Manufacturing key for rebound of Georgia Economy

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By Michael E. Kanell

As workers came back from their late-morning break, a symphony of production began to play.

Beneath a large American flag, the Alpharetta factory rang with the sounds of press brakes, turret punches, laser cutters and welders. The thump of metal sheets being pounded, the sizzle of others being sliced and the rhythmic scrunch of metal folded cleanly at the edges — as if it’s paper — harmonized with the hoots of forklifts backing, braking and prowling the floor.

It is the music of manufacturing. And it doesn’t come cheap.

The turret punch and robotic press together run about $1 million, said Bruce Hagenau, president of Metcam, the metal fabricator with 180 workers. “To be competitive, you have to invest a lot of money in equipment.”

That’s because some competitors – like those in Asia – can count on cheap labor. Others – like those in Europe – are highly automated.

For Georgia, it matters that companies like Metcam can figure out a way to stay even. As the state’s post-recession economy struggles for traction, manufacturing has offered a welcome – if modest – boost.

Manufacturing accounts for barely 8 percent of the state’s jobs. In the past two years, it has added more than 10,000 jobs.

Moreover, many experts say manufacturing plays extra loud: The jobs tend to pay better than average. Manufacturing companies must buy lots of materials – much of it purchased locally. Production also increasingly depends on good technology, so manufacturing spurs innovation.

And when it comes to improving the trade balance, shifting the flow of dollars from out to in, manufacturing is the story, said Gretchen Corbin, the state’s deputy commissioner for global commerce.

“Manufacturing represents 92 percent of the state’s exports,” she said. “And I think we have small and large companies expanding in manufacturing.”

That recent expansion comes against a backdrop of massive change.

After World War II, more than 30 percent of the nation’s jobs were in manufacturing. In the following generation, millions of jobs were lost to both low-wage regions of the globe and automation.

The result has been fewer opportunities for high school graduates, but also more productivity. U.S. manufacturing produces goods of greater value with fewer workers.

Positions are now more likely to require technical knowledge. And companies are more likely to value innovation, efficiency and a smaller workforce than the past generation’s repetitive mass production with mobs of workers.

Bright Light Systems makes specialized lights for airports, rail yards, caves and 60-foot high poles. The company has only four employees, hiring manufacturers in Georgia and California for production, said Brad Lurie, CEO of the Cumming-based company. As the business grows, the company plans to expand its in-state manufacturing.

The lights are designed to be very bright, but far more efficient than older lights. To continue innovating, Bright Light wants to be near researchers and other technology companies, he said.

“Our uniqueness is in our design – it’s our intellectual property,” Lurie said. “Technology is a key factor in why I want to put a business here.”

While Georgia manufacturing benefits from relatively low costs, that is not enough to keep most high-value manufacturing competitive. Many of those companies are fueled with research from nearby universities and powered with well-educated employees.

For instance, the Center of Innovation for Manufacturing – one of six such centers under the Georgia Department of Economic Development – has worked with 1,879 companies in the past three years, aiming to help growing companies find expert guidance. Underscoring the importance of a research institution, the center itself is located on the Georgia Tech campus.

“I think the meat of what we do is bringing manufacturers together with people who can solve their problems,” said John Zegers, center director.

The center, which has an annual budget of just $233,000, can also offer modest, matching grants to promising companies that need a little capital.

For example, Cumming-based New Frequency, which employs 15 workers, makes wireless sensors. The company’s premier product is attached to animal traps, allowing them to be monitored from afar, instead of requiring a daily visit to the site.

The company wants to add software that would improve how the sensor communicates what’s happening with the trap – technology that would be useful for other markets, too. The center has provided $30,000, slightly less than half the project’s cost.

“We developed the software to a certain level, but Georgia Tech had the expertise to take it further,” said CEO Todd Moran. “If we were developing it ourselves, it would be a half-million-dollar project.”

New Frequency also had an offer from the state of Virginia, a grant that could have been as much as $2 million – and no need to match it. Yet the company went with Georgia’s, Moran said: “It was much less money here, but we wanted the relationships with Georgia Tech that this would give us and that the other offer wouldn’t give us.

“Georgia Tech has some expertise that we simply didn’t have. They know where things are going, they have a vision, they have experience with other projects. It is like having an IT staff that you didn’t have to pay for.”

The company expects to add 40 jobs over the next five years.

Another source of help is the state’s Manufacturing Extension Partnership, part of a 60-group network under the National Institute of Standards and Technology, that works with roughly 1,000 companies a year, said director Chris Downing.

“It is a combination of what could be considered education and coaching,” he said. “The focus is on small, medium-sized manufacturers that are not, in general, being served by the larger consulting firms.”

That kind of networking has a long history of both success and failure, said Lesa Mitchell, vice president for innovation and networks at the Kauffman Foundation, which studies and promotes small business.

“This country has tried these things for over a century – giving access to expert networks,” Mitchell said. “That always works, if you have the right people.”

The number of jobs added by these small companies pales compared to the kind of splash made by recent high-profile announcements like those of Caterpillar or Baxter to build large plants in Georgia.

Yet the nurturing of small business could be the better bet long-term. Some research studies point toward home-grown, “organic” growth as a better source of long-term economic health than recruiting a handful of large companies from elsewhere.

But for small companies to have a big impact on the economy, there have to be a lot of them. And the obstacles for manufacturing are higher than for many other businesses, said Mitchell.

“Manufacturing tends to be very capital-intensive, so if you are an entrepreneur, even getting through the early stages is very difficult,” she said.

And for manufacturing companies, the fight to survive and the need to spend never end.

Metcam, for example, is in its 23rd year and hopes to hit $30 million in revenue by the end of next year. Standing in front of Metcam’s two laser cutters one morning last week, CEO Hagenau warned a visitor to beware of the sparks cascading onto the floor. He mused out loud about the newer “fiber lasers” that work faster while using less energy than the two, 10-year-old machines in front of him.

“One of those could replace both of these,” he said.

Manufacturing Jobs in Georgia

Factory employment in the state has rebounded slightly since hitting bottom two years ago.

Year – Number of Jobs

2005 – 451,600

2006 – 445,100

2007 – 427,900

2008 – 404,600

2009 – 349,200

2010 – 347,100

2011 – 350,900

2012 – 357,500

Note: Figures are for September of each year.

Source: Bureau of Labor Statistics



Additional Information


Georgia Tech Manufacturing Institute (GTMI)

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