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• Small Business Manufacturing Is Up. One Reason: Reinvention
  

  By Joshua Sophy

  Small business manufacturing is growing, according to a recent analysis. One big reason for the growth is the ability of small manufacturers to reinvent themselves to take advantage of new industries and new business opportunities.

  The PayNet Manufacturing Index found that American manufacturing by small businesses is up 48 percent since 2009. While it still hasn’t rebounded to pre-Great Recession highs, the trend overall is significantly upward since 2009. See chart above (black line is the full index – green line reflects the industrial machinery sector).

  PayNet’s index measures investments by small manufacturing businesses in property, equipment, tools and business units. In other words, small businesses in manufacturing are investing again – a positive signal.

  Manufacturers of industrial machinery and equipment are one category of manufacturers fueling this resurgence in an area of the economy that has been losing jobs since the 1990s. Companies manufacturing equipment like gas compressors, carburetors, tools, and industrial fans fall into this category. They did better than manufacturers as a whole.

  PayNet President William Phelan said with the release of the new data, “This sector is the biggest example of the resurgence of U.S. manufacturing. The process of re-invention and recreation is core to business right now and surviving companies have figured this out.”

  Instrument manufacturers make up another category showing positive gains since the 2009 recession lows.

  One sector that has not seen growth is small manufacturers in the printing and publishing sector. They appear to be a casualty of the digital age. There’s less need for book binding and other traditional printing technologies, PayNet points out.

  PayNet also notes that these investments by small business manufacturers are driving productivity increases of 15%. Small businesses are “producing more manufactured goods for the same level of capital.”

  PayNet is based in Skokie, Illinois. It was founded in 1999 and maintains a large proprietary database of small business loans, leases and lines of credit encompassing over 20 Million contracts. The company also publishes the Thomson Reuters/PayNet Small Business Lending Index. PayNet recently launched a Small Business Delinquency Index.

  Source: Small Business TRENDS, May 6, 2013 (http://smallbiztrends.com)

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• Survey: Optimism Grows Among Small, Midsized Manufacturers
  

  By MDM Staff

  Prime Advantage, a buying consortium for manufacturers, recently released its annual CFO survey results, which found that small and midsized manufacturers anticipate ongoing revenue growth despite the ups and downs in the business environment.

  Only 5 percent of the companies surveyed feel the U.S. economy will contract this year and over half feel the economy will expand. Nearly all CFOs (96 percent) believe U.S. manufacturing will expand or stay the same in 2013.

  The level of optimism among CFOs about their own companies increased this year. Seventy-two percent of respondents rated their optimism about financial prospects of their companies as moderate to high, which is 10 points higher than last year (which was a record high). Executives are more optimistic about the business outlook for their key customers, with 73 percent of respondents forecasting moderate to rapid growth (up from 59 percent in 2012).

  Fifty-one percent of respondents feel more optimistic about the economy this year compared to last year, when 67 percent felt more optimistic about economy. At the same time, the level of optimism about U.S. economy has risen from the previous year to 36 percent (in 2012, only 26 percent of respondents felt this strong).

  When asked to cite the top potential threats to economic growth in the U.S., executives named healthcare reform, the U.S. budget deficit and European fiscal conditions as the biggest hurdles to the growth and stability of the U.S. economy.

  To address current economic conditions, U.S. manufacturers would support simplification of the business tax (91 percent), balancing the U.S. budget (78 percent) and reducing regulations (72 percent) as the most desired government actions.

  Priorities

  As companies actively explore new markets, they are also increasing investment in R&D. Fifty percent of companies plan to increase spending for new product development, the highest percentage since 2009.

  Cutting operational costs and developing new products and services, the top priorities of 2012, retained their positions for 2013. However, long-term strategic planning was replaced by seeking new markets for products and services, which moved 29 points up to the third position from the seventh position it occupied in 2012.

  More companies than a year ago are planning to increase the number of domestic employees in 2013, as indicated by 49 percent of respondents (up from 41 percent in 2012). Three in four companies are planning to increase wages and salaries this year. This is in contrast to 2011, when 72 percent of companies expected to add employees. Steady corporate employment plans have also appeared in other recent industry surveys, such as BofA’s 2013 CFO Outlook and Duke/CFO Magazine CFO Survey.

  Companies are still struggling with finding skilled labor. Seventy percent of respondents indicated that the low level of skilled employees in the area is the main reason for difficulties in filling positions. Sixty percent of companies that were actively hiring indicated they had open positions for which they were having difficulty finding qualified labor.

  Nearly half of U.S. manufacturers (46 percent) indicated they engaged with local educational providers in order to train workers (up from 19 percent in 2012). Other short-term solutions to these challenges are setting up training for new employees (63 percent of the votes) as well as re-training existing employees (58 percent). As a long-term solution, companies indicated working with local economic development and government leaders, increasing funding for vocational education options, getting more involved with the K-12 program, and developing better training programs in manufacturing and technical areas.

  Top Concerns

  External concerns facing U.S. manufacturers for the most part remained the same. One in three companies in the survey named customer demand as the top external concern; two-thirds included it in their top three concerns. Price pressure from competitors was the second leading concern, selected by 61 percent of manufacturers. The cost of non-fuel commodities, a long-time third concern, was replaced by the federal government agenda, selected by 36 percent of manufacturers (up from 21 percent in 2012).

  Ability to maintain margins, the chief internal concern of 2012 and 2010, retained its top position again, selected by 71 percent of respondents. The cost of healthcare, the leading concern of 2011, has moved up to second place, as 55 percent of respondents have included it in their top three concerns, up from 38 percent a year ago.

  The Prime Advantage Group CFO Survey was conducted in March and April of 2013 using an online survey platform. Prime Advantage surveyed a cross-section of finance executives from its member companies consisting of industrial manufacturing firms representing more than 25 different industries with annual revenues ranging between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million.

  Source: Modern Distribution Management, April 25, 2013 (http://www.mdm.com)

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• The Case for Making Small U.S. Manufacturers a Priority
  

  By Harold L. Sirkin

  When people think of manufacturing, they typically envision large publicly listed companies that make cars, aircraft, home appliances, electronics, medical devices, and so forth. They rarely think about the thousands of small manufacturers around the country—many of them “mom and pop” operations—that make products ranging from guitar amplifiers to flight display systems.

  Some 250,000 manufacturers in the U.S. have fewer than 500 employees. Studies show these smaller businesses produce more innovations per employee than large manufacturers. And truth be told, it is generally from these small companies that the jobs of the future will spring. Indeed, as David Rocks and Nick Leiber observed last summer, smaller manufacturers have been leading the “reshoring” wave that my colleagues and I have been writing about.

  More important, many of these smaller companies are critical to the success of the big guys, supplying parts and components across a wide range of industries.

  Unfortunately, the needs of small businesses often are overlooked or shortchanged. As researchers at the Center for American Progress have observed: Small and medium-size manufacturers often have great difficulty obtaining the financing and venture capital they need to “restructure, grow, and scale up,” while their access to bond markets is constrained by “high borrowing and transaction costs.”

  Washington’s solution to all this: a proposed 8 percent reduction in the Small Business Administration’s noncredit technical assistance programs for the current fiscal year.

  Contrary to popular belief, the average U.S. manufacturing business, according to the Bureau of Labor Statistics, has fewer than 50 employees—a number that has remained relatively stable for years. Indeed, of the approximately 259,000 manufacturers in our country in 2010, only a handful had more than 10,000 employees, the Census Bureau reported. Just 3,449 had 500 or more.

  Still, according to the government’s “Profile of U.S. Exporting Companies: 2009-2010,” a report and survey published by the International Trade Administration, small and midsize manufacturers with fewer than 500 employees accounted for a third of U.S. export value. Such companies run the gamut, manufacturing everything from bells to whistles, both literally and figuratively.

  Bevin Bros. Manufacturing, for example, has been producing bells in East Hampton, Conn., since 1832. If you ever wondered who supplies the thousands of Salvation Army bell-ringers around the country, that’s Belvin. The company’s 180-year-old factory was destroyed by a devastating fire last May, but the sixth-generation, family-owned business resumed production in October.

  Another “mom-and-pop” manufacturer is the American Whistle Corporation in Columbus, Ohio. The 57-year-old company is the only manufacturer of metal whistles in the U.S., according to its website. Number of employees: 10.

  If you’re a fan of pop music, you’re undoubtedly familiar with Fender and Gibson guitars, two iconic brands, whose makers are headquartered, respectively, in Scottsdale, Ariz., and Nashville, Tenn. If you’re a performer, you may use a Swart amp, “hand-made in the USA” by Swart Amplifier in Wilmington, N.C.

  In addition to the big-name car companies we’re all familiar with, the U.S. has several niche automakers, including Devon Motorworks, Fisker Coachbuild, and Shelby American.

  The point is: Thousands of products made in America—from automobiles to amplifiers—are made by small manufacturers. Like their much bigger, better-known brethren, these companies are indispensable to our economy.

  Executives at larger companies should be invested in small manufacturing’s success, since their own success often depends on them. Government, investors, and lenders also need to make small manufacturers a priority. Without them, job creation and economic growth would likely come to a standstill.

  Source: Bloomberg Businessweek, April 9, 2013 (http://www.businessweek.com)

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• How Small Manufacturers Are Filling The R&D Gap
  

  By Meribah Knight

  While a recent study showed that private investment in research and development plummeted in the Chicago area over the past decade, small metal manufacturers say they ’re allocating more resources to research than ever before.

  But their efforts are harder to measure than those of large companies like the old Motorola Inc., which cut a lot of jobs from its R&D lab, or firms focused on stacking up patents. Research at small fabricated metal and machinery firms usually focuses on finding more efficient ways to make components. Local executives say their large automotive, utility and telecommunications customers increasingly outsource component assembly and depend on subcontractors to do such research.

  “Now they are relying on us to develop what the product and process will be for them,” says Steve Kase, president and CEO of Aurora-based automotive and telecommunications parts maker Ask Products Inc. and chairman of the Tooling and Manufacturing Association in Park Ridge. “They are asking us to become the experts because they cannot afford to have an expert in every component technology.” For instance, Ask Products recently was tapped by a large utility to make a connector capable of splicing two types of cable.

  At Fusion OEM, a low-volume contract manufacturer in Burr Ridge, President Craig Zoberis says the decline of in-house R&D at bigger companies allowed his business to flourish. “The first thing they cut was research and development, and then they outsourced it,” he says. “That was good. It opened up a market opportunity.” The 11-year-old company, which has 48 employees and brought in $8 million in revenue last year, has seen a 57 percent jump since 2009 in the revenue coming from original equipment manufacturers seeking Fusion ’s research services.

  Three months ago, Chicago-based Transco Products Inc., a component supplier for the nuclear industry, hired a manager to develop a comprehensive plan for research and development at the 100-employee company. “We are looking at growing that investment because we see it as critical to our company ’s growth,” President and CEO Ed Wolbert says.

  The research investment study, performed by the Chicago Metropolitan Agency for Planning, used patent applications as a key measurement. But smaller firms say they tend to introduce new research in the marketplace and innovate on the factory floor rather than in the lab. At Transco, Mr. Wolbert says, patents almost always take a back seat to competing in the marketplace. “For intellectual property reasons, we want to have patents, but that is not our final deliverable. Our final deliverable is a product to our customer.”

  Rather than adding up patents, small and mid-sized firms point to the research-and-development tax credit as a more accurate measure of their efforts. “I think it ’s kind of shocking to say that R&D has fallen so much,” says Walt Snodell, chairman of Aurora-based Peerless Industries Inc., a manufacturer of audiovisual mounting solutions. “The real question is how do you measure it?” At Peerless, the company ’s investment in R&D went up 20 percent in 2012, according to the company ’s tax filings. For Transco, R&D is about 6 percent of its nonproduction budget, according to the filings. The company aims to increase that amount to 12 percent over the next five years, Mr. Wolbert says.

  CMAP researchers acknowledge that their tools are imperfect. “There is informal R&D that is really hard to measure, and maybe the official statistics don ’t get to it as well,” says Garett Ballard-Rosa, an assistant policy analyst at CMAP.

  Some companies are creating formal R&D departments. Three years ago, Rockford-based Eclipse Inc., a manufacturer of industrial burners with 750 employees worldwide, realized it needed to grow its new-product sales by doing more with new technology. The company laid out a plan to hire scientists and engineers and invest in new equipment like a three-dimensional printer for rapid prototyping. Eclipse has approximately 20 people and is recruiting Ph.D. candidates in mechanical and chemical engineering. Kim Droessler, director of product development, says he plans to get the department up to 35 people by the end of next year.

  “We were struggling to make R&D a priority many years ago, but now it is one of our top three initiatives,” he says.

  Source: Crain’s Chicago Business, March 16, 2013 (http://www.chicagobusiness.com)

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• Maker's Row and the Future of American Manufacturing
  

  By Erica Swallow

  Ideating, pattern-making, finding materials, ordering samples, tooling and producing — these are the six once-mystical steps of manufacturing that are becoming easier to understand and take part in, thanks to New York-based startup Maker’s Row.

  Founded by Matthew Burnett and Tanya Menendez, Maker’s Row is an online directory of America’s top manufacturers. The site makes an industry traditionally based on old-school communications align with today’s expectations of transparency.

  After graduating from Pratt Institute with a focus in industrial design, Burnett began taking on watch design work with large brands, including Marc Jacobs and DKNY. Before long, though, he launched his own watch brand, Steel Cake, and was off on an entrepreneurial journey, which he says was a transformative experience that enabled him to create and see his own designs through to fruition.

  The manufacturing experience with Steel Cake, though, was a big disappointment for Burnett. Working with manufacturers abroad, he would receive initial product samples that looked beautiful, but when his full mass orders would arrive, the merchandise would look nothing like the samples, he tells Mashable.

  With orders of 1,000 pieces — which is usually the minimum when dealing with overseas manufacturers, says Burnett — being so far away from his manufacturers became a gamble that he wasn’t willing to participate in. So, he started The Brooklyn Bakery, a leather accessories company focused solely on American-made goods.

  The Brooklyn Bakery was a hit, with its merchandise being picked up by more than 100 boutiques and even larger retailers, including Nordstrom.

  Barnett was even able to convince Menendez, then a Goldman Sachs analyst, to leave her job to join him in the venture (and later in the founding of Maker’s Row). The turning point for Menendez, she says, was visiting the Sherry Accessories factory in New York City.

  “It was mind-blowing that products were being made in New York City, and that you could get the materials, have the assembly done here, sell it, and actually make a profit off it, actually make your own money.”

  The biggest challenge for Brooklyn Bakery was expansion. As it turns out, finding contractors, suppliers and materials for new product lines is a royal pain — you may be an expert in leather goods, but the moment you try to switch to jeans or varsity jackets, you’re pretty much screwed, the duo explained.

  “It was such an outdated process to find an American manufacturer,” Menendez explains. “We were literally going to trade shows and looking through print catalogs. Looking through print catalogs to find something feels so out of date, but all of the other product-based entrepreneurs we knew were doing it that way, too. The main way to find manufacturers was through word of mouth, these catalogs, or trade shows.”

  “The thing that was ridiculous, is that it was easier to find a manufacturer on the other side of the planet than it was to find one in your own country,” Barnett adds.

  Barnett says he was using tons of makeshift resources for sourcing — including Google, the Yellow Pages, and even foreign-based services — to find American manufacturers for his goods. He had gotten the process down for certain goods, and it had sort of become a competitive advantage, he says, to be privy to the knowledge that a certain manufacturer was the only one that could perform a certain process. But he had to start at square zero the moment he wanted to produce a new type of product.

  Noticing that expansion was the biggest inhibiting factor for his peers as well, he dreamed up Maker’s Row, a way for designers to easily search for manufacturers throughout each step of the creation process.

  “They were pigeon-holed to the staples they had started out with,” Barnett explains. “Small businesses have so many things to worry about — from sales to marketing — that they don’t have time to search for manufacturers. That’s the problem we wanted to solve.”

  Barnett and Menendez made the decision to go full-time last summer when they were accepted into Brooklyn Beta Summer Camp, a 12-week incubator that provided them with seed funding and mentorship to get their product out the door in November.

  Menendez says that the team is now focused on building a high quality community. With 1,400 manufacturers on board — mostly sourced through their personal connections and word of mouth — they’re turning their efforts to optimizing and beautifying each manufacturer’s presence on the site. Catalogs need to be up-to-date, images need to be stunning, and descriptions need to be thorough, so that users can quickly find the right suppliers.

  The site’s user base is mostly small businesses, says Barnett, though designers of all sizes can use the site to find manufacturers, as the factories represented range from small craftsman shops to large facilities.

  So far, Maker’s Row has facilitated 24,000 interactions — which is a measure of calls, emails, saves and clickthroughs to a manufacturer’s website.

  Maker’s Row is doing its part to demystify the manufacturing process, making it more transparent and easier for creatives to find suppliers. Menendez and Barnett have a number of thoughts on the future of American manufacturing and pointed out three trends they believe will continue to define the industry:

  • On-Demand Economy: “We see the economy, in general, moving into a more on-demand economy,” says Menendez. “Speed to market is becoming much more important to small and large businesses. How quickly you can take an idea, turn it into a product, and put it out for customers to start buying it, is becoming much more important.”
  • Small Batches: With the rise of entrepreneurship in America, Menendez believes that the demand for producing small batches — hundreds of items, instead of thousands — will increase, and thus need to be satisfied by factories.
  • Insourcing: Barrett explains that large-scale businesses including Apple and GE are bringing manufacturing back to the US. When small businesses see this trend, they begin looking for ways to manufacture at home, as well. That’s why Barrett feels it is important for his company to represent the domestic manufacturing landscape across many industries.

  Currently, Maker’s Row is solely focused on apparel and accessories manufacturers, but it plans to expand into six more industries this year.

  While the co-founders were shy to disclose which industries, I for one am excited to see if they jump into the technology sector. Combine Maker’s Row with a site like Christie Street — a crowdfunding site specifically for gadgets — and you’ve got a full plan for producing and launching the next must-have tech device.

  As is, Maker’s Row is already a dream come true for would-be designers to stop planning and start doing. And that’s not an honor many entrepreneurs can add to their trophy cases.

  SOURCE: Mashable, March 12, 2013 (http://mashable.com)

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• Tight Labor Market Keeps Help Wanted Signs Posted In Oklahoma
  

  Oklahoma’s low level of jobless workers has challenged some firms’ ability to find skilled employees.

  By Brianna Bailey

  ENID — Aircraft Structures International Corp. founder Mickey Stowers would like to hire 40 more workers, but Garfield County’s unemployment rate of about 3.5 percent has made it harder to find skilled laborers.

  Stowers needs more sheet metal workers and structural mechanics to help the firm rebuild Cessna 208 Caravans at its production facility at the Enid Woodring Regional Airport.

  The company has even purchased a house in Enid to give out-of-town hires a temporary place to live and is considering buying or building an apartment building to house workers.

  He hopes to attract unemployed aerospace workers from Wichita, Kan., who have been laid off from companies such as Boeing and Hawker Beechcraft in the past year.

  Increased oil and gas activity in the area, as well as a nearby wind farm under construction, has put a drain on available labor in Garfield County, Stowers said.

  “Everybody in town is looking for employees — even McDonald’s,” Stowers said. “Everybody that wants a job has a job.”

  Like many counties in Oklahoma, Garfield County’s unemployment rate has hovered at or below 4 percent during the past year. Many economists define full employment as an unemployment rate somewhere between 3 and 5 percent.

  Labor market tight

  Low unemployment rates can lead to labor shortages as well as reduced productivity, said Deidre Myers, director of research, economic analysis and policy services for the Oklahoma Commerce Department.

  Manufacturers in northwestern Oklahoma in particular are having a harder time finding workers because of lower unemployment, she said.

  “There are several ways this can affect businesses,” Myers said.

  “Companies may not be able to hire a full workforce to meet their production demands — a manufacturer may not be able to fill a second or third line, because they simply don’t have the people.”

  Johnny Thornburgh, an extension agent in Ponca City for the Oklahoma Manufacturing Alliance, said it’s a constant struggle for small companies in western Oklahoma to find and keep workers because of the pull from higher-paying jobs in the oil field and overall low unemployment rates.

  Many smaller companies simply can’t compete with the wages that oil and gas-related jobs are paying, Thornburgh said.

  “A small manufacturer only has so many dollars to spend. The workers have got to want to be there,” he said. “A small manufacturer can’t offer things like a big signing bonus — those things simply aren’t in the budget.”

  Training could help

  More training programs to create more skilled workers in the state could ease some of the labor shortage problems that low unemployment rates can cause, Myers said.

  The Oklahoma CareerTech system has stepped up its aerospace and trucking programs in response to demand for more oil field trucking jobs in western Oklahoma and the growing aerospace sector.

  “In western Oklahoma, the need for truck drivers has been tremendous,” said Paula Bowles, chief communications officer for Oklahoma CareerTech. “We’ve partnered with energy companies in the state to develop statewide programs in those areas.”

  CareerTech’s aviation maintenance technology programs are offered at several CareerTech centers in the state in response to growing demand.

  Statewide, the Oklahoma economy added 35,200 jobs in 2012, a 2.2 percent gain over the previous year.

  In December 2012, Garfield County had an unemployment rate of 3.5 percent, according to data from the Oklahoma Employment Security Commission. To the west in Woodward County, the unemployment rate was 2.7 percent in December.

  Offering incentives

  Oil and gas activity in western Oklahoma has left Woodward-based Diamond Services Co. with an increased need for workers for pipeline construction, excavation for well sites and compressor stations, as well as truck drivers and general laborers, said Mark Campbell, Diamond Services vice president.

  The company employs about 110 people, but “we’re always looking for people — it never really stops,” Campbell said.

  A shortage of rental housing in Woodward also has made it hard for Diamond to hire people from outside the area, he said.

  “We’ve hired people from out of town who have had to live in an RV,” Campbell said. “We’ve helped out with housing assistance, but 60 to 90 days later they’re still not finding available housing.”

  Diamond and other companies in Woodward are boosting wages and benefits to become more competitive for workers, Campbell said, including paying 100 percent of employees’ health insurance coverage.

  Diamond Co. has had a difficult time finding enough workers in the Woodward area to meet its needs and moved in 2011 to open a satellite yard in the El Reno area in hopes of attracting workers from the Oklahoma City metro area.

  “The main reason we did that is because we needed people and we didn’t have them available in Woodward,” Campbell said.

  Enid has also seen an increase in companies offering additional benefits and housing assistance to help attract out-of-town workers, said Brent Kisling, director of the Enid Regional Development Alliance.

  “We are seeing some unusual benefits that employers are offering starting to creep in over the past few years,” he said.

  The city has formed a partnership with the monster.com job-listing website to ensure posts for jobs in Enid are seen by out-of-state job seekers. The Enid Regional Development Alliance helps subsidize local companies’ costs for posting job listings on the site.

  “It is a challenge when we have a 3 percent unemployment rate, but it’s a problem that you love to have,” he said.

  Source: NewsOK, The Oklahoman, February 13, 2013 (http://newsok.com)

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