A wave of new manufacturing companies will change the economy—if we can fund them

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Manufacturing may never again be the U.S. employment engine it once was, defined by big industrial brands, employing thousands of people for generations.

But the sector can again become a jobs engine with the launch of thousands of new manufacturing businesses, a ground-up wave of middle-market companies across diverse industries. What we lack in large we’ll make up for in volume, in hot sectors like food and beverage, advanced contract manufacturing and lifestyle and consumer industries.

A significant barrier is financing. Raising capital is still hard. Early-stage businesses face an especially challenging venture capital environment. Growth companies in the middle-market have more options — investors of all stripes like companies with strong balance sheets. But to say that growth-minded manufacturers are turning away deals wouldn’t be accurate.

Last week the Denver Business Journal reported Colorado venture capital deals were down “sharply” in Q1 of this from the same time in 2015. Financing experts I know point to a slow IPO market and caution not to read too much into the development. But total VC activity in 2015 was also down from 2014, even though Colorado remains in the top 20 percent of states in deal flow. The state’s an attractive place for investors when deals go down.

Is manufacturing benefitting? Technology has long been the preferred domain of the venture community; manufacturing, not so much. But tech-enabled manufacturing in the form of bioscience or medical device companies is certainly in the VC mix.

Middle-market deals seem there for the taking. CohnReznick stated bluntly late last year, “The markets are bloated with cash right now. A research report by RR Donnelley found that PE general partners only returned $232.5 billion in 2014 and that capital called by PE investors was also down. This represents a 21st-century high for total net cash flow in the segment. . . . PE continues to demonstrate faith in manufacturing companies as the final quarter of 2015 unfolds.” The firm estimated that more than 1,650 mid-market private equity deals took place in 2014, a record high flow. “More than 1,030 of these deals,” the report added, “or roughly 62 percent, occurred in the industrial manufacturing and wholesale distribution sectors.”

The trend here is more hit and miss.

Companies in hot sectors with a solid track-record, like those in craft food and beer, have their pick of private equity deals — if they’re open to terms and changes that come with the transaction, either real or perceived. ‘Institutional’ money is increasingly available, like the natural and organic food funds targeting Boulder County’s ecosystem. There’s now growing competition among investors in the hopes of finding the next Oskar Blues, or an exit with a Boulder Brands. Technology-fueled manufacturing is also hot. It’s easy to see the recently announced $500 million ‘middle market’ fund contemplated by Boulder’s tech-centric Foundry Group deployed in support of high-tech manufacturers.

But with a healthy economy and frothy M&A market, investors are cherry picking, leaving deserving but slightly more risky or lesser known ventures under-funded. Manufacturing may be trending up, and appealing for investors in high-growth sectors, but promising businesses remain undervalued and undercapitalized, or simply unknown. A lot of that cash remains on the sidelines.

Less unknowns means more investing. We’ll try and uncover the ‘top 10 investment opportunities in manufacturing’ this summer at the second annual Manufacturing Growth & Investor Conference. If your company should be on that list, let me know. Or plan on attending the conference July 28.

The goal is to finance a generation of brands and establish a new manufacturing employment beachhead. Entrepreneurs are doing their part.

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

Middle-market innovators steal the show at the inaugural Colorado Manufacturing Awards

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Colorado’s largest company was a finalist as were other signature manufacturing and supply-chain brands, but middle-market companies flashing process and product innovation stole the show at the inaugural Colorado Manufacturing Awards April 6 at Denver’s brilliant ART Hotel.

The awards were organized and presented by CompanyWeek and Manufacturer’s Edge with help from CACI, the Colorado Chamber of Commerce, and the Colorado Advanced Manufacturing Alliance (CAMA). I had a blast moderating the selection committee deliberations prior to the event and can share the ‘insider’ notes today.

Nine industry categories plus the supply chain were contested, and the upset theme materialized early in the evening when Boulder’s electronics upstart Modular Robotics won Aerospace & Electronics over Colorado’s high-profile satellite maker Sierra Nevada Corp.’s Space Systems and global storage powerhouse Seagate. Selection committee members cited Modular Robotics’ groundbreaking efforts to establish a domestic manufacturing workforce from a new generation of ‘alpha geeks and robot nerds’ — a STEM-connected smart workforce of the future.

Voormi was a surprise winner in the Lifestyle & Consumer category over accessory giant Otter Products and snowsports powerhouse Never Summer, arguably the state’s quietest if influential lifestyle brand. Voormi’s product innovations are noteworthy — technical garments featuring new fiber technology sourced from Rocky Mountain wool — but the company’s mission to develop a world-class domestic garment manufacturing outpost, coping with an underdeveloped apparel supply chain, also scored high.

Process innovation relating to workforce development also separated Boulder’s uber-focused medical device manufacturer Mountainside Medical. The company’s European-style recruitment, training, and mentoring workforce model continues to provide competitive advantage in a contested space. Centennial’s Allosource was a highly regarded runner-up in Bioscience & Medical.

Colorado’s most high-profile national manufacturing sector may be Food and Beverage, and co-packers like category winner Fresca Foods have been catalysts of a food revolution that arguably began along the Front Range. The company’s impact on a generation of food entrepreneurs lifted the Louisville-based firm over one of Colorado’s fast-growth companies, Noosa Yoghurt, and beverage innovator Infinite Monkey Theorem Urban Winery.

But innovation in Colorado food and beverage manufacturing is also defined by its powerhouse craft beer sector. One of the first and still the largest in southwest Colorado is Durango’s Ska Brewing Company, winner of the Beer & Brewing category over Avery Brewing Company and Wild Goose Canning. Ska’s’s growing popularity and consumer footprint was only half the appeal to the awards panel. In a recurring theme, the selection committee favored the company’s wider influence on the beverage manufacturing ecosystem, citing spin-offs Ska Fabricating (de-palletizers and canning equipment) and Peach Street Distillers.

The brewing supply chain was brought into sharp focus by the popular choice of Colorado Malting Company as winner of the Supply Chain awards category. Josh Cody, whose family-owned farming operation fuels Colorado’s craft sector more than any supplier, traveled from Alamosa only to win the award and graciously deflect credit to the craft entrepreneurs who’ve put Colorado on the national beverage map and positioned the San Luis Valley as an epicenter for ingredients that sustain the industry. In a category also featuring Arrow, Colorado’s $25 billion ‘quiet giant,’ Colorado Malting’s choice again spoke to the selection committee’s preference for companies influencing local, sector-wide growth.

If food and beverage has become Colorado’s national manufacturing calling card, its Contract Manufacturing sector, today boasting world-class advanced fabricators in technology sectors like aerospace and bioscience, may be it’s future. In this most difficult category to judge, metal 3D printing innovator Faustson Tool and its blue chip roster of clientele emerged in a close vote. Primus Aerospace and NFT/Paradigm, the other finalists, are the tip of a tech-fueled spear that’s coming to define the local manufacturing economy.

Energy & Environment winner Vestas can make the case it’s still the most influential fabricator in the state, though, and with good reason. Today Vestas Towers in Pueblo is the world’s leading manufacturer of wind towers at a time when alternative sources are ‘crushing’ the energy scene.

Vice President Tony Knopp’s pro-Colorado remarks were music to the ears of the large crowd, but the company’s growing impact on the regional manufacturing economy appealed to committee members, with 300 or so welders on the company payroll and a recruitment and training ecosystem to envy.

The same is true for Fort Collins-based stalwart Woodward, winner of the Industrial category. Contract manufacturer to some of the world’s great industrial brands like Boeing and Caterpillar, Woodward seems intent on maintaining its global standing in part by attracting and retaining a new generation of technology-enabled manufacturing employees. Its new facility in Fort Collins updates the image of modern manufacturing with open, wired, and collaborative spaces. Woodward’s a legacy manufacturer, casting and manufacturing products around the globe, with another foot squarely in the future.

Construction firms and builders share an important space in the economy with manufacturers, and winner of the Built Environment category, RK, is an omnipresent brand in construction sites throughout the region. RK is a true hybrid manufacturer/constructor with an eye to the future with prefabricated structures even as it continues to provide critical infrastructure and building services. But again, RK’s success in overcoming workforce challenges — recruitment, training, and retention, process innovations all — scored very high with the selection committee.

Innovation occurs in many different ways. Winners of the inaugural Colorado Manufacturing Awards manifest most all of them.

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

In a rush to sell ads, The Denver Post fumbles Progress Colorado

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Newspapers are in trouble and in the race to find financial footing in digital media, publishers are cooking up all manner of revenue opportunities. A favored tactic is to develop specialty or niche publications, content developed to appeal to advertisers first. Some do it better than others and manage to create interesting, entertaining content, or otherwise add value to the roster of ‘custom publishing’ projects endemic to the trade. Even then it’s hard to differentiate one “Top Lawyers” insert from the next.

But despite good intentions, the content often turns out to be bad. The Denver Post‘s Progress Colorado 2016 Business and Economic Guide that I plucked out of my Sunday paper is a good example. It’s a compilation of positive stats and market data with ‘advertorial’ thrown in here or there — featuring a dentist, a healthcare company, a construction firm. It’s intended to be a sales pitch for the regional economy.

It ends up being a weird conflation of business and consumer content, unsure of its audience, or not thinking about its audience. In ‘Health & Wellness’ we’re led to believe Colorado’s fit population has created a wellness culture that’s responsible for growth in healthcare jobs and infrastructure, including several new hospitals around the state. Of course the opposite should be true — but who’s quibbling? We now have a lot of new hospitals to care for all those healthy people.

In “Food, Beverage & Craft Breweries” a headline shouts, “Colorado now in top 10 for both food and beer,” and proclaims the state a “top destination for food, beverage, and craft beer enthusiasts.” Again I’m confused. What’s this a guide to? Are people moving here to eat and drink or start a business? After all beverage and food manufacturing is booming. But throughout the publication, manufacturing is nowhere to be found.

Which of course accounts for my snarky tone and this column.

So if Progress Colorado is a transparently self-serving advertising platform, why complain at all?

For one I’m sore that again an otherwise reputable voice in economic matters dumbs down business content. The Post doubles down on the approach at ProgressCo.org. Content here is also a random mix of paid and original content, written for consumers as well as business executives. I’m left wondering why the paper didn’t just invest in business editorial — news reporting or business features — in the ‘regular’ paper.

I know the answer. Content in publications like this doesn’t have to meet a quality threshold. And in a weak moment, I empathize with the Post‘s executives. I’ve also been down this path. Media in ‘transition’ really means media in ‘survival’ mode. Any content that can facilitate ad sales is worthy content. It keep the doors open.

But newspapers and magazines like the Post have the wherewithal to make different choices. Editors can be empowered to invest in smart, edgy business content even in ‘supplements.’ Aldo Svaldi, Jason Blevins and others there are terrific business writers. The Post could strike a different balance; they choose not to.

Until then Progress will be slow, manufacturing will continue to be an afterthought, and companies willing to support print media will invest in content never meant to inform or entertain readers in a meaningful way. And that’s a shame.

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

Unfiltered at Natural Products Expo West

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The quiet food revolution that began in Colorado and places like Portland, Oregon, a couple decades ago ain’t so quiet anymore. As the Boulder Daily Camera surmised earlier this year, “Food is the new tech, and Boulder is its Silicon Valley.”

At the center of Colorado’s nationally renowned ecosystem is Naturally Boulder, a trade group with nearly 1,000 members and oversized influence, having touched hundreds of natural products companies in some form or fashion the past decade or so.

Lat fall, I wrote about Naturally Boulder’s high-energy ‘Pitch Slam & Party,’ an event that captures the DNA of the sector and puts it on full display, as select entrepreneurs pitch product and business ideas and vie for cash and a spot at Natural Products Expo West. It’s a coveted prize: The event means important exposure for brands seeking, well, everything: money, connections, distribution, talent — momentum.

This year’s edition of Natural Products Expo West took place earlier this month, and I caught up with Bill Capsalis, Naturally Boulder’s president pro tem, to get an update on the event and the pitch slam winners, and to talk about the sudden national prominence of Boulder County and where this compelling story may go next. (Well, maybe not so much where it goes next. Before we start, he’s already rejected a ‘trends’ column.) Capsalis likes to keep the conversation grounded; his bullshit filter is well-refined.

Which is fine by me.

Bart Taylor: Bill you’ve told me this is your umpteenth Natural Products Expo West. Not sure whether congratulations or condolences are in order, but describe the event two weeks ago compared to some of the early events.

Bill Capsalis: I’m finding it hard nowadays to see the entire show in three days. There are so many people (80,000) and so many booths (3,000) that you find yourself in traffic jams in the aisles, especially in front of certain booths with delicious food being shared. You have to be careful because you can eat 2,500 calories of chocolate, chips, and other snacks and drinks before you make it down three aisles at the show.

This is my first pet peeve — it sometimes feels as if the show has become a snack and drink event. One thing the world probably doesn’t need any more of is snacks and bottled drinks. It seems we are hell-bent on replicating what big food companies have been doing for years — continually adding more and more iterations of the same products into the store shelves — but the problem is the stores are running out of room for more products. I predict a course correction on the innovation side of things in the future, but for now, bring on the Matcha in a can, and may I please have some more probiotic drinks?

BT: Three-thousand booths? Wild Zora won NB’s event this summer, and to your point, is a snack food. Seems it would be silly to say they ‘stood out.’ Was it still important for them to be at the Expo?

BC: Wild Zora was perfectly positioned as part of the hot new products hall. What makes Wild Zora different is that they are riding the wave of the Paleo diet explosion, so for a lot of reasons they don’t fit into the “copycat” snack product category. They commanded attention because, after all, it’s a meat bar!

When I saw them they were having a good show, meeting some great people. I haven’t spoken with them since but I suspect they will say it was a great event for them on many levels. I have said many times before that, often at this show, it can be more obvious who isn’t there than who is there. So for young brands like Wild Zora and many others from Colorado, it is really an important step in their evolution as a brand.

BT: So what’s your second pet peeve?

BC: Pet peeve number two: how over time, food becomes like fashion. Products that were hot 10 or more years ago just aren’t hot any more — like super fruits from South America, not hot any more. There is some logic behind these fads that come and go; as product innovators and formulators look for more and better ingredients they scan the globe bringing us amazing things like quinoa from South America, ancient grains from our own soils, and plant-based functional ingredients that can heal us like turmeric which is a staple in the Ayurvedic way of life. Generally I’m a fan of all of these ingredients and find the most interesting products are the ones that focus on functional health benefits for us all. It kind of makes me chuckle to see a small handful of cold-brew coffee companies one year and then 25 the next! Today’s food entrepreneurs have access to a lot of data and they understand when a category gets hot that it is time to jump on it and become the leader in the space or be left chasing the limited shelf space. Keep an eye out for protein from creepy crawlers — cricket protein is on the rise.

BT: Yes, I recall a bug protein product at your summer event. Where does all this leave Boulder and Colorado? Is there a natural food or products direction that’s a unique fit for this ecosystem?

BC: Boulder, Denver, and Colorado as a whole have a very unique place in the natural and organic products industry and I don’t see that changing. If anything we will become more important as time goes on.

The amount of innovation coming out of just Boulder alone is astonishing. There were about 50 companies represented at Expo West this year from this area and I think this will continue to grow. Our trade association Naturally Boulder currently has 1,000 individual members and I don’t see that number declining, only going up. When you consider the high number of entrepreneurs in this area willing to take the risk to launch a food brand, then look at all the businesses set up to help them grow and learn, including publications like CompanyWeek, it creates a web of support unequaled in other parts of the country. The climate for change in the food system seems evident to me and we are sitting on top of it here in Colorado.

As for bugs as protein sources, probably not for me. But the company founder told me he was working on ways to scale up his production so that they could use it to feed livestock. The possibilities seem endless.

Read more later from Bill Capsalis.

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

Leave politics behind to find the formula for manufacturing success

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“I am really, totally committed to bringing back manufacturing.” –– Hillary Clinton, campaigning in Ohio

Most every candidate running for president has pledged to support U.S. manufacturing. Apparently one thing we agree on is that too much has been lost by outsourcing so much manufacturing in so little time. Ask consumers, businesses, you name it: We want to make more things here.

We don’t agree on how, though. Leaders of both political parties blame agreements like NAFTA and the pending TPP for emptying the cupboard of U.S. jobs, presumably because voters do. But America’s most influential manufacturing organization, the National Association of Manufacturers (NAM), sees it the other way.

Jay Timmons, CEO of NAM, believes free trade agreements work for manufacturers and the U.S. I’ve heard him acknowlegde the difficulty of the issue, but suggest that the positive trade balance we enjoy with most treaty-bound partners makes them worthwhile. Nevertheless, NAM disagrees with much of its rank and file. Free trade is a non-starter for candidates running in Ohio, or Michigan, or Pennsylvania, states where national elections now pivot.

Politics aside, there’s a growth formula we can agree on, one shaped not in the political sphere but of course by industry, by the companies already leading a manufacturing revival and by lessons being learned. It’s not to say that elements of a campaign framework aren’t helpful or relevant. Some are. Hillary Clinton suggests we ‘Expand access to capital, especially for smaller manufacturers,’ a goal we agree with. We’ll host the second annual manufacturing growth and investor conference in Denver this summer — with a Utah version to follow. Growth manufacturers need money.

In addition to capital, our simple blueprint would:

1. Acknowledge that in most of America, manufacturing looks different that it did generations ago — and respond accordingly.

Federal Reserve data we published last week provides a roadmap as to where manufacturing is growing fastest. It’s an important guidepost as we consider a growth strategy:

A half-dozen or so sectors have reached their all-time peak production levels in the past year, including manufacturing sectors critical to the economies of Colorado, Utah, and much of the West: semiconductors, food, medical equipment, electronics and aerospace equipment.

If you were skeptical this region wasn’t at the center of the new manufacturing economy, think again.

2. Connect manufacturers with qualified business partners.

As we reshore jobs and develop new opportunities, the challenge for manufacturers is finding qualified, compatible business partners. Manufacturers need a robust supply chain. In many ways ‘business development’ means making it easier for manufacturers to find qualified business partners.

I read an analyst last week bemoan the amount of time and energy U.S. industry has invested in studying, building, analyzing, and awarding global supply chains as its domestic counterpart languishes. It’s a powerful observation. But the time is right to redouble efforts: U.S. manufacturing is suddenly competitive. A push to develop a world-class domestic supply chain should pay off.

3. Support manufacturers with modern, innovative economic development and marketing.

We’re investing millions in training, retraining, and education. In Colorado and Utah, taxpayer dollars are funding infrastructure programs, including high-tech ‘advancement’ centers. What’s also needed is economic development that’s well-aligned with manufacturing, including public/private partnerships to incubate and accelerate manufacturing companies in food and beverage, lifestyle and consumer goods, and other high-growth industries.

They dot the lancscape in the tech space. But technology’s most glorious manifestations are brought to life by manufacturers. Think Apple.

Capital. Connectivity. Training and business development. A simple plan that even the most ideologically opposed observers can agree on.

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

Trump’s apparel manufacturing strategy open to debate

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Enter manufacturing into the GOP presidential debates.

Is it reasonable for Marco Rubio to criticize Donald Trump for manufacturing his clothing line in China and Mexico and not the United States? Yes and no.

As we’ve chronicled the past two years, it’s simply not feasible for most high-volume apparel brands to locate primary manufacturing in the United States. The recent push to reestablish viable cut-and-sew infrastructure domestically notwithstanding, the U.S. effectively gave up on making apparel and sewn products like athletic shoes three decades ago.

Supply Chain Digest published Federal Reserve data recently that demonstrates the point.

The Federal Reserve began tracking manufacturing output by ‘Key Sectors’ in 1985. The apparel industry “saw its peak output level all the way back in January 1986,” SCDigest concludes, “and since then, U.S. apparel production decline 82.3 percent, the most of any industrial sector.”

As a practical matter this means that most any apparel or sewn-product brands wanting to manufacture in volume must go elsewhere to find reasonably priced labor, or access to raw materials and other supply-chain resources. The Trump Collection’s no different.

Is Rubio correct in questioning Trump’s commitment to move manufacturing back to the U.S.? “The answer is he is not going to do it,” he proclaimed. “And you know why? The reason he makes it in China or Mexico is because he can make more money on it.”

More accurately, Trump won’t, likely because he can’t make any money doing it. He’d be out of business.

On the flip side, it’s possible to commit to a U.S.-made strategy, difficulties be damned. Two weeks ago, I was in downtown Los Angeles at American Apparel, meeting with Brad Gebhard, AA’s new president. Gebhard and a new management team are lifting North America’s largest apparel manufacturer out of bankruptcy with a new plan and renewed commitment to domestic-made clothing. AA employs thousands of sewers, assemblers, and finishers. It’s a miasma of immigrant labor, mostly, an eye-opening, teeming urban ecosystem. It’s a sight to behold.

A more nuanced critique of Trump’s manufacturing strategy would point out American Apparel’s commitment to an immigrant workforce, that U.S. apparel can make a comeback on a large scale given smart, reasonable immigration reform. The contrast with Trump’s remarks — and his business strategy — would be easy to make and reality-based.

Indeed, Trump could have made the gutsy and pro-manufacturing decision to invest in developing a more robust domestic manufacturing operation to support his apparel ambitions. We see it happening all over the U.S. in other industry sectors with companies from Tesla Motors to local upstarts like Modular Robotics.

The scale would be smaller but the potential upside greater — a brand informed by quality, by an authentic commitment to American workers.

Unfortunately, Trump’s apparel strategy betrays this new American-made ethos. His actions also keep American jobs offshore, when he has opportunity to invest in U.S. manufacturing and doesn’t, and where advocacy of immigrant labor would advance the economic discussion and not stifle it.

Rubio didn’t make that point — in part because he’s also yet to articulate a plan to reform immigration in a way that would boost U.S. manufacturing.

More next week on the Fed data outlined above: It speaks pointedly to Colorado’s manufacturing opportunity and our own shortcomings in pursuing a supercharged industrial comeback.

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

Focus on the supply chain to develop, recruit manufacturing brands

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Last week’s column on Colorado’s rural apparel manufacturing initiative easily became the most-read article in CompanyWeek this year, thanks to a big assist from Fashion Association Denver and others who posted the content on social media.

Denver’s fashion scene is very interested, it turns out, in the prospect of making more apparel and sewn products here. I pass this along to reiterate the importance of manufacturing and the supply chain to modern consumers who increasingly favor locally made products.

Are fashion professionals and enthusiasts an anomaly? Are they alone in paying closer attention today to the means of production, to where goods are made and who’s making them? Or wanting a more involved role in decisions about materials and processes and the quality of goods being produced? Of course not. Colorado’s craft food and beverage makers have empowered a new generation of U.S. consumers, in part through brands and products conceived and made locally, with high quality as a calling card.

There’s high interest in the apparel manufacturing initiative because the prospect of local, widely available production resources would represent profound change for apparel and fashion professionals who’ve grown accustomed to prototyping and producing in Asia, or Los Angeles and New York, even for small-batch runs.

This must sound familiar to manufacturers in other industries. Companies conceive and design products here only to outsource production to familiar offshore producers or through services like Alibaba. We’ve created a much-admired ecosystem in Colorado to incubate ideas and intellectual property and companies. We’re not close to developing an equally capable supply chain for manufactured products that would speed go-to-market and provide sustained support as the business and production scales. To put it another way, we’re unsure how important our means of production are.

It’s part of our collective struggle with manufacturing. Nationally, we’re divided over whether free-trade agreements like TPP hurt or help U.S. industry. We can’t decide whether manufacturing is key to future economic prosperity or a bygone sector passed over by a technology and service economy. Locally, we send mixed signals about the importance of manufacturing. Everywhere, we’ve essentially whiffed on training a new generation or two of industrial and vocational workers.

Here’s a suggestion: Let’s connect more brands with means of production and begin viewing economic development through the lens of a robust supply chain.

In part this means equal focus on incubating companies and brands but also on developing the service and supply network necessary to support them. It’s a long list. Manufacturing and maker businesses need raw materials, advanced equipment, and transportation infrastructure. They need skilled labor, capital, technology, and go-to-market expertise.

The bright spots are certainly bright. The state’s universities are churning out a stream of engineers and graduates with advanced degrees to populate high-tech companies. Regional tourism and lifestyle attributes attract a steady stream of motivated, talented entrepreneurs. And the region’s bellwether brands are attracting resources and providing leadership to break through the most intractable challenges, like workforce development.

There must be more. Manufacturing will grow only as fast as a broad-based, cross-industry supply chain develops to support it.

A growth economy awaits.

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

Carol Engel-Enright, sewing, with a RCAM trainee

Walmart says no, but rural Colorado’s apparel manufacturing initiative storms ahead

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It’s tempting to say they never had a chance, really, this upstart bunch that somehow was selected a finalist for Walmart’s U.S. Manufacturing Innovation Fund.

The idea for Rural Colorado Apparel Manufacturing, or RCAM, was strong, so the submission was eye-catching and in keeping with Walmart’s push to support domestic manufacturing. But last month, Walmart informed CSU’s Dr. Nancy Miller and Carol Engel-Enright, along with the RCAM team including its visionary, Julie Worley, that they didn’t win. Walmart’s selections read instead like a laundry list of academic exercises with tertiary ties to manufacturing.

Think it’s deterred the group from pushing forward? Think again.

“It’s a blessing we weren’t selected for funding,” Engel-Enright says, with perhaps a hint of disappointment. How far would $300,000 have gone in rural Colorado? A country mile. But Engel-Enright insists a clean break will force RCAM to act like a real business. To develop realistic budgets, to generate revenue, control costs, and be accountable to investors.

As with any startup, it won’t be easy. But RCAM is one of a number of grassroots efforts aligned with the region’s incredibly active apparel and lifestyle business ecosystem, in this case intent on reconstituting a U.S. cut-and-sew workforce decimated by decades of offshoring and neglect, to keep jobs here instead of shipping more overseas.

Born from the 2014 Colorado Apparel Manufacturing Summit, Worley, a Phillips County economic developer, boldly envisioned that underutilized labor in the small towns of eastern Colorado could comprise a new workforce of sewers, assemblers, and finishers.

Enter RCAM. Today it’s more than an idea. RCAM-Wray center, in northeast Colorado, is up and running “in its third production run!” Engel-Enright states proudly, sewing long-sleeve T-shirts and hoodies with ‘kangaroo’ pockets. Today the Wray center employs six operators, led by Leslie Starks, who happens to have a fashion degree and acumen, it turns out, for the business side. “She’s caught on quick to industrial matters,” Engel-Enright says.

That RCAM-Wray is online — with centers in Julesburg and Ordway, Colorado, to follow — is testament in part to Engel-Enright’s unique skill-set, a combination of industry experience in fashion design and production, of owning and operating businesses of different stripes, of finding jobs for her fashion students in private industry and recently of a hard earned doctorate from CSU in education with an emphasis on design entrepreneurship. I tracked her down at CSU in early 2014 with the idea for a Colorado apparel manufacturing summit. It wouldn’t have happened without her.

Still, she’s realistic about the daunting challenge of developing apparel manufacturing infrastructure to compete with the Asian powers, in particular. “When it comes down to it, there’s no model out there, no blueprint to follow, to train a new generation of sewers and production specialists. We’re developing the plan and the process as we go,” she says.

That’s not to say the end results are also obscure. “We know the standard. We have to produce quality garments that measure up to the best in the world,” she asserts, but adds, “When do we know our efforts will translate into quality apparel? No matter how big the order, can we produce a quality piece?” More questions.

Early returns from the initial production runs and training sessions promise answers. “There’s no surprise about the quality of people we’re finding from these communities. They’re incredibly hardworking — we can’t get them to stop and take breaks!” she laughs. “But Julie and Darlene Carpio and others knew this would be the case. Rural America has so much to offer; there’s no doubt we can train a workforce to compete on an international stage if we’re smart about this.”

There are other needs — like equipment. “The Wray center’s working on knits, on flatlock machines [a sewing machine that creates a flat seam with the same appearance inside and out],” says Engel-Enright. “All three centers will have all the basics — straight stitch, overlock, and coverstitch. Julesburg is organized and investors are in place with deposits on equipment. We’re ready to go there when training and jobs are lined up.” But advanced cutting equipment and specialized sewing and finishing machines are much needed.

Without Walmart dollars, funding is the challenge. An Advanced Industry grant from Colorado’s Office of Economic Development and International Trade seems to fit the bill, but OEDIT views apparel-related business as a ‘Creative Industry’, not ‘Advanced Industry.’ The AI grant program is today under review; perhaps a revision will accommodate a wider cross-section of manufacturing industries.

All of which leaves Engel-Enright entirely unfazed. “These centers won’t replace Asian factories,” she says matter-of-factly, “but they will reduce barriers to entry for small business. A former student and budding entrepreneur told me, ‘What seemed insurmountable now seems possible.'”

Supporting a business-savvy academic would have been yet another benefit for Walmart, along with goosing domestic manufacturing and helping rural America ‘Live Better’.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com with questions or information about the 2016 Colorado Apparel Manufacturing Summit, September 28 in Denver, Colorado.

Manufacturing a dizzying tale of two sectors

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Last month’s flat PMI set off another round of hand-wringing by the national business press, the latest in the entertaining spectacle of media deciding manufacturing’s fate.

Pundit’s are confused — often in the same article.

From MarketWatch in late January, “Opinion: U.S. manufacturing teeters on the edge of recession“:

“Capital spending is down.” Bad news. “But production and hiring are still rising.”

Whew.

But hold on. “Some people are using the ‘R’ word. They are saying that U.S. manufacturing is in a recession.”

Not good.

“Spoiler alert: The preponderance of the evidence shows that the factory sector has decelerated but is not in a ‘recession’ yet.”

Relief!

Well, not so fast. A headline in Business Insider the same week exclaimed, “Manufacturing is still in recession.” Rats.

“We got the two big data points on U.S. manufacturing during January on Monday. They both showed that new orders from American manufacturers picked up last month while job gains slowed.”

I thought hiring was still rising? Confusion.

“And overall, the sector is still in recession.” Damn.

“The Institute of Supply Management’s PMI shrank for a fourth straight month and came in at 48.2, versus 48.5 expected. Any headline reading below 50 is in contractionary territory, and prints under 45 are historically associated with recessions.”

But we’re over 45. So we’re not in recession? Exhale.

Enter Bloomberg Business: “Manufacturing in U.S. Shrank in January for a Fourth Month.” Here we go again.

Subhead: “New orders, a leading signal for production, resume expansion.” Expansion! We’re back!

“The 48.2 reading,” was “lower than the 48.4 median forecast in a Bloomberg survey of 79 economists. Levels less than 50 for the gauge indicate contraction.” What? We’re contracting again, within two paragraphs.

Not really! “This may be signaling the start of some stabilization in manufacturing activity and U.S. economic activity,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York.

The patient is stable.

Seriously, I could go on.

To be fair, it’s easy to understand why analysts are confused. Manufacturing is bipolar. It’s in transition, one that confounds even as we glimpse a promising future.

It’s a sector that doesn’t matter anymore. Or it’s a bellwether.

Exports are struggling. But domestic consumption is rising.

Energy’s in the tank, but other industries are high-growth.

Manufacturing labor is retiring or just entering the workforce — with a shortage in between.

And more.

Who said manufacturing is boring?

Bart Taylor is founder and publisher. Reach him at btaylor@companyweek.com.

Utah, Colorado competition heating up before cooperation is the norm

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Two weeks ago, the Denver Business Journal reported that a national nonprofit organization with ties to outdoor recreation is poised to choose between Utah and Colorado for its new home, with a move sometime in 2016. That’s no surprise to us; we’ve been speculating for over a year that both states will benefit from a growing trend among startups and established lifestyle companies to make the Rocky Mountains including the Wasatch Front, home.

I wrote about one company, Mercury Wheels, that relocated to Ogden from Mississippi after narrowing their choice to Colorado and Utah, and guessed at the time it would be an exercise duplicated often by other companies as the region’s lifestyle attributes and focus on business prove hard to resist.

Colorado has gone so far as to copy Utah’s Office of Outdoor Recreation as a means to fully develop industry-cluster strategies and gain a competitive edge in recruiting and developing lifestyle businesses. Fiona Arnold, executive director of Colorado’s Office of Economic Development and International Trade, was excited about the development in the DBJ article.

“We know that the outdoor recreation industry is a really booming and growing industry. And for quite a while, Utah was kicking our butt,” Arnold said in the DBJ. “Being able to recruit this organization if we can really starts to bring critical mass in the outdoor recreational industry to Colorado and allows us to be able to say we really own this space.”

Arnold would likely acknowledge that simply creating the office and hiring a director to staff it won’t overcome Utah’s two- or three-year head start. Nor will landing a single company constitute ‘owning’ the space.

A more likely scenario is that each state will benefit from numerous relocations and a frothy startup environment for lifestyle companies regardless of economic development efforts. Colorado remains far away from developing a meaningful industry-cluster strategy to attract lifestyle businesses regardless of the development of its own Office of Outdoor Recreation.

For one, lifestyle manufacturers require a robust supply chain. Neither state can claim sufficient cut-and-sew labor to support gear and apparel makers; contract manufacturers required to machine and tool critical parts are here, but need sustained orders to invest in the sector and re-tool operations; and in Colorado, it’s unclear how ‘lifestyle’ intersects with the state’s economic development blueprint.

Despite this, industry is taking matters into its own hands. Lifestyle manufacturers like Osprey Packs sustain operations in both states. To them and others, what’s needed is less a competition between states and more cooperation to develop a support ecosystem that spans the region.

Until then, it’s each state for itself — except here, at CompanyWeek. We’re rooting for more ‘coopetition’ and less hyperbole.

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