San Francisco foodies look east to Boulder (naturally)

Special guests at last month’s Pitch Slam & Autumn Awards included stakeholders from San Francisco’s dynamic food scene, in Colorado to learn more about Naturally Boulder, the trade association that’s been so instrumental in vaulting the state’s natural and organic products sector to national renown.

And why not? Colorado’s ascendant, nationally recognized food and beverage sector is leading a regional charge in nondurable goods manufacturing. Nondurable goods employment increased in Colorado by 2.6 percent in 2016 and is expected to post a 2.1 percent gain in 2017, averaging about 53,300 workers for the year, led by food and beverage.

The sector pales in size to California’s global food juggernaut, but those in San Francisco and elsewhere see the obvious: tightening up food communities and providing early-stage companies better access to resources will only accelerate growth, keep promising food brands local, and enable the entire ecosystem to better respond to the demand from consumers wanting natural and organic products from local providers. Naturally Boulder has emerged as a national model.

Part of it is the power of networks. Events like Pitch Slam are must-go gatherings that today attract investors, economic developers, and other service professionals that promising early-stage companies inevitably need to thrive. As a result, the network becomes a magnet for entrepreneurs.

San Francisco’s no stranger to this dynamic in manufacturing. SF Made is a bright national beacon among regional associations advocating for companies that comprise the modern manufacturing economy — or legacy brands that have led the way. Today we profile McRoskey Mattress Company, an SF Made member and proud California manufacturer with roots in the 19th century.

But as we’re seeing today in Colorado, focus pays dividends. And even then, the speed with which industry sectors transform can leave behind even the most agile brands.

With the help of a tight, collaborative community, companies like EVOL, LARABAR, and Justin’s pushed through exits that enriched owners and within the span of a decade, changed the national conversation about food. Just as quickly, the market has changed again.

Today, even with food-focused investment funds camped out in Colorado alongside a cadre of Wall Street veterans and family offices, the game is suddenly harder. Harder for brands to get funded; harder for early-stage brands to get shelf space at Whole Foods; and harder for entrepreneurs to sell industrial brands, today much more knowledgeable and invested in innovation, on the benefits of acquisition.

Which means foodies in San Francisco and San Diego (like Opera Patisserie, profiled this week), must all be smarter, more ambitious, and more innovative than those who came before.

It’s why associations or groups that build community and educate, incubate and accelerate companies can make all the difference. It must be why industry mavens from San Francisco see value in a trade group in Colorado, despite California’s unmatched resume for food and agriculture.

Besides, even with brands conceived in 1899 in San Francisco still leading the way, much about today’s manufacturing is just being learned.

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

Chipotle broke its brand promise; manufacturers should take note

For manufacturers, Chipotle and other restaurant brands that manage complex supply chains and shape raw materials into refined products are kindred spirits. They’re makers all. We’ve also profiled regional growers and ranchers who shape the ‘locavore’ community and supply Chipotle and others, so the outcomes of local food artisans are always of interest.

Likewise, there are lessons to be learned when restaurant food brands flail, and for consumer manufacturers especially, Chipotle’s crash to earth the past couple years offers two important takeaways.

Lesson one, complex supply chains break. Be prepared.

Chipotle’s challenge in growing, packaging, transporting, preserving, and presenting food products have been well documented and from where I sit, there’s no need in piling on. What they accomplish day to day, week to week, is hard. Other brands that have transformed entire industry sectors with vision and innovation can relate. Failing at complex operations is inevitable. Chipotle’s supply chain was bound to crash at some point. Their recovery has been admirable.

But at the center of Chipotle’s current woes may be a more fundamental fail. As a long time customer and fan, I’ve lost the deep connection I once had with the Chipotle brand, and suspect others have as well. And until someone inside the company tells the truth, attempts to rescue the brand with Band-Aids like ‘queso’ will fail.

I was an early Chipotle customer and ate often at the chain’s first location on Evans Avenue near the campus of University of Denver. More accurately, I overate. The trademark burritos were stuffed to the point that their makers would often struggle to wrap the conglomeration into a single tortilla. (Watch Sebastian Maniscalco’s hilarious take on Chipotle’s burrito makers.)

I still eat at Chipotle, a couple times a month. I like the food, but today my visits often come with a side of irritation. The company’s burrito artisans spoon about four ounces of chicken or steak or whatever over rice or beans. I had to know so I asked. Gone is the visceral delight of being served a three-pound burrito that often doubled as lunch and dinner. Of standing in line for 15 or 20 minutes with like-minded schlumps, all giddy that the eight bucks about to be spent was true value.

Chipotle was not only a culinary delight, novel and innovative and massive, it was an over-the-top deal. And we came back, wide-eyed and ready for more. Today an algorithm dictates that a few ounces of organic pork, served in a jillion burritos, will sustain growth and the stock price.

All fine, except that the company has walked away from a its core brand appeal. When I visit the restaurant now, an accountant serves up my burrito bowl. The food’s still good. The experience, the satisfaction, gone. Is it a surprise the stock price has crashed — down 60 percent the past year? Not to me. It’s just a business now. I wonder if today it’s just a business to Steve Ells and his lieutenants.

Lesson two: Keep your promises. If divesting a share of your company or going public obscures or buries the values that attracted a legion of customers to your brand, you’re toast.

Served with a side of queso.

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

America’s new industrial brand is on display here, in the Rocky Mountains

Of the 850 or so companies we’ve profiled the past four years, is there a single business we can point to that embodies all that’s compelling about the new manufacturing economy?

It’s a tall order. But among the criteria, we might agree that said company would be:

  • Offering employment opportunities that appeal to a Millennial workforce.
  • Utilizing advanced manufacturing techniques and materials, with at the same time flashing a profound connection to the craft — to engineering and design, fabrication, construction and assembly — calling cards of U.S. industrial acumen.
  • Building products at the forefront of a resurgent Made in America movement, products that also open new export markets for the company and for counterparts in the sector; or, filling America’s massive OEM pipeline for parts and products from contract manufacturers that are often sourced overseas today.
  • Renewing an American commitment to reclaim industries offshored or otherwise abandoned in pursuit of low-cost labor or services or materials.
  • Providing primary jobs in communities in need of new employers and diversified economies, while at the same time investing in the local supply chain to build a foundation for other manufacturers and makers.
  • Inspired to embrace the mantle of U.S. manufacturing exceptionalism.

Moreover, if we can identify more than a handful of companies, across manufacturing industries, that meet these criteria, would this then formally equate to a new era — a new golden industrial age — of American manufacturing?

I’m inspired to ask these questions because this week we feature a company that meets our criteria of a bellwether modern manufacturer.

We first profiled Steamboat Springs-based Moots in CompanyWeek‘s inaugural month of September 2013. This week we revisit the company and new president Drew Medlock, seemingly a great addition to a company leading a vanguard of maker businesses reshaping the sector.

Consider:

Moots’ talented designers and fabricators, sellers, brand managers, and other employees may not fully grasp what they’re accomplishing — no more than those working at Colorado’s other cycle manufacturers like Guerilla Gravity or Alchemy — but the combination of entrepreneurialism and a renewed interest in the physical product add up to a powerful magnet for aspiring young professionals.

Moots is pioneering with advanced materials and processes — titanium and 3D printing, for starters. The Moots’ weld is also a thing of beauty.

As Medlock notes in the profile, “I think European customers have even more of an appreciation for metal bikes over carbon fiber.” Can Moots open international markets for other exporters, even if it can’t today handcraft enough bikes to become a significant player? It’s a good bet. Moots’ brand embodies quality and craftsmanship, ingenuity and industry.

Much as Utah’s ENVE Composites has done for wheels and components, Moots is leading a movement to bring cycling manufacturing back to the U.S., mainly from China and Taiwan. As Medlock points out, it’s no walk in the park. Domestic manufacturing “is always a major challenge for us in terms of cost. We always try to source . . . domestically. So that’s a challenge. It’s not easy.”

Yet for communities from Steamboat to Park City to Telluride, the primary jobs that Moots and its peers keep in the local economy can be a foothold to establish more non-service sector jobs, employment alternatives that help places escape the single-industry business cycles that bedevil local economies.

Finally, Medlock and the Moots team may not realize they’re game changers, given the day-to-day challenges of staying in business while bucking the move to offshore production, where cheap labor and materials add up to black on a spreadsheet. If they could, they might fully embrace the transformative effect many small- to medium-sized manufacturers are having on America’s manufacturing brand.

This week, we’ll do it for them, and remind the business community that if we don’t align resources to ensure that Moots and other companies like it succeed, we’ll have a missed an opportunity to change our industrial fortunes. It’s a sure bet that, in sounding a cautionary tale about supply-chain challenges, there are days when businesses like Moots and leaders like Medlock contemplate resource-rich ecosystems, wherever they may be.

Let’s not miss the opportunity to rally around change agents like Moots. Manufacturing will prosper as a result.

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

Manufacturing Day, RIP

This column originally appeared in October, 2017.


On one hand, Manufacturing Day, an event dreamed up by the National Association of Manufacturers in 2012, serves a useful purpose. Americans are in need of a reawakening to the potential of manufacturing employment, for the benefit of their families and our communities. The Day has become a showcase of manufacturing jobs, with companies throughout the nation opening their doors to high-school kids and undergraduates. As today’s factories are certainly a far cry from several generations ago, it’s useful for kids to see the modern technology and clean rooms of today’s manufacturing and by all accounts, the Day was a rousing showcase of modern manufacturing.

On the other hand, we’ve moved on. Manufacturing is more relevant than Manufacturing Day imagines, even though we continue to conjure up the image of a Pittsburgh steel plant to contrast the new manufacturing economy and use the day to bemoan a negative perception of the sector. It’s more likely these dated images reside mostly in the minds of business columnists who’ve never made or bent or cut or shaped anything without an eraser on one end and a ballpoint on the other. (An official objective is to “change public perceptions of manufacturing.”)

Instead, Manufacturing Day should also be reimagined. Where activities and pronouncements earlier this month worked to reinforce negative stereotypes, a new Manufacturing Day would embrace a national mission to overcome shortcomings that continue to weigh on growth, in addition to workforce.

Let’s keep it simple and focus on two outcomes:

Provide direct support for early-stage and middle-market manufacturing. We could count the ways, but tax cuts masquerading as tax reform are one example of economic policy that helps large corporations and National Association of Manufacturing members, but does little to tip over decades of paltry investment in early-stage manufacturing companies and workforce.

The notion that U.S. corporations are suffering because of punitive tax rates is folly. The opposite is true. They’re killing it. The price-earnings ratio of the stock market the past 20 years has been 70 percent higher than the previous 100. The profit margins of U.S. corporations have been 30 percent higher.

But these extraordinary profits aren’t translating into jobs, into a middle-class employment rally. Again, the opposite. Companies aren’t using these dividends to build new plants in the US. They’re buying back stock, in part to drive stock prices higher. Great for stockholders, bad for growth. It’s a mindset that also diminishes the creation of new companies. The number of people working for companies one to two years old is half of what it was 20 years ago.

Tax reform would direct proceeds from any tax-cut windfall to investments in new companies and factories, capital equipment, and infrastructure. Germany and other industrial powers set a GDP target for manufacturing investment. A meaningful tax reform outcome for manufacturers would be reinvestment to drive U.S. manufacturing GDP back over 15 percent — an outcome that requires a new commitment to early-stage and middle-market companies.

A national effort to reconstitute the domestic supply chain. I’ve said it before: manufacturers need, well, everything, and much if it has been offshored or remains out of mind in our stilted view of what a ‘global’ economy should look like.

A supply-chain transformation begins with a forceful argument for what manufacturing is. For the first time in four years, since launching CompanyWeek, I heard a National Public Radio journalist refer to a distiller as a manufacturer. Progress! Manufacturing today is an eclectic mix of industries and companies.

Communities that embrace a new industrial future will develop resources, real estate, financing, talent and contract manufacturing for food startups, high-tech fabricators, brewers and distillers, outdoor industry, and bioscience and aerospace companies. And invest in services and technology that better connect manufacturers with each other and the supply chain.

This is a ground-up call to arms. It doesn’t begin in Washington D.C. It’s not a NAM-inspired marketing program. The National Association of Manufacturing is a phantom to 95 percent of manufacturers, most of whom are small businesses.

Let’s instead turn Manufacturing Day into a week or even a monthlong effort to connect entrepreneurs and middle-market companies with domestic resources that help them keep business investments in everything, including talent, local.

In other words, Manufacturing Day has runs its course. More connecting, and less caterwauling, is the true north for sector development. Let’s get on with it.

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

How Amazon’s Whole Food plans may undermine innovation

Amazon’s disruptive model has always evoked strong feelings, good and bad. So who wins and loses as Amazon bursts into the grocery business with the acquisition of Whole Foods? Beginning this week, WF shoppers will enjoy lower prices on “high-volume staples.” It’s a short-term win for consumers.

But if Amazon’s discounting strategy extends into most WF SKUs, the small, innovative brands that have led a food manufacturing revival in California, Colorado, Oregon, and other progressive states may see margins erode, a potentially devastating development for companies that have benefitted from WF’s model.

Specialized retailers have been a catalyst of the artisanal, craft manufacturing boom. By providing early-stage brands encouragement and key shelf space, grocers like Whole Foods have fostered growth and innovation. The higher margins that shoppers pay have also worked to protect small producers: locally made, organically-sourced products are often more expensive to make, especially early on, when companies aren’t big enough to co-pack or able to invest in larger more efficient product facilities. Notes Steven Hoffman, managing director of Compass Natural Marketing, “An authentic brand will never win on price, but it can win customers who share its mission and values.”

And here’s the rub. Is Whole Foods’ values connection with customers and brands consistent with Amazon’s algorithms “that scrape competitors’ prices before automatically matching or narrowly undercutting them on its website?” What happens if Whole Foods evolves, if not to a discount brand, but a store that squeezes margins across the board? Margins that sustain early-stage companies and fuel the steady stream of new ideas pouring from food ecosystems in California, Colorado, and elsewhere.

Bill Capsalis, former president of Naturally Boulder, the go-to trade association for Colorado’s natural and organic product sector, isn’t concerned — yet.

“Let’s be clear, we’re talking about one retailer here,” Capsalis says. “Yes, they are important, but my own experiences show me that due to Whole Foods’ own policies and processes they have been getting a 10 percent to 30 percent premium on the same products you can buy at other retailers.”

Capsalis was bullish on Amazon’s acquisition of Whole Foods initially. “It’s good because brands can now preserve margin by selling direct. If you combined the expertise of Whole Foods and the way they curate brands and products — with the tech savvy and direct to consumer model of Amazon – the consumer really wins big time in this equation.”

Hoffman also takes a long view. “This is a continuum of what’s already been happening with brick and mortar retailers having to compete with e-commerce sellers,” he says. “Distributors that had been serving Whole Foods, too, are having to deal with this quantum shift, as Amazon comes with its own myriad warehouses, and margins are sure to be squeezed along all channels of distribution.”

Today, he adds, the impetus is on brands to evolve, and the game’s on. “Before, I would recommend companies explore online strategies in addition to trying to get into Whole Foods and other retail markets. Now, online strategies will become an essential part of every brand’s business model. My guess is that, if you do well on Amazon.com, you may very well end up on the shelves at Whole Foods Market.”

That said, Capsalis and others are wary. “The fears of what’s to come with this merger are real and palpable,” he says. The fears, no doubt, are related to Amazon’s track record of transforming America’s retail landscape — and the resulting unintended consequences.

Here’s what we know: Small food brands that are transforming the industry need sufficiently long runways to innovate and operate. Eroding margins can be a slippery slope in the wrong direction. In the outdoor industry, Patagonia founder Hap Klopp calls this eventuality “the race to the bottom” — a focus on cheaply-made products from discount brands that works to undermine product differentiation and, in the end, American manufacturing.

Industry advocates in California, Colorado, and across the West will do well to ensure that innovation and entrepreneurship remain the calling card of food manufacturing ecosystems, and remain key outcomes of Amazon practices, not just lower prices.

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

Five reasons why manufacturing jobs are coming back to stay

Last month after taking a shot at Forbes columnist Tim Worstall for his snarky column, “Manufacturing Isn’t Important But Factory Goods Orders Are Rising — That’s Nice,” I heard back from Worstall in a cordial if combative response.

Among other things, I’d argued that his habit of diminishing manufacturing simply because companies move it offshore undermines the sector by undervaluing it. Worstall wouldn’t have it. He responded, “I am not saying that manufacturing shouldn’t happen. I am saying that it’s entirely unimportant that it happens in the U.S. or not.”

I invited Worstall to Colorado to debate the proposition, as I disagree with his premise and his clarification. But our friendly, in-person spat will have to wait, as Worstall’s ensconced in Portugal.

Perhaps his colleague at Forbes, John Tammy, will accept in his stead. Tammy is also anti-manufacturing, as evidenced by his shortsighted missive published a few weeks later, “When They Promise To Bring Back Manufacturing Jobs, They’re Promising Stagnation.” Tammy chides that manufacturing jobs are a vestige of the Civil War era, when “New York was a city of factories.” He adds, “Lest we forget, it’s where the talented migrate, and the talented disdain low-wage, back-breaking manufacturing work. So have American workers of all stripes left manufacturing employment behind.”

This surprisingly common theme in the business press, that manufacturing and a modern U.S. economy don’t mix, runs headlong into a different reality on the ground. Manufacturing jobs are coming back, reshored or contemplated in the U.S. first, despite the protests.

Here are five reasons why:

  1. Consumers want more stuff made here. More than ever, we now care about where products are made, for reasons involving health and wellness, convenience, product quality, social and economic accountability, and other issues.
  2. Brands want to make more stuff here. In response to consumers, and for other compelling reasons including cost, access to technology, brand integrity, and social responsibility, the trend in product management is for companies to shorten supply chains in support of domestic manufacturing.
  3. Rise of the new tradesman. Today’s high-tech, entrepreneurial, manufacturing sector will continue to get traction with families and undergrads, and a new and viable career path is emerging. Elon Musk and others are providing inspiration by rewriting the rulebook, seeking out a generation of new U.S. tradesman, many armed with advanced degrees. This from Ashlee Vance’s Musk biography, on the hiring process at SpaceX: “Most attention goes toward spotting engineers who have exhibited type A personalities traits . . . who excel at robot-building or haves built unusual vehicles. The object is to find individuals who ooze passion . . . and have real world experience bending metal.” Experience bending metal. How great is that?
  4. Domestic manufacturing is now a national security issue. There’s widespread acknowledgment that along with our collective manufacturing acumen, we’ve also offshored technology and advanced processes to places like China, countries that use this knowledge to compete against American companies and employees. We’ll manufacture more products domestically as a result. The move last week by the U.S. to block the Chinese government’s attempt to buy Lattice Semiconductor is a trend, not an isolated incident.
  5. The economics of global manufacturing are changing — to the benefit of the U.S. The cost of production is rising sharply in places that today are production destinations for American brands. The purely economic rationale to offshore manufacturing is fading.

The straightforward means to accelerate the trend and establish a new manufacturing labor class is to focus on the domestic supply chain. Companies that want to make more products in the U.S. need more of, well, everything.

Support of the domestic supply chain is a clear litmus test for any trade association, economic development entity, elected official, or academic leader that claims to support manufacturing.

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

Bold steps needed to advance a national manufacturing blueprint

Somewhere, on a Forbes magazine list of most-hated professions, manufacturer must appear just above lawyer and journalist.

It’s one explanation for the manufacturing-related musings of columnist Tim Worstall who, in a snarky column last month entitled Manufacturing Isn’t Important But Factory Goods Orders Are Rising — That’s Nice, proclaimed of manufacturing:

“It just doesn’t have all that much relevance in a modern economy. I mean, sure, it’s nice, manly men have been doing more manly things with machines and all that, but in terms of how it affects the rest of the economy we’re down at a level of significance where, well, it doesn’t. Affect the rest of the economy in any manner we’ll notice that is.”

In working up a response, I instead fell upon Fast Company’s saving feature, 25 Brands that Matter. Of the 25 “companies whose products you love to love because they stand for something more than merely what they sell,” eight were manufacturers, and two of the top five. It’s a beautiful repudiation:

By Fast Company’s reckoning, technology and manufacturing companies are the pin-ups of the U.S. economy.

It’s unlikely that FC’s editors or readers will draw the same conclusion, let alone Worstall. Today, Apple is known as technology company, Patagonia an outdoor industry brand, and Nike a sporting goods giant.

We’ve been okay with these labels because manufacturing’s been something companies just do offshore, out of sight and out of our globalized view of what should constitute a “modern” economy. But until manufacturing is considered the full extension of a brand’s identity, America’s sector will continue to be marginalized.

It’s ironic that voices emerging to challenge conventional wisdom are often not mainstream business media but instead entertainment-and-culture rags like The New Yorker, who last week explored manufacturing’s conundrum in Joshua Rothman’s smart column, “Should We Subsidize Manufacturing?”

He does all of us a favor by collating the thoughts of economists, industrialists and sociologists like Louis Uchitelle, author of Making It: Why Manufacturing Still Matters. For this group, America’s relationship with manufacturing is cultural as well as economic. As a result, a retreating sector tears at the social fabric of the country.

Uchitelle’s ideas are especially thought provoking. For one, he argues that Americans “are in denial about the importance and prevalence of subsidies.”

From Rothman’s New Yorker piece: “Our factories have always been ‘semipublic institutions’ funded, to a surprising degree, by taxpayer dollars. ‘The false premise that manufacturing is a free-market activity — that subsidies don’t exist or are inconsequential — should finally be put to rest,’ Uchitelle writes. ‘No one anywhere in the world makes steel or autos or shoes or virtually anything else in a factory without subsidies.’ Uchitelle thinks we ought to subsidize manufacturing more, and more rationally. We should also recognize that, when we decide not to subsidize manufacturing, we are deciding to kill it.'”

Uchitelle’s prescriptions are bold: “Subsidies should be increased, and their role emphasized. The dollar should be devalued to encourage exports and slow the financialization of the economy. Import tariffs should be raised and trade agreements renegotiated. Taxpayers should have more say in where factories are located: similar factories should be built near one another, ideally in or near densely populated cities, to strengthen the industrial base and force companies to compete for workers. ‘Buy American’ clauses should be extended: Uchitelle notes that the glass in the new World Trade Center was made in China, as was the steel in the new Verrazano-Narrows Bridge.”

And the coup de grace: “A G.D.P. percentage target for manufacturing. In the nineteen-fifties, twenty-eight per cent of G.D.P. came from manufacturing; today, it’s twelve, and only Britain and Canada lag behind the United States in manufacturing output. Uchitelle argues that a figure of seventeen per cent would put us in line with other industrialized nations. In Germany, he points out, ‘manufacturing output has generated a steady 22 percent of the national income year after year for at least seventeen years, and the government is quite open about its participation.'”

With the the current dialogue stuck at ‘how important is manufacturing?’, bold steps like a G.D.P. target can seem a bridge too far. On the other hand, a new, disruptive agenda may be exactly what’s needed to reorient policy makers, and reticent business columnists, to a new manufacturing reality.

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

Defending Ivanka, Inc.: Trump can silence her critics by investing in U.S. apparel production

U.S. apparel brands are working hard to improve working conditions in overseas factories that manufacture their products. But when should a brand invest in U.S. jobs instead?

If only the The Washington Post would have explored this question in last month’s takedown of Ivanka, Inc. We’d of learned more about Ivanka Trump’s operation and the apparel industry at large.

Instead, the paper settles for a political hit on Ivanka Trump that largely falls flat. Under the simple headline, Ivanka, Inc., the story trumpets,

“The first daughter talks about improving the lives of working women. Her father urges companies to “buy American.” But her fashion line’s practices collide with those principles – and are out of step with industry trends.”

The author’s real objection is that Ivanka, Inc. manufacturers offshore, at all. In related video content entitled Here’s what Ivanka Trump has been doing in the White House’, the paper boasts,

“A Washington Post investigation revealed that Trump’s clothing line relies exclusively on foreign factories in Asian countries. That’s despite the administration’s call to “buy American.”

But most apparel companies rely on foreign factories in Asian countries and couldn’t manufacture here even if they’d like (many would like). Some investigation.

Kelly and Will Waters of Telluride’s homegrown brand Western Rise are navigating a global supply chain to build an apparel brand. I asked Kelly about her operations — Western Rise manufacturers offshore — the Post‘s story, and the challenges of manufacturing onshore.

“It’s a complicated, multifaceted issue,” Waters begins, “in that a lot of manufacturing jobs can’t come back because we don’t have the factories available, we don’t have the fabric suppliers here, we don’t have the workforce available, to sustain that level of manufacturing — and also to sustain it at the price the American consumer has come to expect as reasonable for their apparel. I think that’s one part of it.”

She continues, “One of the other things that can be difficult for apparel manufacturers, and I know this was mentioned in the article, is that very few manufacturers own their supply chain, and because of that, it can very difficult to regulate that supply chain, and the ethical practices in the mills and factories doing work for you. It becomes even more difficult when you use a third person, as was mentioned in the article, a ‘middleman’ you hire to negotiate rates with all these mills and factories. It’s another degree of separation between you and your supply chain, which makes it that much more difficult to check in on things like labor, and environment, and work hours, and the sustainability of the fabrics, or water consumption and environmental footprint of the factories you use, and all of the things that get looked at. It’s very difficult when you have that degree of separation.”

Waters has eliminated the middleman. “We source all of our fabrics directly with our mills,” she says, “and we contract work directly with our four different fabric and apparel factories.”

But bringing production to the U.S. is no simple task. “Short of billions of dollars in investments and state of the art facilities,” she adds, “it’s going to be hard.”

Who better than Ivanka Trump to invest in apparel infrastructure? If only the Post would have asked.

Where Ms. Trump shouldn’t be held to a different standard despite her high-profile father’s exhortations, Ivanka Trump, the company, can reasonably be expected to invest in U.S. manufacturing infrastructure, in keeping with President Trump’s message. The company has resources, influence, and a bully pulpit to effect change.

Waters has an idea where to begin. “I think the place you start is workforce training, but I would hesitate to say workforce training in the traditional cut-and-sew manufacturing process. I think we’ll see manufacturing come back to the U.S. is in the areas we excel, which is creative problem solving and technology, and things like 3D knitting, which we could house here in the United States, and what we need to run them is people who are familiar with code, versus people that are familiar with flat lock stitching. You’re talking about building an infrastructure from the ground up. And to be honest, we’re not going to be able to compete with Bangladesh and Africa on cut-and-sew prices and hourly wages for employees. We need to compete in areas where we have strength.”

Can Ivanka, Inc. evolve to where it’s a change agent in fashion apparel production? Trump’s low-cost, mass-merchandising product strategy also feeds the very offshore production system that U.S. brands view as unsustainable. It’s a brand strategy that Hap Klopp, founder of The North Face, calls the ‘race to the bottom’ — high volume, cheap products for the consumer and low margins for the manufacturer. Up and coming U.S. brands embrace the opposite.

If not Ivanka Trump’s company, Colorado and the region are home to a cadre of brands and entrepreneuers reimagining the global apparel supply chain. More are on the way. Of the thousand or so brands coming to Denver this January for the city’s first Outdoor Retailer, most manufacture overseas. As a regional blueprint for apparel production evolves, the possibilities for growth are intriguing. We’ll dig deeper into the concepts and people leading the discussion next time.

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

Rust Belt bias flunks the 2017 Manufacturing and Logistics National Report Card

Last year, the 2016 Manufacturing and Logistics National Report Card from Ball State University in Indiana raised eyebrows in Colorado’s manufacturing community when we reported the state was given a D. The bad grade provoked well-intentioned efforts to assess the state’s manufacturing shortcomings.

This year, our footprint has expanded west to include California and makes for an even larger data set to parse. Here’s the 2017 Manufacturing and Logistics National Report Card grades for California, Colorado, and Utah, the states where CompanyWeek now publishes.

There’s a lot to unpack here.

By the looks of things, the only subsector grade saving California from Colorado’s ignominious D in overall Industry Health is a A in Productivity and Innovation.

But in other states, including many in the Rust Belt, it doesn’t appear the overall grade correlates at all with subsector scores.

Consider Michigan:

Michigan’s A grade in overall ealth, without an A in the other categories, is a headscratcher. Likewise, Utah would appear to have earned a high overall grade.

The explanation seems to be that per-capita employment is weighted more heavily. According to the Report, Michigan’s manufacturing employment is 11.7 percent of the state economy, a high number compared with most states. The Report Card notes that 5 percent of Colorado employment, and 8 percent in California and Utah, is in manufacturing.

Is Michigan’s sector — or that of Indiana, Kentucky, Iowa, and South Carolina, other states with A grades for industry health — in better shape than California or Colorado’s because it has more jobs?

Maybe, but here’s why that’s a tough argument to make.

Manufacturing jobs have steadily decreased as a percentage of overall U.S. employment. Per-capita employment seems a dated metric; it’s yesterday’s measure of industry health.

That’s not to say workforce doesn’t matter. The opposite. Human Capital is the study’s most important metric. The lack of skilled labor is manufacturing’s biggest challenge — nationwide.

Today’s healthiest manufacturing economies are focused on developing the right workforce. What’s appealing to manufacturing companies is a future workforce flashing STEM skills. States experiencing a net in-migration of young talent, in economies with a rich R&D backdrop, is also a plus. Michigan’s D in Human Capital is telling, as is Kentucky’s D and South Carolina’s F.

Other criteria in the Report Card are important in the future. Sector diversification is manufacturing’s new calling card. Want to begin to solve manufacturing’s labor problem? Showcase its growth industries — beer and distilling, natural and organic good, technology-fueled fabrication in aerospace, and the outdoor industry — that appeal to a new generation. They’re the growth industries of the manufacturing economies in the West.

Global Reach is today a two-way street. Exports are only one side of the global manufacturing coin. Reshoring — shortening supply chains — is the flip side, and states developing manufacturing infrastructure to accommodate brands wanting domestic manufacturing will thrive.

Michigan’s recovery, with automotive manufacturing at the center, has been startling. It’s a testament to the power of industry innovation and deliberate economic development efforts to reimagine manufacturing in a key industry. Other states, like Tennessee (overall health: B+), are led by energetic and capable manufacturing leaders intent on bring new ideas to their communities.

But today manufacturing health will follow economies where talent enables innovation and communities understand the value of manufacturing jobs. If Michigan and other Rust Belt states leverage their manufacturing legacy to recruit a new generation of STEM-inspired employees to manufacture a widening portfolio of industry products, an A will be well-earned.

Otherwise, the centers of modern U.S. manufacturing will tilt toward R&D-inspired, entrepreneurial economies also benefitting from an influx of talent and money.

The race is on, and more than good grades are in the balance.

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

Outdoor Retailer’s a coup, but outdoor industry brands need more than a trade show to thrive

We often beat the drum about the outdoor industry’s promise for manufacturing growth. 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 to exhibit and take orders from retailers across the globe, most manufacture offshore. Yet more and more want to shorten supply chains and make more things in the U.S. Manufacturing economics increasingly favor local production, and importantly, so do millennial buyers.

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 the tourism and service-sector windfall from convention business, but on who will develop supply chains for companies poised to create jobs to manufacture the toys of this multibillion dollar industry.

Is Colorado a better location than Utah (or California for that matter) as industry expands? 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.

But the industry’s power players bluntly demonstrated that OI’s progressive bent is a better fit in Colorado than in more conservative Utah, a reality that lays bare the stark choice forced on OR’s constituents. In Utah’s misguided zero-sum game, it was either oil and gas development or the outdoor industry. OI lost.

Utah’s outdoor industry will rebound and thrive. So will communities that develop innovative new tactics, a new toolbox, to recruit OI companies.

Here’s a short list:

Consider industry-tailored business centers and accelerators. OI manufacturers require specialized supply chains. Communities that integrate the disparate components into new centers of innovation, a common practice in technology and other growth industries, will become magnets for companies and talent.

In an editorial celebrating Colorado’s OR ‘coup,’ the Grand Junction Sentinel cites city plans to develop “a business park that will cater to outdoor industry manufacturers” as an important next step. It’s a game changer if the initiative also includes: an education partner to provide workforce training, ideally advanced curriculum and degreed programs (Utah State today offers a degree in Outdoor Product Design and Development); advanced manufacturing technology and equipment; mentorship and coaching; and bankers and investors, legal experts, and other business service providers.

Techstars in Boulder finds emerging technology companies, funds them, coaches and trains their leaders, and connects them with national and global opportunities. Who will develop the first OI accelerator in the region? (See Oregon’s Bend Outdoor Worx.)

Develop warehousing and fulfillment services. As Bill Gamber, Honey Stinger and Big Agnes CEO, said last week, Colorado lags in important infrastructure for manufacturing companies. Warehousing space for inventory is a challenge, especially for smaller companies in Denver, where costs have skyrocketed the past few years; rail access and other transportation issues like I-70 make other markets like Odgen look very attractive. Communities able to navigate these challenges on behalf of OI companies will have a leg up.

Embrace new marketing tactics. States with exceptional outdoor tourism assets understand how to attract visitors, but efforts to recruit and retain manufacturing companies often lag. It’s easy to market a location as a destination for skiers. There’s less understanding on how to promote a place as a destination for companies that manufacture skis.

Invite all manufacturers to the party. In the fast-growing food sector, manufacturers are benefitting from advanced manufacturing solutions developed in other industries, like energy and aerospace. NFT Automation is providing technology that helps co-packers and single brands alike automate production. It’s a huge development, the expertise for which was developed in other industries.

The reservoir of industrial talent here outside of the outdoor industry is deep. Companies needing to fabricate products in metal and other advanced materials can find resources here, but the resources must be brought to the discussion. Local economic development leaders know the companies that can help. Rally established manufacturers to new opportunity.

Develop regional strategies and partnerships. The outdoor industry is a regional and national opportunity. State’s that work to connect companies with regional supply-chains are certain to benefit most. Today it’s common to meet OI companies born and headquartered in Colorado, Utah, and Wyoming, with manufacturing in California.

Locating relevant and qualified supply-chain resources throughout the region will be a valuable service to OI companies.

Luis Benitez, director of Colorado’s Outdoor Recreation Industry Office, seems the right person to bring the industry together, across state lines. He’s been a collegial voice throughout a difficult time for the industry. “I think the most important aspect of this process,” he told me, “is to understand that whether it is Utah or Colorado or anyplace else in the country, the outdoor recreation industry has the opportunity to rise above politics, and show that the things we support and cherish know no borders or boundaries.”

Two years or so after Colorado copied Utah to establish a state-level office and appointed Benitez as its leader, Utah officials lost their minds and a billion-dollar OR windfall to Colorado. Last week’s high fives aside, Benitez’ comments are welcome salve. But if Colorado is to copy Utah industry’s success, the hard work’s just beginning.

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