakers must develop a toolbox of incentives that keep companies and jobs home. Punishing companies for finding the shortest path to raw materials, cost-effective services, and skilled labor isn’t an answer. Developing them here is.
Who will be manufacturing’s champions in 2020? By year’s end, we’ll need every one.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
California’s golden mix of manufacturing industries bodes well for the future
/in General/by Bart TaylorAs CompanyWeek Editor Eric Peterson recaps some of the standout manufacturing companies featured in 2019, it’s also a good time to look forward. Much has been made recently about U.S. Bureau of Labor Statistics (BLS) employment data. We summarized Colorado’s numbers here.
What to make of California’s 2018 and 2019 data, but more importantly, the BLS forecast that after 2020, U.S. manufacturing employment will begin a prolonged swoon? What’s in California’s future?
Any manufacturing employment conversation today is two-sided: positive with respect to the sector’s current 10-year national expansion, yet bookended by a loss of four million manufacturing jobs during the Great Recession and a forecast by BLS actuaries who believe employment will fall from 13 million or so jobs in 2020 to 12 million in 2028.
It’s easy to find voices to argue both sides of the story in California. Skeptics cite California’s rich technology ecosystem as a priority, or the impact of automation on future manufacturing job growth. A small but vocal faction might argue that manufacturing is incompatible with a “modern” economy.
Indeed, a recent study suggests California enjoys a commanding position in technology, with three of the top five cities in a cabal that essentially controls America’s high-tech economy:
Not surprisingly, we’ll argue the opposite.
Here are California’s top five manufacturing industry employers (final numbers 2018):
Machinery manufacturing is a close sixth, with 77,197 employees.
Why are these numbers positive?
Other data points to a hyperactive California sector. CMTA, the California Manufacturers and Technology Association, notes that “a third of California’s current 1.6 million job openings are in manufacturing industries sectors.” As tough as it is for companies to find qualified employees, it’s clear that today, manufacturing is a job creator in California.
As we turn the page on a successful year in manufacturing, our focus on Californian companies changing the narrative is unchanged, only heightened. We begin 2020 with a yearlong quest to find the “10 Most Influential Manufacturers” in California.
Have a company in mind? Email me to get the 2020 underway.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
Five Colorado manufacturing storylines for 2020
/in General/by Bart TaylorAs we look back this week at a great 2019, it’s also time to forecast the storylines shaping 2020 manufacturing in Colorado and the region.
1. Food’s undersized brand gets a lift
Before publishing last week’s manufacturing employment report, I asked a handful of respected manufacturing executives and development officials to name Colorado’s largest manufacturing industry employer. One got it right.
Colorado’s food sector may be underappreciated, but its success can’t be taken for granted. For example world-class growers along the Arkansas River plains, in verdant Western Slope enclaves, and emerging cannabis plays across the state would benefit from a more cohesive and robust production ecosystem and supply chain widely available along the Front Range.
Developing a Colorado food brand that fuels interest and collaboration statewide seems a priority. Do we even know how to do that?
2. Technology’s oversized reputation gets an overhaul
Here’s a stunning factoid from the Wall Street Journal about the U.S. technology sector that also puts Colorado’s manufacturing opportunity in perspective.
The report also mentions technology’s next tier. No Colorado city is part of that group, either. Boise, Idaho; Provo, Utah; and Madison, Wisconsin, are, and while they may be up and coming tech outposts, they sure ain’t Denver when it comes to overall economic heft.
Colorado’s tech ecosystem may be worth the considerable hype and attention we seem to shower on it. But tech-informed manufacturing is a blue ocean opportunity that technology isn’t. Ergo:
3. Will Colorado’s global manufacturing brands engage more locally?
Big companies comprise a small percentage of manufacturing here, but also lead the industry in technology and automation. But for every Woodward, RK, and OtterBox, big manufacturers investing in growing the local production ecosystem, many others seem uninterested.
Colorado could be an epicenter for outdoor industry manufacturing. A new technology-inspired production paradigm is waiting to be championed by any of a dozen global brands that call the Rocky Mountains home. Innovation percolates in small companies — ask Molson Coors or any number of industrial food brands investing in Colorado startups — but manufacturing needs its bellwether brands to reach down and engage with best practices, experience, and talent.
4. Industrial cannabis is here. Like, right here.
In the second half of 2019 we profiled three cannabis manufacturing companies that combined, employed 400 people — Folium Biosciences (220), Mile High Labs (140), and Paragon Processing (40). Include Colorado’s largest self-manufacturing brands like incredibles and Wana Brands and dozens more that employ thousands, and it’s clear that cannabis is a workforce tsunami.
Manufacturers and the associations that support them have been unenthusiastic or downright hostile to cannabis industry. We hope this changes in 2020. For one, the kids working at Colorado’s cannabis companies would benefit from understanding a career pathway that would keep them in manufacturing when they’re ready to move on if not up.
Last year at this time I wrote that manufacturing is codependent, that manufacturers must come together to solve their challenges. I also said that collaboration is “a work in progress.” Let’s ensure the epicenter of industrial cannabis, and the human capital that’s catalyzed growth, stays here.
5. It won’t always be this easy.
America’s longest peacetime expansion will end, if not in 2020, then sometime soon. What happens when a growth economy normalizes?
For starters, business development becomes mission-critical. In the race for new business, Colorado’s top industries are highly competitive nationally:
Our collective challenge is to ensure these industries remain best-in-class as companies work harder to land new contracts when the going gets tougher.
Good luck in 2020!
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
“It’s official: Manufacturing is getting crushed.” It’s not, but here’s why that sentiment matters.
/in General/by Bart TaylorConventional wisdom holds that manufacturing’s recent job surge is an aberration, that automation and robotics, combined with cost savings from offshore production, will diminish the need for U.S. workers and the importance of manufacturing at the same time.
It’s not a trivial conclusion. Jobs matter. People starting a career or business, or developing a city or state economy, want to bet on a sure thing. Is manufacturing growing or not?
The narrative CNBC favors is that it’s retreating, citing Bureau of Labor Statistics last month to argue that President Trump’s manufacturing-related trade policies are falling short — but more, to suggest that “national manufacturing appears to have peaked”:
It’s reasonbable to believe that jobs “have peaked.” In the same report, the Bureau of Labor Statistics forecasts more net manufacturing job losses in the future — from roughly 12.5 million U.S. jobs in 2018 to 12 million in 2028, falling from 8 percent of total U.S. employment to about 7 percent during that time. A decline would lengthen manufacturing’s downward trend from 13.4 million jobs in 2008 — and earlier, pre-Great Recession, when 16 million Americans worked in manufacturing.
Yet both Obama and Trump have presided over a manufacturing employment surge, and as we’ve chronicled, manufacturing is today a tale of diverse industries and regions. The sector is growing in some states as it retreats in others. For example, Western states, our primary focus, are witnessing the emergence of a new industrial makeup that seems to upset conventional wisdom.
As the New York Times has noted, America’s West is a new engine of manufacturing employment, with its counties growing at twice the rate as their Rust Belt counterparts. In the same period that CNBC’s graph depicts job losses in Michigan, Ohio, and Pennsylvania — manufacturing employment in Colorado, Washington, Oregon, California, and Arizona — bellwether economies in the West — stayed the same or grew slightly.
We’ll dig in deeper to Colorado and California manufacturing employment in the weeks ahead, but the message seems clear enough: Industry mix means everything. In Colorado, we know that food and beverage is the state’s fastest growing manufacturing industry. When combined with high-tech clusters across a range of industries like aerospace and bioscience along with construction-related fabrication that shows no signs of slowing, manufacturing here continues to challenge conventional wisdom. So far it’s lost on CNBC. They surmise: “It’s official: Manufacturing is getting crushed.”
In some industries, and in some places, maybe. But here and other pockets across the U.S., it’s at the center of innovation and growth in industries expanding along new fault lines, in communities that value local production. Or value like-minded companies that outsource manufacturing in regional or international supply chains. It’s the next best thing. Companies like Teton Waters Ranch, featured this week, a manufacturer to be sure but not manufacturing here. Colorado’s food and beverage ecosystem is richer for them being here.
In America’s new and dynamic manufacturing ecosystem.
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
How design-centered manufacturing is transforming Industry 4.0—and the 2020 CMAs
/in General/by Bart TaylorThere was a time when American manufacturing’s most effective promotion was products Made in the U.S.A. Today, products designed in the U.S. but made offshore tend to capture the imagination of consumers. “I design it, you build it” is still a rule of thumb for industrial designers, and the build is often “over the wall” offshore.
But the rules are changing, and growth industries of the West are at the center of a broad transformation. Powered by new technologies like 3D printing and software-enabled machining, designers increasingly control the means of production.
The trend promises to alleviate challenges at the center of America’s manufacturing conundrum. Prototyping at the point of design reduces iterative cycles and costs. Intellectual property is more easily managed and less exposed to overseas “partners.” Parts and products also become smarter when manufacturing processes are “baked into” industrial designs.
In sum, the design-to-manufacturing continuum is narrowing. At tomorrow’s factories, tech-savvy machine operators will rub elbows with industrial designers and engineers. It’s a component of Industry 4.0.
We’re embracing the trend. As we launch the nomination period for the 2020 Colorado Manufacturing Awards later this month, we’re pleased to announce a new category that focuses on product design and engineering as much as the build.
A new 2020 CMA category — Innovative Product Award/Design-Centered Manufacturing — will showcase consumer and commercial products designed for manufacture in the U.S.
Here’s the criteria:
Nominations for the 2020 Colorado Manufacturing Awards open Tuesday, October 1 and extend through the end of 2019. Award winners will be announced in April 2020.
We’ll announce criteria for the entire slate of industry and advocacy awards later this month at a kickoff in Denver. Register here to join us Sept. 26 from 3-6 p.m. as we preview the 2020 CMAs, rally for local manuacturing, and hear from stakeholders providing key services for the manufacturing community — all a prelude to national Manufacturing Day events, Friday October 5. Or, contact me anytime with questions.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
Manufacturer or distributor? Both, but let’s help apparel brands reshore production
/in General/by Bart TaylorA reader in California took us to task last week for “promoting” O’Neal USA, a sports apparel company we featured in CompanyWeek. A legend in the powersports market, Jim O’Neal’s jerseys are a motocross staple.
He also moved apparel manufacturing offshore, a reality not lost on our reader. Instead, the reader said, “highlight and promote companies that keep production/manufacturing and business in California/USA. This story should be sent to Sacramento and DC to discuss the problems with the high cost of doing business here and the tariffs.”
We do feature those companies, every week, but he raises an important issue. Should O’Neal be celebrated as a manufacturer, brand, distributor, or what? Our reader suggested “a U.S. Corporate Office and Warehouse.”
Does it matter? Yes. Because companies that do travel the last mile to manufacture in America think it does. And they’re right. Navigating the issues that bedevil companies like O’Neal, to keep production in the U.S., is often the hard way to go. We should notice. And buy their products.
But in apparel and outdoor industry, O’Neal is the rule, not the exception. Jim O’Neal’s explanation for manufacturing offshore — wages, environmental laws, qualified labor — is common.
We can agree that most designers would keep their means of production closer to home if they could. And the good news is that we’re developing more domestic production infrastructure. Technology is a catalyst.
CompanyWeek Editor Eric Peterson’s story this week on Elementum 3D is one in a series we’ve published that demonstrates how additive manufacturing is becoming a mainstream production option. And it’s only getting better. Elementum 3D is expanding “the materials library” by fueling printers with aluminum, copper, and custom materials, and composites, tungsten, and tantalum in the pipeline.
Yet for O’Neal and others in apparel, production solutions are elusive. Where Nike is on the cusp of printing an entire shoe in America, and doing so in volume, apparel brands still rely on sewers. Innovation comes slowly to apparel production.
But there’s a path, and it’s navigable. The physical act of sewing may be the last thing to change, but that shouldn’t slow us from innovating everywhere else in the apparel supply chain — including what we buy. Supporting small, independent brands is an important step; they keep production home if there’s a way. Focusing on technology that fuels new prototyping and production is a given, including, as Elementum 3D’s Jacob Nuechterlein says, training a new generation of designers. “There aren’t that many people who know how to design for 3D printing,” he says.
Lastly, let’s keep pushing to develop new production and prototyping facilities companies like O’Neal can support — with business. Big guys like Nike and Under Armour are funding their own. We should all work toward democratizing enabling technologies by raising new centers of manufacturing innovation and excellence.
In doing so, we’ll help O’Neal and others keep production onshore. Then we’d have no doubt what to call them.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
5 takeaways from a week in manufacturing data
/in General/by Bart Taylor1. Is manufacturing dead or a leading indicator for the economy?
Whenever the Purchasing Managers Index (PMI) from the Institute for Supply Management lands under 50, as it did last week, manufacturing naysayers proclaim the sector irrelevant or worse.
This time around pundits are struggling to explain how manufacturing also seems to be a bellwether for the rest of the economy.
“The weakness in manufacturing has now infected the services side of the U.S. economy, which makes up about 80% of it,” sniffed Peter Boockvar, chief investment officer with Bleakley Advisory Group, in a note to clients.
In other words, the U.S. economy goes as manufacturing goes.
Manufacturing’s demise was always overstated. It’s a strategic sector and getting more so.
2. Manufacturers are creating jobs. They can’t find employees.
Manufacturing has an employment crisis — just not the kind reflected in Friday’s jobs report released by the Labor Department that showed U.S. manufacturing losing 2,000 net jobs in the quarter.
How would the graph below look with an additional half-million employees in jobs that remain unfilled? Employment would look a lot different if companies could fill open jobs.
3. Trump’s tariff plan needs a strategy.
President Trump’s trade plan hasn’t yet panned out. CNBC reporting last week summed up the consensus among analysts:
At some point soon, short-term pain must be framed by long-term gain.
4. American brands have gotten themselves into the tariff pickle by investing in offshore manufacturing.
Trump’s strategy-less tariffs get tarred and feathered, but the crisis in supply-chain management — in making things offshore in China — isn’t Trump’s fault. American companies have made China a manufacturing superpower. (Manufacturers aren’t the only U.S. companies beholding to China.)
It was inevitable that tariffs would be used to change China’s behavior and protect the interests of American companies and workers. The status quo wasn’t working. It’s unfortunate that its intended beneficiaries are suffering given the shortcomings of Trump’s plan.
But this is an industry problem that companies, not government, must fix. Collectively and collaboratively, brands and manufacturers must lead a U.S. production renaissance by investing here, and not in overseas production.
5. Innovation and industry diversity continue to distinguish U.S. manufacturing.
The sector continues to surprise, and much of the good news is related to growth industries shaping a new American industrial character.
Manufacturing is growing fastest in the West, in state economies with thriving natural food, craft beverage, and value-add industries like aerospace. Innovation is rampant here, even in legacy industries where technology is powering a new wave of engineering, prototyping, and manufacturing solutions. (Read this week’s profile of Barber-Nichols.)
There’s a race to a new, global-defining manufacturing economy comprised of exciting new industries flashing the tools of Industry 4.0. And it’s winnable. Here in the U.S.
Step into the fight or step aside.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
Coors’ cut-and-run is a final capitulation, but also the wrong bet on the future
/in General/by Bart TaylorTen years ago, Coors’ stunning cut-and-run from Denver would have been analogous to Microsoft leaving Redmond, Apple leaving Silicon Valley, or Ford leaving Detroit. We’d have been left at a loss for words.
Today, things are different. Today, the move is no more than a final capitulation to a regional craft brewing industry that’s buried Coors under an avalanche of innovation, and to Peter Coors’ hubris and personal failure to build a bridge to entrepreneurs who deep down respected the Rocky Mountains’ first craft brewer, Adolph Coors.
It’s also a strategic blunder that will cost Molson Coors.
According to the Denver Post, Coors is leaving Denver because it can tap marketing talent in Chicago that’s unavailable here, talent from midwest business schools that apparently plies the hallways of the Fortune 500 food and beverage giants from Chicago to Montreal, the Canadian HQ for the brewing conglomerate.
But last I checked, the innovation coursing through food and beverage is emanating from entrepreneurial, early-stage ecosystems in cities like Denver — not from a corner office at General Mills or Miller or Molson Coors. Legacy, industrial food and beverage brands have shifted gears. University of Chicago grads are great, but today, companies are focused on acquiring innovation. As Coors leaves Colorado, a dozen other companies are setting up shop here to tap into the risk-taking creativity on display in all corners of the economy.
—
Coors wanted no part of that scene, at least in the end. Last January I wrote about a MillerCoors blog post, “Brewery Taproom Visits Dragging Down Sales at the Corner Bar,” an empty cheap shot at craft competitors. I expected more. I expected an iconic brand to lead from the front.
Luckily, manufacturing is full of companies that are leading — leading by reimagining manufacturing in a dozen industries in response to customers, to employees, to the communities that today value their business. The trend to make more things closer to where they’re inspired or designed, to where they’re purchased and used, has only been accelerated by globalization, by companies chasing the promise of cheaper, easier — or smarter. We’re still finding some of the best things don’t come easy.
Manufacturing’s challenges are unique — as a manufacturer like Coors has discovered. The challenge of selling a Coors Banquet to a Millennial consumer is similar to the challenge of a selling that same person on a manufacturing career.
But as Coors’ retreats from its fight, we’re joining this battle. It’s a better bet. We’re all in.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
The ongoing quest to publicize the generational excellence of the people and companies in manufacturing, in the most entertaining and meaningful way we know how, is underway: the fifth annual Colorado Manufacturing Awards. Nominate your company, your customer or peer, your mentor or someone you respect. As an iconic manufacturer departs, let’s celebrate the economy that it leaves.
As Black Diamond bolts to China, red lights should be flashing.
/in General/by Bart TaylorLast month I acknowledged I’d been overly optimistic about the outdoor industry’s appetite to bring manufacturing back to the U.S. Just days later, Utah-based Black Diamond stunned employees by announcing 70 layoffs as part of plans to move manufacturing back offshore, reversing a decision made in 2015 to reshore manufacturing to Utah.
Bad timing.
As disappointed as former employees and Utah’s business community must be, the reaction from national voices in outdoor industry has been predictably muted. There persists a quiet resignation that the products of outdoor recreation have to manufactured anywhere but here. It’s an ethos shaped primarily by the reality of apparel manufacturing, where the desire to cut and sew domestically runs headlong into an immovable labor challenge. We simply don’t have the requisite production workforce to make as many soft goods in the U.S. as brands would like.
But BD isn’t moving apparel production back offshore. They’re moving metal fabrication, for products designed and engineered in Utah. It’s precision fabrication that’s often located in the U.S. in other industries; work that may be more expensive than in Asia but seems feasible here.
Black Diamond president John Walbrecht doesn’t see it that way, explaining in an SNEWS interview:
If Walbrecht’s search was exhaustive — and here’s more of his explanation — it’s a hard slap in the face for U.S. manufacturing. America’s manufacturing opportunity is to extend its design and engineering acumen to new manufacturing technologies onshore. It’s a discernible trend in the manufacturing ecosystem — so much so we’re adding a design-centered Innovation Award to the 2020 Colorado Manufacturing Awards.
BD’s rationale surprised local manufacturing professionals I contacted. One founder of a design-to-manufacture firm in Denver surmised:
Another put it this way:
As difficult the decision — and for Utah’s outdoor industry sector, it’s yet another punch in the gut — Walbrecht is in good company. He’s insulated from industry backlash — and from criticism from D.C. Black Diamond ain’t Harley-Davidson.
I’m not as sanguine. I was also told, “Surely this does not mean that the proper American company could not have done just as well or better.”
This was a financial decision. To fabricate here is more expensive for some of BD’s outdoor products. But it shouldn’t deter communities that are home to outdoor industry companies from developing a manufacturing supply chain to support brands that want to manufacture their products where they’re inspired, designed, and engineered. America can be competitive in outdoor industry products. That BD chose China, and not Utah, should again be a call to arms.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
Ordered to leave China, American manufacturers must shoot for the moon
/in General/by Bart TaylorPresident Trump’s import taxes have always been a tactic lacking a strategy. As such the possible outcomes are limited. If the goal is to end unfair and unreciprocated access to the U.S. market, tariffing the import of Chinese-made shoes, or European cars, is arguably an effective tool.
But if the goal is also to encourage companies to make more stuff in America, tariffs aren’t a remedy. Companies operate in China for a reason. In many cases the means of production reside there, not here. Moreover, as Harry Moser at the Reshoring Initiative points out, “uncertainties from the tariffs will cause 2019 reshoring and FDI (foreign direct investment) to be moderately below the 2018 level.” Tariffs may actually be slowing down the reshoring of manufacturing jobs from China to the U.S.
Now that the President is ordering American companies out of China and production reshored, all eyes are on the domestic supply chain. But if U.S. companies are to actually make more stuff in the U.S., two things must happen.
First, we need to agree that the patient is sick.
Today we labor under the assumption that, in some parts of the U.S., we’re a manufacturing superpower. The past few years, I’ve hashed out the results of Ball State University’s national manufacturing report card, which this year again basically flunked the manufacturing economies of the West. California was an exception in the 2019 Report, improving from a D to a C.
At the same time, the Rust Belt manufacturing economies in states like Indiana, where the report’s sponsor, Ball State University, is located, get As and Bs every year. The difference? Manufacturing employment per-capita. It’s a metric that reflects decades of legacy manufacturing.
Why, then, haven’t we witnessed a tsunami of American brands returning to the U.S. to set up shop in Kentucky, Michigan, or Ohio? I wrote last month of Black Diamond’s decision to return to Asia after reshoring manufacturing in 2013. Why not Indiana? Easy answer. Even in U.S. communities that support high concentations of manufacturing jobs, often the ecosystems lack the skilled labor and advanced processes and machinery that comprise the modern, integrated supply chains found in China.
Are there pockets of highly advanced manufacturing operations in the U.S.? Of course. But scale is lacking, in part because American companies have invested in offshore operations, for decades.
When we acknowledge that U.S. companies can’t immediately walk away from investments in offshore manufacturing, but should redirect resources in the future, we’ll pursue a second imperative: embracing a ‘moonshot’ strategy to modernize America’s means of production.
In a smart column, “Trading Up: Why America Must Ditch China and Pursue Better Manufacturing Opportunities,” Robert Atkison summarizes it this way:
We’re talking a national industrial policy. Are we ready to embrace such a plan? What of the naysayers who object that we’d be playing favorites with manufacturing?
There’s a litany of less ambitious means to pursue as we debate the merits of a manufacturing Marshall Plan: invest in technologies, people, and process for most-favored industries, in some cases driven by regional and community preferences; publicize companies and leaders currently reimagining manufacturing; develop resources that make it easier for companies to locate capable supply-chain partners; elect officeholders who advocate for local manufacturing.
There may never be a better opportunity to rally the nation around a moonshot-like goal to reconstruct our manufacturing commons, our national means of production. At the same time, we should look closer to home. And make small changes that add up to something big in the future.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.