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Episode 25 – Competing in a New Era of Manufacturing

Site Selectors Guild
Episode 25 - Competing in a New Era of Manufacturing
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Rick Weddle: Welcome to “Site Selection Matters” where we take a close look at the art and science of site selection decision-making. I’m your host, Rick Weddle, president of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision-makers to provide you with deep insight into the best and next practices in our profession. In this episode, we have as our guest, Von Hatley, managing director with Jones Walker Consulting, a wholly-owned subsidiary of the Jones Walker law firm, headquartered in New Orleans, Louisiana, with offices across the United States. Today, Von will talk with us about advanced manufacturing and more specifically, how regions and communities can improve their competitive position by optimizing their advanced manufacturing capabilities. Join me as we welcome Von Hatley to “Site Selection Matters.” Von, we hear a lot about advanced manufacturing today. Take a minute or two if you will, to define exactly what advanced manufacturing is, and should mean for our listeners.

Von Hatley: So, first, thanks Rick for inviting me on the call today. The classical definition of advanced manufacturing is the use of innovative technology to improve products or processes. You see advanced manufacturing in many industries, but it really was born out of the research and development that came with the automotive and the aerospace industry, in addition to defense. What it means though is it’s the process to create new materials or change the molecular structure of feedstock. But it also means several different things to several different companies. Some of the newest things we see in manufacturing today is the use of 3D printing, or additive manufacturing, in addition to mechatronics, which is where people are integrating robotics softwares and electrical and mechanical systems to control and produce new products from there.

Rick: So, Von, is there really any manufacturing today that isn’t advanced or isn’t working to be advanced?

Von: Well, I think the answer is, is you really have two types of manufacturing today. One is advanced manufacturing and the other one is the manufacturers that are going out of business. At the end of the day, you can take something as simple as a toothpick. It’s made by a tree and turns into a small thing that you can hold in your hand that can be shrink-wrapped, all without the use of human hands to touch the product. And so, at the end of the day, I think that all manufacturers are working to advance their ability to produce their products and services, and then that they all wind up becoming advanced manufacturers over time.

Rick: So, it’s really just that use of that innovation, that new technology, these advanced platforms to be relevant and timely and correct in this current environment. So, out with the old and in with the new, so we say. Hey, Von, let’s unpack this whole answer a bit if we can. Talk a little bit more about advanced manufacturing, specifically the supply chains, and maybe how these supply chains can be optimized at the regional or other levels to support new investment and new job growth.

Von: Sure. Well, let’s first talk about what a company is doing to advance their supply chain. We’ve seen this only with the transportation, with the Toyota Production System in the 1970s and early ’80s into just in time manufacturing. And what that has evolved into over the last 40 years is really the advent of new technology to integrate their supply chains being the visibility of the raw materials coming in or out of their factory and in addition to managing the logistics of all the products that are moving in and around their supply chains. But what can happen at the state level, or what we’re seeing there is that they really have the ability to create an environment that allows the supply chains and for the manufacturers to optimize themselves.

And so, what we’d like to see, not all states are doing it, but several sites are, are things such as tort reform to where you can limit the product liability of a manufacturer in case, I get sued for something that may or may not even be involved with the manufacturer of their product. You see taxes, single-factor apportionment formulas at the state level to where manufacturers are taxed for products that are sold and consumed within the state but are not taxed for products that are sold outside of the state. You see dedicated facilities for manufacturers and that’s normally at the local level, but also at the state level with university and research and development. And then you also see things such as advanced incentives to support manufacturing and manufacturing R&D efforts in addition to expedited permitting processes to allow a manufacturer to get up and running quicker than they normally would under former times.

Rick: So, you’ve just run through a plethora, if you will, of the kinds of things that a state or region can do or put in place to create that ecosystem if you will, to support that advanced manufacturing activity. It sounds like a pretty comprehensive approach. It also sounds like these new facilities and their supporting supply chains are bringing a lot of change in the way they go about things to the regions and communities. What in your thinking…let’s just get right to it, what do you think this means for the people who work in these facilities, for their current employees and those who would like to work in those facilities or make a career in manufacturing. What’s different?

Von: Well, I think first thing we have to realize is a 21st-century manufacturing worker, their profile is much more complex than in the past. You know, in the past, an individual simply could show up for work, stay for their entire shift, maintain a drug-free lifestyle, and collect a check at the end of their pay period and then all would be well. But if you look at today, the profile of the new worker, they have to do all of those things but many others. They have to be self-managed; they not only have to be a team player but adept in team problem-solving techniques, they have to be a servant leader, they have to be a diplomat, they have to be a teacher, they have to be the example to others, goal-oriented, and also mechanically inclined, and expert machine operator, comfortable with technology, but also an articulate communicator. All of those things combined, when companies say people are our greatest resource, it’s this type of worker, not just any type of worker that exemplifies the descriptor of the greatest resource.

Rick: It’s really not our father’s factory anymore, is it?

Von: No, no, not at all.

Rick: It’s changed. You just ticked through, you know, team player, servant worker, all of those things, really requiring a lot of difference and differentiated approaches. But also, that probably means these careers are more fulfilling and more rewarding for these, what you call the new worker or the new factory worker?

Von: Oh, sure. I think so. I mean, in the past, in the 20 and 30 and 40 years ago, the person that controlled the factory was the plant manager, the supervisors. But now that responsibility is down to the individual employees. So, where an employee in and of himself can, or herself, can decide to shut down the line or shut down the plant because they see a problem and they need to fix it. And so I think with that, in and of itself, allows that employee to feel much more satisfied in their daily routine and their daily ability to help and influence the overall quality of the product that’s being produced.

Rick: You know, Von, I want to get into a conversation around the role of the economic developer and how they can work to improve their regions and their communities, and I think that’s important. But I would be remiss if I didn’t know that your breadth of knowledge on this topic is just pretty amazing. And I’m also noting that I guess you at one point previously, in your career, you had the title of manufacturing cluster director at the state level, maybe, in fact, the first in the country to have that title. Could you tell us a little bit about your work there and what you learned from that process?

Von: Sure. In early 2001, I was chosen to be the cluster director of durable goods manufacturing from one of the states in the South. And as far as I can tell, I was the only person in the United States to have that role. And so, it’s sort of interesting, I asked the secretary, “What do we have to support this?” And he said, “Well, your business card.” So, I had plenty of ways to improve from there and…but you know, it was really interesting for me because I come out of manufacturing as a plant manager and had spent about a decade consulting for one of the global strategy firms in manufacturing as well and so, you know, what I was able to do was we were able to benchmark our competitive position, look at our taxes, look at our delivery system for training, looking at our laws that supported or hindered manufacturing. And then over time, after we had established some good baseline of credibility, then approached the companies and their specific industries, we had automotive, or aerospace, or rail, or defense, and then work with them to collectively come up with a way to really create a better environment. I mean, they all had their own supply chains but what we found is that…so supply chains, although they weren’t competing against each other, sometimes they were, and sometimes they were cooperating with each other. And so what can we do as a state to create an environment to allow those supply chains to optimize themselves.

Rick: Very interesting. You know, Von, going back a number of years in this business, we started out, we all used to talk about target industry or industry sectors. You used the term industry clusters in that. Can you tell us how that differentiates? What’s the difference between just a target industry sector and a really bonafide industry cluster?

Von: Well, I really think now that we’re evolving into sort of two different types of clusters, you know, one is the company-based cluster to where organizations by choosing a location are then bringing in the people to run and operate and manage that facility. But then on the other side, what I see is I see occupational clusters. And that’s really where you have university research or a cluster of like-minded universities that are working towards some level of common purpose. And those are creating the occupational clusters in and around the country. That’s been going on for a while. And, Rick, I believe you’ve got some experience in that area, too. So, let me bounce this back over to you. I mean, what do you see in the occupational cluster level?

Rick: Well, that’s a good point, Von. When you look at the… From an industry cluster point of view, we always used to say industry goes where it’s invited and stays where it’s well cared for. Well, the extension of that is it really goes where other industries of a similar nature have agglomerated or aggregated together so that you have all the inputs in that area. But also, you have in that as that process evolves, occupational clusters, where you have dense presence, if you will, of specific skills and trades, and it could be anything from bench scientist and lab technicians in a research facility down to the actual shop workers in a manufacturing facility in that area. And so, as you look at these occupation clusters, you find that they really determine what kind of industry can grow in these areas, because labor and workforce has become such an important thing. And I for one find that occupational clusters may actually be more of a predictive model for the growth and success of a region than just the presence of industry because it really means a lot in that way. Is that kind of in your experience, also?

Von: Yes, it has. One of the things that I recognized in my career is that if you land a new manufacturing plant, you really can’t train everybody all at the same time to run the manufacturing plant. It just doesn’t work. And so, you can really only have somewhere between 20% and maybe 30% of the employees of the first 2 or 3 years that have little to no experience in that industry at all. And so, if that’s the case, you know, you’ve got to bring in the other 70% to 80%. And where are they going to come from? Well, hopefully, there’s coming from the clusters that are in and around the location within driving distance, or the way is really just to relocate them to the facility that you’re trying to get up and running.

Rick: Von, if I’m a new economic developer or an economic developer in a new role, starting in a region or a community, what should I be doing now to improve my competitive position in this area of advanced manufacturing? Do you have two or three tricks of the trade you might give me for some guidance on?

Von: Well, I think the first thing you have to recognize is that, on average, somewhere between 65% and 75% of total operational costs are the cost of labor and the workforce. And so, if you know that, if you spend at least that amount of your time on helping develop and build the workforce, at least you are working in conjunction with the needs and the goals of the manufacturing companies that you’re trying to attract. How do you do that? Well, you know, it’s easy to sit there and say, “Well, we need to build this brand new, huge brick and mortar school and dedicate it all to manufacturing and then do a university research facility near us.” But for all intents and purposes, not everybody has the ability to do that. And it doesn’t work anyway, everywhere, anyway, to begin with.

And so, I think the first thing to do is just simply coordinate with your local businesses. I just think there’s such a shortage of just simple brown bag sessions with manufacturing managers sitting down with economic developers and the people in the finance community to see what they can do jointly to improve and introduce young people to the potential for manufacturing in the future. I mean, if we look at the numbers, I mean, the United States may be short nearly 3 million open positions in manufacturing by as early as 2028. And so, if that is the case, what we’ve got to do is we’ve got to focus on STEM curriculum. We need to focus on mechatronics. We do need to have some level of manufacturing introduction into the high school level, be that for the academies or certified manufacturing specialist programs. But then again, I would also lean on, and most economic developers don’t lean on this, the manufacturing societies that are in and around the area, to begin with. So, if you are a certified human resource person, you’re part of SHRM, or you’re certified production inventory manager, you’re part of this American Association of Supply Chain Management, all of those people together, they can help you move your economic development initiatives forward and in a positive manner.

Rick: You know, Von, I used to always say, your next best customer looks a lot like your last best customer. So, it sounds like what you’re saying is, get out there, get involved with your existing industries, talk to them, listen to them, hear what they need, and work on those things. That’s pretty common sense, isn’t it?

Von: Well, I think that’s what it is. We used to always grow up listening to let’s do career day. Well, I think career day is every single day. And so, if you’re working with your existing businesses on a structured basis, not just simply inviting them to things, you know, once a month, or once a quarter or to annual meetings, but really what are you doing every single week to sort of foster those relationships, I think those economic developers will be more successful.

Rick: Good idea. Let’s move up to the 30,000-foot level if we could and take maybe a longer view, with your experience, Von, can you take a look into your crystal ball and tell us what you see coming in this area in the next few or maybe several years. What can we expect to happen?

Von: Well, I think one of the things that we’ll all be influenced by is renewable energy. I think at the end of the day manufacturers do want to be shepherds for and help to improve rather than detract from protecting the Earth that we live on. And so I think I would start with that because I think all manufacturers have that fiduciary and just some social responsibility to create a better environment for us. And then I think that what we will find on the worker level is that it’s not simply advanced manufacturing, it’s advanced economic development initiatives, and it’s advanced workforce training initiatives.

And so now, as I said before, to get the manufacturing worker to where they need to be, they really need to be more educated and learned about emotional intelligence as much as IQ. So, I think EQ is going to be very important. And then if you really just sort of look at the technology changes, I mean, you know, cloud computing, I think it’s gonna continue to advance in the industry, in addition to things such as lights out manufacturing, and then obviously 3D printing. If you see what’s going on in 3D printing, even in the last decade or so, I mean, the latest engine that went on a Boeing 777 had over 300 parts that were 3D-printed in the last year. Three or four years ago, that was zero. And so, we’re seeing a lot of movements there as well.

Rick: Von, you’ve taken us from advanced manufacturing to advanced economic development. What a ride that’s been. That’s probably a topic for a whole other podcast coming up before long. You’ve really given us a lot to think about. What a great conversation this has been today but that’s really all the time we have. So, let me start by saying thank you, Von Hatley, with Jones Walker Consulting for talking with us today on this episode of “Site Selection Matters.”

Von: Thanks, Rick.

Rick: Thanks for listening to this episode of “Site Selection Matters.” And a special thanks today to Von Hatley for helping us get inside and better understand how communities and regions can optimize their advanced manufacturing capabilities. What an informative discussion. Again, I’m Rick Weddle, president of the Site Selectors Guild. This podcast episode represents my views and the views of my guests, and they do not necessarily represent the views and opinions of the Site Selectors Guild or its membership. We do hope you’ll subscribe to “Site Selection Matters” podcasts on Apple Podcast, Stitcher, Spotify, or wherever you listen to your podcast. We look forward to bringing you some great discussions in the year ahead. Until next time, good day.