‘Global AND local’: Executives make projections about the year ahead in manufacturing

A panel of accomplished chief executive officers will discuss the challenges and opportunities for competing in a global economy at the 2014 BizTimes Manufacturing Summit.

Executives from manufacturing companies throughout Wisconsin are invited to attend the breakfast event, which will take place on Wednesday, Oct. 1, at the Pewaukee headquarters of Harken Inc. at 24983 Bluemound Road.

The executives on the panel will be:

• Katherine Gehl, chief executive officer of Gehl Foods Inc., Germantown.

• Paul Grangaard, chief executive officer of Allen Edmonds Shoe Corp., Port Washington.

• Frank Krejci, chief executive officer of Strattec Security Corp., Milwaukee.

• Austin Ramirez, chief executive officer of HUSCO International Inc., Waukesha.

In preparation for the event, BizTimes asked each of the executives to outline some projections about manufacturing in 2015. The following are their responses.

Katherine Gehl

• “Manufacturers will realize that our broken political process/unproductive government is the single greatest threat to our competitiveness (and therefore to business success and job growth). Business people will get involved in political reform as centrists to protect and revitalize what has previously been the most competitive economy in the world. They will not be advocating for narrow issues specific to their businesses but rather for common sense reforms to get us out of gridlock.”

• “People drive performance. This is not new. It just continues to be true. ‘Organizational Health’ (a measure of team strength toward achieving company objectives) is one of the three ‘O’s’ that determine performance (with the other two being Organizational Strategy and Organizational Effectiveness).”

• “Big data.”

• “Interconnected products (previously called the ‘Internet of things’).”

Paul Grangaard

• “Under the headline of the old adage, ‘You don’t know what you’ve got until it’s gone,’ I see two big trends out of Washington and Madison, with the pendulum beginning to sway. First is specific to manufacturers. Our state and federal governments have often acted in the past like manufacturers are mostly a problem – they can be polluters, they consume a lot of power off the grid, they’re often not ‘high-tech/new economy’ businesses, they have a lower average pay level than service industries like software and finance. Now, there’s growing realization that it isn’t just the energy and the defense industries that are crucial to our national security and our standard of living. A strong economy and a strong middle class that will sustain our prosperity in years to come both require a strong manufacturing sector. Attitudes toward manufacturers are changing toward the positive.”

• “Second, the financial crisis of 2008 (and some other validly criticized usurpations) caused politicians and some media types generally to declare ‘open season’ on large corporations in the United States. The tax code-driven inversion strategies recently announced by some large U.S. companies – whereby companies move their headquarters overseas as part of a merger transaction to avoid paying huge U.S. taxes on foreign earnings – are causing moderate politicians and literati to realize finally that our tax code is a mess and a huge competitive obstacle. I see the debate about the corporate tax code rising to a higher level, as a result.”

• “Third, as ‘Made in USA’ becomes once again a competitive advantage in the marketplace, we’ll see greater dialogue about what ‘Made in USA’ in a global supply economy really means. Other countries have much more lenient definitions for ‘Made in’ than the United States does. If we truly want more U.S. manufacturing jobs, we need to find a better way to give ‘Made in USA’ credit to those companies that are forced to source raw materials overseas, because the domestic supply doesn’t exist anymore, but still do a great deal of the product’s manufacturing in the United States.”

• “Fourth, education, training and workforce readiness will remain a major issue. Our education system does not support a competitive manufacturing and business community well enough.”

Frank Krejci

• “The baby boom generation is moving into the historical retirement ages when life expectancy was not much beyond age 65. I expect that people will work longer for both financial and lifestyle reasons. Companies will find ways to create part-time work or job sharing to take advantage of their skills and expertise.”

• “While Asia has been and will continue to be a focus of low-cost sourcing, more sourcing will be done from Mexico. There are advantages of less wage inflation, lower transportation costs and easier communication because of the time zones. In addition, there is the economic advantage of less money tied up in inventory and a lower risk of premium freight charges due to disruptions in the supply chain.”

• “Manufacturing has not done a good job of filling the pipeline for the talent, interest and skills needed to compete globally. Companies will be forced to either invest in better programs for training or move their operations. As manufacturing becomes more sophisticated, a greater gap will grow between the skilled and non-skilled. For the good of society and business, we must find ways to elevate the capabilities of the less skilled. Necessity is the mother of invention.”

• “There will be continued growth of robotics to improve efficiency, safety and quality. The cost of robots is dropping and they are becoming easier to program.”

• “There will be a continued increase in local content and on-shoring. The advantages of better communication and closer collaboration create a significant opportunity to improve costs and quality. As processes become more automated, higher labor costs in the North American markets will be offset by the benefits of collaboration and transportation.”

Austin Ramirez

• “Global AND local…Our customers want local service in every major market around the world.”

• “Having a global footprint will be a key to success. Customers are focusing on total cost of ownership, including logistics, quality and purchase cost. This is not about offshoring, it is about providing local manufacturing in the market where the product is consumed.”

• “New markets. The world is going to continue to be in low/no growth mode. Successful manufacturers will innovate new products and services in order to generate growth. Companies that don’t figure out how to grow despite the macroeconomic headwinds will atrophy.”

• “The War for Talent. This silly phrase was coined during the dotcom boom to justify crazy salary/benefits. That dynamic isn’t coming back, but success in the manufacturing sector will be determined by human capital, not physical capital. This is especially true given the increasing need to be global and drive innovation.”

• “Citizenship. There are two elements to this. First, manufacturing will be increasingly impacted by decisions made in the public sector (government). Successful companies will learn how to engage effectively with the public sector to generate positive policy decisions. Second, younger employees want to be part of companies that are making a positive impact in the community. Companies that don’t have effective programs in place to give back will find themselves losing the War for Talent.”    

The panel will discuss a wide range of topics, including global competition, onshoring, lean manufacturing, supply chain management, commodity costs, innovation, brand development, quality control, robotics and staff recruitment and development.

The panel discussion will be moderated by BizTimes executive editor Steve Jagler. To register to attend, visit www.biztimes.com/mfg.