Knight Aerospace

CompanyWeek Q&A: CMTC’s Jim Watson assesses the current state of California manufacturing

The narrative of California manufacturing can be a dizzying array of good news mixed with bad. Yet one reliable marker underscores the story: California’s manufacturing ecosystem is still the largest and most influential in the U.S.

At a time when interest in domestic production is higher than it’s been in decades, it’s enough to rally action to strengthen and enhance California’s invaluable economic asset. That first means ensuring that manufacturers operating here get what they need to prosper and grow.

We circled back with CMTC’s CEO Jim Watson as part of our Q&A series to assess the current state of California’s sector, gauge how we’re doing in keeping companies healthy, and to discuss what lies ahead.

CompanyWeek: Jim, remind us what’s at stake here. Where does California’s manufacturing ecosystem rank nationally in terms of size?

Jim Watson: California’s manufacturing community is the largest in the U.S., with more manufacturers and more manufacturing employees than any state in the union. In total, California has roughly 36,000 manufacturing establishments and 1.2 million manufacturing workers.

California is also the largest state contributor to U.S. manufacturing GDP, representing 14.5 percent, followed by Texas at 10.9 percent. Far behind are the contributions made by Ohio, Illinois, Indiana, North Carolina, Pennsylvania, and Michigan.

And, manufacturing’s contribution to California’s GDP continues to grow. In 2020, manufacturing reached $324 billion, with $134 billion in manufactured goods exported (representing an 85 percent share of total goods exported in 2020).

There’s a lot at stake for us. About 75 percent of California manufacturers are small, employing less than 20 employees. And, as illustrated during the Great Recession and the pandemic, these small manufacturers are the most vulnerable to economic downturns and catastrophic events. Losing California manufacturers — be it to another pandemic or migration to other states — will have significant consequences on our economy.

CW: Describe the industry makeup of California manufacturing.

JW: The manufacturing ecosystem here is quite diverse — especially when looking at the difference between Northern and Southern California.

In Northern California, manufacturing is concentrated in the high-technology industries related to computers, software, communications equipment, and pharmaceuticals. More than 62 percent of all manufacturing employment is in high technology or medium-high technology. In addition, Northern California has high profile food, wine, and agriculture sectors in the manufacturing community.

Southern California, on the other hand, is varied, with companies in fashion, food, metal fabrication, plastics, aerospace parts and instrumentation, computer and electronic components, and medical devices.

Several key industries in California have contributed to both wage and employment growth. Industries such as aircraft and spacecraft, pharmaceuticals, computer and electronic products, communications equipment, medical, and precision and optical instruments fall into that category.

CW: The national narrative tends to focus on the efforts of other states to entice companies to leave. What are companies telling you about the reasons they’re staying in California?

JW: Lifestyle, for one. Let’s face it: California’s a high-cost state for manufacturing. But people want to live here.

Of course there are other factors. California manufacturers rank very high in the nation for productivity, providing a buffer to some of the higher costs. California’s consumer market is one of the largest in the U.S.

For manufacturers, California’s large manufacturing base provides access to a broad range of suppliers for sourcing parts and components. If you leave, you’ll be leaving America’s most robust manufacturing supply chain. So, there’s also the advantage of selling California-made products to Californians.

Our educational system is second to none, comprised of 260 colleges/universities and 110 community colleges. We turn out talent from machine operators to engineers.

The two largest seaports in the Western Hemisphere (L.A. and Long Beach) provide access to products from the Pacific Rim and beyond.

All of these factors combine to provide ample reasons to stay in California.

CW: To your point about Northern CA’s manufacturing workforce, I also think that an increasingly tech-driven manufacturing sector aligns with the state’s technology and R&D ecosystem, which is second to none. Agree or disagree?

JW: Agree. California’s employment is more concentrated in the higher paying, high-and-medium technology industries, with 36.9 percent of manufacturing employment in high technology. These jobs drive innovation, new products, and technology deployment.

The average manufacturing job in California pays $112,000 a year, and each job supports another 2.5 non-manufacturing jobs. These non-manufacturing jobs that are created contribute to the state through consumer spending and taxes — and they only exist in California because the manufacturing jobs are here.

I think the positive alignment goes beyond that. Overall, manufacturing’s critical contributions to defense, commercial aviation, satellites, motor vehicles, pharmaceuticals, and computer/electronics keeps our state and nation safe and strong.

CW: So, what does the future hold for California manufacturing?

JW: California’s manufacturing community, like the nation, will be impacted by workforce, supply chain, and technology challenges.

Jobs EQ, which provides timely data on workforce, indicates that over the next year, the demand for manufacturing jobs will exceed 135,000. Supply chain shipping backlogs are not expected to ease until the summer. And, while technology demand is growing, the pace is not sufficient to keep California manufacturing competitive over the next five years.

These are big challenges. Small manufacturers make up most of California’s manufacturing establishments, and they have the fewest resources to meet these challenges. The size of the problems and number of manufacturers will require a broad collaborative of academia, industry, and technical assistance programs to provide solutions.

To accomplish this, it will take a statewide manufacturing strategy to drive focus and assistance to keep manufacturing and high-paying jobs in California.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com. Jim Watson is CEO of CMTC. Reach him at jwatson@cmtc.com.

Cox Manufacturing

Outdoor Relocation: OR ditches Denver to return to Salt Lake City

Four years ago, I wrote this about Utah’s devastating loss of its prized, homegrown trade show, Outdoor Retailer (OR), to its neighboring über-competitor:

“Last week’s news of Denver’s successful bid to land Outdoor Retailer (OR), the industry’s most important trade show fumbled away by Utah, again highlights prospects for a new industrial play.

Here’s the opportunity in a nutshell: Of the thousand or so brands traveling to Denver in January 2018 . . . most manufacture offshore. Yet more and more want to shorten supply chains and make more things in the U.S.

The measure of how successful any city, or state, or region will be in developing the outdoor industry will depend not only on who reaps tourism and trade show business, but on who will develop supply chains for companies poised to create jobs to manufacture the toys of this multibillion dollar industry.”

Four years later, OR has failed in Denver. The only thing we know for sure is that little has been done to reimagine the outdoor industry manufacturing ecosystem – in Colorado or in the West. Nor did OR or its partner, the Outdoor Industry Association, rally to the opportunity. Instead, as companies struggle with supply-chain disruptions and production issues, the lingua franca of outdoor industry leaders continues to be themes that led OR out of Utah to begin with, as articulated by Conor Hall, the new leader of Colorado’s Outdoor Recreation Industry Office, or OREC.

Hall said this last week, in an interview with the Colorado Sun, that the departure of Outdoor Retailer should be seen as “a really exciting opportunity” for the state: “We are hearing from our industry partners that they’d like something that is more of an event or festival that convenes around all these issues, like public lands and diversity and inclusion. What can we create here in Colorado that not only fills the void left by Outdoor Retailer, but matches the evolution and transformation this industry is going through.”

We talk to “industry partners” all the time, the product companies and brands outfitting outdoor enthusiasts. Public lands, diversity, and inclusion are important topics, but today they’re back-burner issues for most companies. Why else would OR set them aside in a stunning move back to Utah?

Instead, the “transformation these companies are going through” is framed by acute supply chain issues. By the struggle to keep employees healthy, happy, and well-trained. By an insatiable thirst for innovation and technology – and more, an ecosystem driven to provide more local production assets, to enable companies that must manufacture offshore, a pathway to shorten supply chains, closer to where products are inspired and used.

[Related: New Balance bulks up manufacturing presence in U.S. amid global supply chain backlogs]

These imperatives seem to be falling on deaf ears.

Colorado doesn’t need another outdoor industry event focused on public lands and diversity. The industry would benefit from a more expansive agenda; a focus on helping companies manufacture more in U.S. fits the bill. It’s well-aligned with the industry’s progressive agenda: shorter supply chains are inherently more sustainable — and greener. More OI production may best be located in rural communities, where housing is more affordable and economic prospects are lacking — call it rural renewal.

More local production would also enable brands to fulfill brand promises made to customers. Utah-based Kuhl is deservedly proud that its products are Born in the Mountains — even as they’re manufactured in Asia. It’s a tough circle to square.

Yet today, to the winner go the spoils. And Utah’s always been an outdoor industry leader, as I noted in 2018. “The irony of OR’s move is that Utah has been better at recruiting outdoor brands than Colorado. Development of Ogden’s outdoor industry (OI) cluster has been deliberate — and successful.” It’s now left to outdoor industry leadership including the Outdoor Industry Association, OR, and the economic development team in Utah state government, to steer the industry ecosystem in a different direction.

Outdoor Retailer’s embrace of education and training that helps companies reimagine the global production ecosystem holds so much promise. Let’s hope OI leaders expand their gaze.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

Finalists announced for the 2022 Colorado Manufacturing Awards

An enthusiastic crowd braved snowy conditions in Denver to gather March 10 as finalists were announced in the 2022 Colorado Manufacturing Awards (CMAs). The seventh annual program recognizes manufacturers and people across multiple manufacturing industries.

Bart Taylor, CompanyWeek publisher and co-presenter of the CMAs along with Colorado MEP Manufacturer’s Edge, welcomed the luncheon gathering by noting that two years ago in March, CMA finalists and alumni convened at the same event, one clouded by COVID-19. “This was the last event many of us attended before the lockdown. It felt like we had one foot out the door,” said Taylor.

Taylor mentioned “bookending the pandemic” with this year’s feat, and brought back two Colorado manufacturers interviewed in 2020 — Left Hand Brewing’s co-founder Eric Wallace and Allosource CEO Tom Cycyota — to speak with the group about a tumultuous two years and the path ahead.

Cycyota’s Allosource was also named a finalist in the Bioscience Manufacturer of the Year category, after clawing back losses from a direct, COVID-related hit. Allosource anchors a deep Bioscience category, with last year’s winner, Englewood-based Leiters, also a finalist alongside Fort Collins-based Tolmar.

The Colorado Manufacturing Woman of the Year finalists are Diana Hall, ActivArmor; Heather Bulk, Special Aerospace Services; and Karen Hertz with Holidaily Brewing Co. Heidi Hostetter, the 2021 winner, announced the finalists.

Northern Colorado again flashed its manufacturing bona fides, with about one third of all finalists hailing from Boulder County and northward.

CompanyWeek will preview all of the finalists in the lead up to the April 7 CMA Winners Reveal & Gala — open to all Colorado business enthusiasts and stakeholders.

REGISTER HERE for the 2022 CMA Winners Reveal & Gala.


Here are the finalists in all categories:

Advanced Machining & Manufacturing Award

Sundyne, Arvada

Hirsh Precision, Boulder

Focused on Machining, Louviers


Colorado Manufacturing Woman of the Year

Diana Hall, ActivArmor

Heather Bulk, Special Aerospace Services

Karen Hertz, Holidaily Brewing Co.


Innovative Product of the Year

Veil Intimates, Denver

ROXBOX Containers, Denver

Geyser Systems, Montrose


Consumer Brand of the Year

Tailwind Nutrition, Durango

Xero Shoes, Broomfield/Denver

Mountain Racing Products, Grand Junction


Building/Construction Manufacturer of the Year

Studio Shed, Louisville

ROXBOX Containers, Denver

MODSTREET, Durango


Aerospace Manufacturer of the Year

S&DC Corp. / MBK Machine, Longmont

Barber-Nichols, Arvada

Armite Lubricants, Lafayette


Bioscience Manufacturer of the Year

AlloSource, Centennial

Leiters, Englewood

Tolmar, Fort Collins


Industrial/Equipment Manufacturer of the Year

Snaptron, Windsor

Wire Experts Group / Rubadue Wire, Loveland

Right Stuff Equipment, Denver


Energy/Transportation Manufacturer of the Year

Solid Power, Louisville

Wire Experts Group / Rubadue Wire, Loveland

Lightning eMotors, Loveland


Food Brand/Co-Packer Manufacturer of the Year

Trisco Foods, Colorado Springs

Bobo’s, Boulder

Meati Foods, Louisville


Colorado Winery of the Year

Carboy Winery, Littleton

Sauvage Spectrum, Palisade

atōst, Golden


Craft Distillery of the Year

Laws Whiskey House , Denver

Ironton Distillery & Crafthouse, Denver

Copper Sky Distillery, Longmont


Cannabis Manufacturer of the Year

ECS Brands, Boulder

NuVue Pharma, Pueblo


Craft Brewery of the Year

Sanitas Brewing Company, Boulder

Denver Beer Company / Cerveceria Colorado, Denver

Crooked Stave, Denver

Holidaily Brewing Co., Golden

Pictured below, from top left, clockwise:

Tom Cycyota, Allosource; Heidi Hostetter, H2 Manufacturing Solutions; Meghan Marsden, Veil Intimates; Eric Wallace, Left Hand Brewing Co.; Glenn Plagens, Manufacturers Edge; Jessica Wilber, Focused On Machining;

M2 Global

Amid calls to lower trade barriers, imports surge. Huh?

Do tariffs contribute to inflation? Opponents of a more aggressive trade posture think so.

Last week Catherine Rampell, The Washington Post’s otherwise enlightened columnist, made the argument this way:

“Competition is good except when it comes from abroad, apparently. That’s the message from the Biden White House, which promises to tackle inflation by promoting “competition” but doesn’t apply this pledge to its own trade policy. Biden has kept most of Donald Trump’s barriers to foreign competition — and those Biden has undone have been largely replaced with different trade restrictions.”

She surmised, “Lifting trade barriers, on the other hand, can almost immediately increase competition and reduce prices. That’s because tariffs, quotas and the like explicitly shield U.S. firms from competing with foreign rivals, including lower-cost ones. That raises prices for downstream purchasers.”

The argument might have been more compelling if not in the same week, it was revealed that the “U.S. trade deficit in goods soared to record levels in 2021, topping $1 trillion as Americans continued to spend heavily on computers, toys, bicycles, clothing, pharmaceuticals and other goods made in foreign factories during the pandemic.”

So today the opposite is true: We’re importing more products than ever. The floodgates are open. Competition abounds. And we’re paying more for what we import.

Rampell would be on firmer ground if she argued the opposite, that it’s in America’s interest to pay higher prices for products made in the U.S. Those dollars would at least be contributing to job creation here, a reality not lost on many economists. “It’s devastating,” says Robert E. Scott with the Economic Policy Institute. “All that spending that’s falling on imports is creating jobs elsewhere and not in the U.S.”

But if the Trump/Biden trade restrictions aren’t inflationary, they’re also not working to persuade U.S. brands to manufacture in the U.S., a stated goal of both presidents.

Last month Outdoor Retailer, the outdoor industry’s tentpole trade show, announced winners of its fourth-annual Innovation Awards, a stellar list of products made by America’s leading OI brands.

No doubt that the companies are innovating. Yet their manufacturing innovations are happening offshore. Of the 11 products from U.S.-based companies, eight are manufactured offshore, most in Asia, including the winner, the BC Flyline Jacket and Bib from OI stalwart Eddie Bauer.

So whatever our trade policy is, here’s what it isn’t — yet: a pro-U.S. manufacturing platform that protects U.S. industry from predatory competition at home even as it provides incentives — carrots not sticks — for companies to reimagine U.S. production.

It should also be obvious that as U.S. companies shorten supply chains to manufacture more in the U.S., we’d at once reduce supply-chain disruptions, lower prices, and work to balance America’s humiliating trade deficit.

For Rampell and other free-traders, inflation is the new cudgel to beat back the idea that U.S. manufacturing is worth protecting. Yet more imports and endless trade deficits aren’t the answer, regardless of short-term political gain. Enabling a new era of domestic manufacturing is the sea change we need.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

MedHab

CompanyWeek Q&A: CMTC’s Jim Watson on California’s Current Manufacturing Supply Chain

California is at the epicenter of the U.S. supply chain narrative. Its ports are recovering from a serious challenge with offloading products from a backlog of container ships, and the largest manufacturing community in the nation is learning how to pivot when supply chain disruption occurs. CompanyWeek recently asked CMTC President and CEO Jim Watson to help make sense of California’s current manufacturing supply chain.

CompanyWeek: Jim, let’s start with the genesis of the supply chain challenge that California is facing. How did we get here in the first place?

Jim Watson: Over the last few years, there were several factors that created a perfect storm.

First, the COVID-19 pandemic caused an exponential increase in demand for durable goods, far exceeding existing capacity to produce and transport products. Second, there was and continues to be a lack of redundancy in current supply chains, limiting the use of alternate suppliers to fill demand.

The outcomes have been port congestion, a scarcity in materials, and rapidly increasing transportation costs. Add an existing workforce shortage exacerbated by COVID in both logistics and manufacturing to the equation, and the result is a disruption that will be with us well into 2022.

CW: In theory, it seems we can mitigate some of the pain if we can make more domestically, if companies can shorten offshore supply chains. Can you give us a realistic assessment of reshoring? What’s the mindset of California manufacturers?

JW: The mindset of California manufacturers is quite similar to that of manufacturers across the nation. They would like to shorten their supply chain and have more control over the way it operates. Reshoring offers an opportunity to achieve both.

Reshoring is composed of two things: U.S. manufacturers reshoring production and foreign companies investing in the production of goods in the U.S. Both have picked up substantially.

More offshore companies are investing in the U.S., as foreign direct investment in U.S. manufacturing reached a new record of $1.88 trillion in 2020, according to the National Association of Manufacturers. In 2005, the level was $499.9 billion. Today, the shortage of semiconductor chips is playing a prominent role in rising foreign direct investment in the U.S.

With U.S. manufacturers wanting to shorten their supply chains, there is a growing focus on finding regional or local suppliers that will provide shorter delivery times for products and components and easier participation in the supply chain process.

The Reshoring Initiative, an industry organization, estimates that some 1,800 U.S. firms intend to reshore all or part of their business this year.

The long-term success of reshoring will depend on the answers to a couple of questions. First: how many products can be manufactured in the U.S. at a price point that can compete with foreign producers? Second: as the supply chain challenges subside, will U.S. manufacturers remain committed to streamlining their supply chains? Only time will tell.

CW: Where do you see opportunity? In other words, what industry supply chains are well suited to support a surge in local and regional production?

JW: Although the final 2021 data is not yet available, it is expected that the transportation equipment industry will reshore more jobs than any other sector, followed by the chemicals and electronics sectors. This was also the case in 2020 and 2019.

In 2021, transportation equipment was forecasted to add more than 54,000 reshored or foreign-investment-created jobs. That notably includes electric vehicle battery production. Chemical companies were forecasted to add 37,233 jobs.

While some industries have better opportunities to reshore, manufacturers that have real-time visibility into their supply chains are best suited to support a surge in production. Visibility will mitigate surprises and guesswork when managing a supply chain, improving quality and the on-time delivery of materials.

CW: Can you describe scenarios playing out with CMTC clients?

JW: Right now, many of our clients are experiencing as much as a 4x increase in transportation costs. Others are waiting for components to complete products with no definite delivery time. Many are actively searching for alternative sources for critical materials and exploring ways to bring them closer to home.

In addition, they’re investigating the digitalization of the supply chain process to enhance supplier visibility. They are exploring automated ways to capture and manage data, expedite supplier collaborations, and maintain real-time information on orders and deliveries.

CW: We’re seeing huge interest in automation-related content from our audience. The race is on to automate. That said, what are some CMTC resources that might help our audience sort through supply-chain disruptions?

JW: CMTC has both virtual and direct assistance: We’ve modified our website to help connect manufacturers to new, domestic sources of supply in order to access the materials they need to ship their orders and meet their production goals. CMTC also has the expertise to evaluate supply chain efficiencies, agility, and resiliency as well as provide assistance to improve performance with automation or by sourcing new suppliers.

Contact Jim Watson at jwatson@cmtc.com, or send me a note, Bart Taylor, btaylor@companyweek.com.

Funky Mello