Baby Boomers & The Manufacturing Boom Potential

In manufacturing how goes the nation, goes Arkansas.

For Arkansas’ manufacturing to rebound, it will have to begin foremost with a healthier U.S. economy, says Randy Zook, President and CEO of the Arkansas State Chamber of Commerce.

Zook says nationally, “We’re growing between 1.5 to 2.5 percent annually, depending on the month of the measurement, and we need this economy to be growing at least 4 percent to be able to generate the number of jobs we need to get enough people back to work and get this thing growing the way we all want it to grow and need it to grow.”

Manufacturers’ News, a national publication, reports in its 2013 Arkansas Manufacturers Register that the state lost 1,930 jobs between September 2011 and September 2012, a dip of 1 percent.

Manufacturers’ News President Tom Dubin says, “The good news is that Arkansas maintains low business costs, which has helped many existing businesses expand.”

Zook says some of those key expansions include Georgia Pacific in Crossett; Firestone Building Products in Prescott; Deltic Timber headquartered in El Dorado; and Anthony Forest Products also located in El Dorado. Other notable expansions are ConAgra Foods in Russellville; Utility Trailer Manufacturing Co. in Paragould; and Peco Foods located in Batesville and Newark.

But because of uncertainty in the economy, Zook says many business owners are hesitant to expand.

“Business people tend to be risk-adverse, especially corporate managers,” he says. “So any reason to be hesitant, they typically will seize upon it until they are confident of the future opportunities for their businesses before they expand.”

On a bright note, Zook says housing is finally finding its way.

“We’ve begun to see some modest improvement there and that’s going to be helpful in Arkansas because we’ve got a lot of housing dependent businesses, timber in particular, plywood, fiber board, and all those sorts of things. So the markets are improving, again we just need more of the above.”

Zook says one way to improve “more of the above” is energy. He calls energy the “800 pound gorilla in the economy.”

“It’s the thing we have the greatest short-term and mid-term opportunity with. We need to turn loose the oil and gas producers in the country on federal lands and expedite the permitting process. We have the potential to not only become North America energy independent but we can become exporters of energy,” Zook says.

“We have a huge opportunity in Arkansas to develop our gas, and hopefully some oil in south Arkansas. Those products could become exports or they could be the feed stock for enormous chemical company investments. The chemical industry has announced $65 billion worth of expanded planned investments on the Gulf Coast in the last 18 months, and we need to be snagging some of that because we’ve got gas available to support those businesses.”

The Arkansas Manufacturers Register reports 3,537 manufacturers in the state employing 194,564 workers, and the Bureau of Labor Statistics says 80 percent of those manufacturers have fewer than 50 employees. According to the Register in 2010, manufacturers contributed 17.4 percent of the gross state product.

A sluggish economy though isn’t the only hurdle facing Arkansas industry.

Arkansas Manufacturing Solutions, a program of the Arkansas Science and Technology Authority, provides consulting and strategic business solutions along with training and innovation ideas among its extension services to state manufacturers.

The agency’s marketing manager Andy Capel says a big five-to-ten year issue facing state manufacturers is one that’s not really been talked about much: the effect of aging baby-boomers.

Capel estimates most of Arkansas’ manufacturers are owned by baby-boomers.

“Those manufacturers and businesses are going to have to have some sort of process where they pass it on to family, they sell, or they exit,” Capel says. “Something’s going to have to happen, because in the next five-to-ten years, a lot of these manufacturers will be changing hands and that’s a big deal.”

He says his agency’s task is to find those that are already seeing that and help them create a plan for the near future.

“I wouldn’t necessarily call it an exit strategy, but create a strategy for moving through the next five to ten years that they can follow the protocol to train, pass-on, and to feel good about that when they step-out,” he said.

“There’s no mold that everyone fits into, so a lot of time will be spent sitting down and processing with them and trying to hammer-out all those details, and then more than anything, connect them with the resources and also at the same time help put that in a workable, manageable plan for them,” Capel says.

Both Capel and Zook see the baby-boomer issue as a looming workforce problem.

“You know we have numbers of 10,000 people hitting 65 every day in the U.S. and if you work the numbers, that’s about a hundred people every day in Arkansas, and many of them are indeed retiring and stepping out of the workforce and we’re not replacing these folks at an adequate pace, so we have to make sure we don’t undermine our potential in growth because of a lack of available folks,” says Zook.

Capel says, “There’s not a workforce right now to come in and do it. And that’s just not talking about guys on the factory floor, but high-end techs. You know, the higher-end jobs. And if you look across the board, every manufacturer is dealing with the same issue, be it engineers, chemists.. . those are all needed in manufacturing jobs.”

He says a lot of workforce woes have to do with image.

“Most people see manufacturing as where it was 50 years ago,” said Capel. One way Arkansas Manufacturing Solutions will be trying to change that image will be through sponsoring a huge push for a national and state event in its second year called Manufacturing Day.

The event will be held on October 4th in key regions around the state, and Capel says the main objective is to promote Arkansas manufacturers in a new light.

“We want to really give people an opportunity to see the cool products and what they do, but more than anything hopefully it will start to change the image of manufacturing jobs,” he said.

Capel says Manufacturing Day will be used as a job fair also. “We’re going to be working with universities, community colleges, and even high schools to bring awareness to opportunities in these plants. That way they can become aware of actually what is out there, and hopefully over time it will help bridge that gap of the workforce issue and that image where kids in college and students are looking more in to that field, rather than elsewhere,” he says.

Capel notes positive movement for the state’s aerospace industry with the creation of the Arkansas Aerospace Alliance. He says Arkansas’ location is ideal and the cost of living and quality of life offer attractive features to draw companies for aerospace expansion.

But like Zook, Capel says because of the economy some of the state’s manufacturers are holding tight and are “still scared.”

“The ones that are embracing innovation and exports, looking at new ways to export not even out of Arkansas but internationally, those manufacturers are thriving,” said Capel. “And I think the more the manufacturers take those two elements into play, the more their companies have been able to find sustaining power and growth.”