This column originally ran in the May 2013 issue of Food Manufacturing.
Interview with Roger Kilmer, Director of the Manufacturing Extension Partnership, National Institute of Standards and Technology
Food Manufacturing spoke with Roger Kilmer of the Manufacturing Extension Partnership (MEP) about the importance of maintaining a strong manufacturing presence in the United States, and what resources are available to domestic manufacturers.
Q: What is the purpose of the Manufacturing Extension Partnership?
A: The purpose of the National Institute of Standards and Technology’s (NIST) MEP program is to enhance the productivity, technological performance and global competitiveness of small- and medium-sized U.S. based manufacturing firms.
In support of this, NIST MEP funds manufacturing extension centers across the United States. Currently, the MEP national system consists of 60 centers with more than 400 field offices that are positioned to address manufacturers.
Q: What does MEP do to help U.S. manufacturers stay in the U.S?
A: MEP works with U.S. manufacturers to help them create and retain jobs, increase profits, and save time and money. The nationwide network of MEP field staff works directly with local manufacturing companies on a variety of services, from innovation strategies to process improvements to green manufacturing. MEP also works with partners at the state and federal levels on programs that put manufacturers in position to develop new customers, expand into new markets and create new products. Through these partnerships, MEP is able to leverage resources and share opportunities with manufacturers.
Emerging Markets: Why Companies Make the Move Overseas
While there is an increasing effort to keep U.S. manufacturers at home, many companies are embracing emerging markets by basing some of their facilities overseas. One of the fastest growing overseas markets in the food industry is Thailand, with annual food exports exceeding $30 billion in 2012. Food and beverage powerhouses such as PepsiCo and Nestle have a manufacturing presence in the country.
According to Supisara Chomparn, Director of Thailand Board of Investment New York, Thailand has become a large player in the food industry due to its “natural wealth and manmade resources, in addition to its prime location at the heart of Southeast Asia.” She adds that the nation’s high quality and safety standards also have contributed to its success in the food processing market.
Many U.S. companies choose to do business overseas due to the number of benefits offered. The Thailand Board of Investment offers companies both tax-based incentives, such as exemption or reduction of import duties, and non-tax incentives, which can include permission to bring in foreign workers or permission to own land.
Chomparn says emerging markets, particularly in Asia, will continue to impact the growth of U.S. food companies into the future. “As consumers in Southeast Asia experience increasing income levels and begin to demand increasing amounts of ready-to-eat and frozen food products, U.S. companies located in Thailand will benefit from being so closely positioned to these markets.”
Innovation is at the core of what MEP does. Manufacturers that accelerate innovation are far more successful and realize greater opportunities to participate in the global economy. By placing directly in the hands of U.S. manufacturers innovations developed through research at federal laboratories, educational institutions and corporations, MEP serves an essential role sustaining and growing America’s manufacturing base. The program assists manufacturers to achieve new sales, leading to higher tax receipts and new sustainable jobs in the high paying advanced manufacturing sector.
Q: Why is it so important for manufacturers to stay in the U.S.?
A: Manufacturing is an important sector of our economy. At a macro-level, manufacturing is a source of productivity, innovation and wealth production, compared to service sector economic activity focused on wealth consumption. At a more micro-level, manufacturing is a driver of productivity improvements, business growth and job creation. Manufacturing accounts for 12 percent of the U.S. economy and about 11 percent of the private-sector workforce. Manufacturers in the United States employ 12 million people in high-wage, high-skill careers.
Research indicates that each dollar’s worth of manufactured goods creates another $1.43 of activity in other sectors. Also, two-thirds of U.S. research and development capacity is concentrated in manufacturing.
Manufacturing and manufacturing competitiveness is more than reshoring. Providing companies with resources and tools to help them make better decisions about manufacturing production and sourcing decisions is critical. Additionally we ought to be helping companies:
- Home-Shore: To keep R&D, product development and manufacturing production in the United States
- In-Shore: To attract new foreign and domestic investments in manufacturing
Q: What are the benefits to domestic manufacturing as opposed to off-shoring?
A: All manufacturers, regardless of size, products and market, must balance the sometimes competing variables of increased speed, lowered cost, increased safety, lowered risk and increased predictability. When looking at domestic versus international production and supply chains, additional variables present themselves:
- Depending on where the raw product is found, reshoring may minimize transportation costs.
- Depending on the market in which the product is sold, reshoring may minimize transportation costs.
- Manufacturing domestically may reduce uncertainty about what is being processed.
- Supplier monitoring costs, such as travel, communication (translation) and associated opportunity costs tend to be significantly higher with off-shore suppliers.
- The regulatory environment in some countries can be opaque and inconsistent.
- Currency fluctuations must be considered.
- Companies that outsource or manufacture abroad should expect to devote extra personnel and time to comply with U.S. regulations on the importation of goods as well as foreign country business regulations.
- The costs of doing business abroad can go beyond traditional economic costs. Political and security risks may impact a business’ ability to maintain normal operations.
- The need for IP protection and enforcement.
Q: If a manufacturer is considering off-shoring as a cost-cutting measure, what considerations should it make before coming to a final decision?
A: Manufacturers should consider how their decisions about products, vendors, financing, transportation, warehousing, risk tolerance and greenhouse gas emissions will affect their business performance and their bottom line. Every business is unique and there is no one-size fits all solution for everyone. There are several resources — both from industry and the federal government — available to help manufacturers make the decision about where to locate manufacturing operations. Two of those resources include the Total Cost of Ownership Estimator by the industry-led Reshoring Inititiative and SelectUSA, a federal program.
Q: What resources are available to domestic manufacturers seeking assistance?
A: The MEP works with U.S. manufacturers to help them address their most pressing issues while also developing plans for future growth. The program’s nationwide network provides a variety of services ranging from innovation strategies to process improvements to green manufacturing. The program has 60 centers in all 50 U.S. states and Puerto Rico, with more than 1,300 field staff to work directly with manufacturers on their most pressing issues.
An interactive map highlighting the MEP resources across the country is available at http://www.nist.gov/mep/find-your-local-center.cfm