Manufacturing’s path to recovery

Although Arkansas’ travails in the manufacturing sector are well-known, several initiatives by state workforce and higher education officials and top employers are starting to gain traction in the highly competitive global marketplace to retain and attract better-paying factory jobs.

The result, experts say, will likely mean that the state’s manufacturing workforce of the future will be leaner and consist of highly-skilled and technology-savvy workers who are able to produce more goods and bring products to market quicker. The next-generation manufacturing plants, they say, will stand in stark comparison to traditional assembly line-type factories that dramatically grew Arkansas’ middle class in the years between the Rockefeller and Clinton administrations.

That paradigm shift was recently highlighted in an ongoing “Next Manufacturing” series by PricewaterhouseCoopers (PwC) that tracks the key issues and potential disruptions facing manufacturers – from contract job shops to large diversified multinationals – as they reinvent themselves. The series of reports builds on the premise that in the last several years a lot has changed for manufacturers.

“Shifting economic alignments, changing customer expectations and new (and cheaper) technology beg a new look at old assumptions and a view to new tipping points of transformation on the horizon,” the report states.

In PwC’s recent 2016 Industrial Manufacturing trends, consultants Stephen Pillsbury and Robert Bono point out that despite market uncertainly, manufacturers must weather the risk that comes with embracing new technologies.

“Manufacturing may be facing some headwinds, but it’s undeniably in the midst of a technological renaissance that is transforming the look, systems and processes of the modern factory. Despite the risks – and despite recent history – industrial manufacturing companies cannot afford to ignore these advances,” the report states. “By embracing them now, they can improve productivity in their own plants, compete against rivals and maintain an edge with customers who are seeking their own gains from innovation.”

ADMINISTRATION’S GOALS
Still, the rapid decline in the number of manufacturing jobs in Arkansas and across the U.S. since the Great Recession has created enough alarm in recent years that the Obama administration and industry trade groups have developed programs and campaigns to maintain the industry that many consider to be the backbone of the U.S. economy.

According to data from the U.S. Bureau of Labor statistics, U.S. manufacturing employment has declined since its peak in 1979, with moderate losses through the late 1990s, mostly caused by higher manufacturing productivity relative to the rest of the economy.

In the 2000s, however, with the rise of China and the new globalization, U.S. manufacturing employment experienced a decade of unprecedented losses, shedding 5.8 million jobs, or about a third of the workforce, according to a January 2015 report by the Information Technology and Innovation Foundation.

Recognizing that the U.S. was losing ground in the fiercely competitive global marketplace, President Obama announced the National Network for Manufacturing Innovation (NNMI) in March 2012 to build a network of up to 15 Institutes for manufacturing innovation around the country, serving as regional hubs of excellence to make U.S. manufacturers more competitive and encourage investment.

At the time, the president set a goal of creating 1 million new manufacturing jobs in his second term. Since then, with a budget of $1 billion, NNMI has rolled out seven new manufacturing institutes across the country, bringing together manufacturers, universities, community colleges, federal agencies and state organizations with the goal of bridging the gap between basic research and product development.

“Our new institutes will build on the success of the existing seven, and for the first time, the topic areas have not been chosen in advance but will depend on industry interests and input. Together, our growing network of institutes will ensure America remains on the leading edge of the 21st century economy,” said U.S. Secretary of Commerce Penny Pritzker.

More recently, the Commerce Department’s National Institute of Standards and Technology (NIST) opened competition in February to award new cooperative funding agreements for its Hollings Manufacturing Extension Partnership (MEP) centers in Arkansas, 11 other states and Puerto Rico. Arkansas Manufacturing Solutions (AMS), a program of the Arkansas Economic Development Commission, serves as the NIST-MEP center in the state and is eligible for $4.856 million in the five-year program.

MANUFACTURING EVENTS
As the federal government has become more engaged in reinventing and reinvigorating the nation’s manufacturing base, industry groups have also stepped up to the plate in recent years with national campaigns and other events promoting the declining sector.

The biggest event has been National Manufacturing Day each fall, which seeks to improve public perception of manufacturing in America by coordinating awareness-raising activities at a variety of locations across the country.

In 2015, there were nearly two dozen events in Arkansas that observed the national day to honor local manufacturers. Nationwide, there were 1,400 events held where the public and private sectors came together to address challenges and concerns for U.S. manufacturers while also celebrating the industry.

Earlier this month, the National Association of Manufacturers (NAM) kicked off its “Power of the Small” campaign as part of a nationwide manufacturing tour that showcases modern U.S. factories across the U.S. The nation’s largest manufacturing trade group’s new campaign is aimed at highlighting the critical role small- and medium-sized manufacturers play in fueling the broader U.S. economy.

“America was made great by small manufacturers with big dreams,” NAM President and CEO Jay Timmons said. “Our success as a country depends on these companies.”

In Arkansas, there are also a number of workforce, education and industry initiatives aimed at bolstering the blue collar-friendly sector that only a decade ago was the state’s top job-producing sector. However, post-recession, the state lost about 14% of its industrial employment between September 2007 and September 2013, with a blip of a slight gain of 645 jobs between that period and the end of 2014.

Between January 2015 and September 2015, Arkansas shed another 1,354 industrial jobs, continuing the post-recession slump that has shrunk the number of factory-related jobs across the state since 2007, according to Manufacturers’ News, Inc., a respected industrial database and directory.

“While many states have seen strong post-recession growth, Arkansas has struggled to come back from the downturn,” said Tom Dubin, president of Manufacturers’ News. “Although the state’s low cost of doing business and abundant natural resources has appealed to many companies, a shortage of skilled workers as well as a stronger dollar has put a dent in growth.”

WORKFORCE INITIATIVES
Despite those gloomy statistics, Gov. Asa Hutchinson kicked off a sweeping economic development initiative at the beginning of his administration that he said represented a fundamental shift in the state’s workforce development efforts. In April 2015, he signed three workforce development bills that he called the foundation of his efforts to retool state job recruitment endeavors.

The governor’s initiative received a big boost in October 2015 when the state Department of Workforce Services (DWS) announced more than $4 million in awards to Arkansas Community Colleges (formerly the Arkansas Association of Two-Year Colleges) as part of its Arkansas Sector Partnership program.

“The goal of the Arkansas Sector Partnership initiative is to leverage partnerships and align state and local resources to deliver sector-based training programs that meet the workforce needs of key industries in Arkansas’ regional labor markets,” DWS Director Daryl Bassett said.

Meanwhile, one of the community colleges that has taken the lead in promoting the state’s manufacturing sector is National Park College (NPC) in Hot Springs, which has hosted a number of activities in the past year aimed at highlighting the sector. In June 2015, NPC, the Hot Springs Metro Partnership and AMS hosted the Spring Manufacturing Summit at the local community college. NPC’s president, Dr. John Hogan, said the event allowed area manufacturers an opportunity to learn more about each other and define some common challenges.

NPC hosted the Young Manufacturer’s Academy for 22 area middle school students in August 2015, which included a LEAN manufacturing simulation with AMS and an introduction to mechanical design through a bridge-building game.

Hogan said future discussions will allow regional partnerships to form and provide an opportunity for employers to identify emerging trends in workforce development, supply chain and other industry-wide challenges. He also noted NPC offers a number of two-year programs that provides students with the necessary skills to find good-paying manufacturing jobs in aerospace and industrial technology, engineering, computer programming, biochemistry and robotics.

“Manufacturing is a vital part of the workforce and economic development for Garland County,” he said. “At NPC, we see our role as helping business and industry educate the workforce through programs we teach every day and also through customized workforce development programming.”

EMPLOYERS’ EFFORTS
But the biggest investment into Arkansas’ declining manufacturing base has come from many of the state’s largest employers, which highlight the work of Arkansas’ labor pool in the competitive global workplace.

For example, Japan-based auto parts giant Denso Corp. has developed a robotics subsidiary in Long Beach, Calif., and has ramped up marketing of the company’s robotics systems that are used for precision assembly, manufacturing, product testing and quality assurance by manufacturers across the globe.

According to Denso, more than 77,000 of the company’s robots are used by companies worldwide, including those at the company’s 224,000-square foot manufacturing operation in Osceola that produces heating, ventilating and air conditioning (HVAC) assemblies and modular radiators.

In Fort Smith, Baldor Electric officials say the key role robots play in the company’s manufacturing process is improving safety, productivity and quality costs. Chris Hoyle, general product manager at Baldor, said at a manufacturing summit last year that the company’s electric motor division implemented robotics across most of its entire electric motor operations, which includes the 1,150-employee manufacturing plant in the city.

Doyle said robots are mainly used in the Fort Smith operations for “moving and lifting” heavy motor parts from one location to the next. “It has been a huge benefit to us for a variety of reasons,” Doyle said. “We are more efficient and safe, and our quality is a whole lot better because of robotics.”

In South Arkansas, defense giant Lockheed Martin has also introduced some advanced manufacturing innovations at its sprawling missile production plant in East Camden. According to company officials, their Camden operations have a robust outreach program to support STEM (Science, Technology, Engineering and Math) development. In the short term, the company is working to increase the number of college freshmen entering Lockheed Martin target degree programs. The long-term goal is to build pipelines from kindergarten to 12th grade that identify and support promising students and guide them into technical degree programs, company spokesman William Sudlow said.

Sudlow added that Lockheed Martin’s highly competitive salary and benefits package, combined with a commitment to employee development, education and training, has positioned its Camden operations as a highly desirable employer and enhances its ability to retain a skilled workforce.

For example, the defense giant’s Camden operations recently implemented new “millennial” training that focuses on the changing dynamics of millennials entering the workforce. The training is structured to two audiences: new millennial employees to help them understand the different generational styles of their peers, and existing employees to help them understand the leadership skills that will help retain millennials.

“At Lockheed Martin, we are engineering – and building – a better tomorrow. And to get there we need a deep bench of skilled employees with a passion for continuous improvement and innovation,” said Colin Sterling, director of operations for Lockheed Martin at Camden. “We want to fill our talent pipeline with local candidates, and to that end we are encouraging students from kindergarten on to consider high-tech careers. Our STEM outreach to area schools is centered on exciting the imagination of a future engineer or encouraging a student to pursue a high-tech production career.”