Let's Rev Up the Engine
The challenges are considerable for the manufacturing sector these days. A recent National Association of Manufacturers report titled “Securing America’s Future: The Case for a Strong Manufacturing Base” listed several. For starters, manufacturing output continues to lag behind earlier economic recoveries. Production is rising at only about 3 percent a year (half the rate of previous expansions). Manufacturing capacity remains underutilized at about 80 percent, so new plant and equipment investment has slowed or hasn’t happened at all. And lack of job growth has discouraged new workers from entering manufacturing— something which has serious implications on maintaining a skilled workforce.
Why is all of this important? Because manufacturing is the engine that runs our economy. One measure of its importance is the nationally used economic “multiplier.” The manufacturing multiplier is $2.37. In other words, for each dollar of final demand for manufactured goods, $1.37 worth of additional goods and services are needed to support that demand. Manufacturing has the highest multiplier of all major U.S. industrial sectors. Agriculture is a distant second at $2.15, and transportation, government, education, and retail are weak followers in the range of $1.89 to $1.57. In short, a strong manufacturing base effectively pulls along the rest of the economy.
That is particularly true for Minnesota. We have approximately 7,500 manufacturing firms, of which 6,500 are SMEs with less than 100 employees. The total number of employees in manufacturing is about 350,000, with one-third of those in SMEs. The total payroll in manufacturing is about $14 billion, with one-third of that in SMEs. These numbers are all 10 to 20 percent higher than the average U.S. state. The bottom line: Minnesota has a strong and successful manufacturing base.
How can our manufacturers strengthen themselves? A 2006 report by RSM McGladrey and The Manufacturing Institute on “The Future Success of Small and Medium Manufacturers” offered some smart advice, noting that companies need to take advantage of the current economic conditions.
Manufacturers, particularly SMEs with less than 100 employees, must include productivity and growth considerations in their business plans. They must craft solid marketing approaches and work to build their brands. They need to develop export strategies and protect their intellectual property. This issue addresses several of those topics, including building a lean culture (“Keep the Change,” page 12), strategic positioning (“The Right Place,” page 22), and intellectual property (“The ABCs of IP,” page 28), to name a few.
Manufacturing and SMEs are doing some wonderful things in Minnesota. Read the articles and learn from the SMEs! They deserve the attention.
Thank you, and until next time, let’s stay in touch.
Wayne A. Pletcher
P.S. Our THANKS to former DEED Commissioner Matt Kramer for the great work he did heading up the department. And WELCOME to the new acting Commissioner, Ward Einess.