A Tale of Two Cities (Actually Three)

“What about manufacturing?”

I thought my question was simple and even logical but it seemed to take my hosts by surprise. In two subsequent meetings in two neighboring cities, I asked both city managers if they had any plans for future industrial growth.

Neither did.

Both communities straddled an interstate highway and while they still retained somewhat of a rural, agricultural nature, it was clear they were bedroom communities for those driving elsewhere to work. Elsewhere was a major US city with an NFL franchise, about 30 miles away.

Median household income was higher, in the $60,000 range, and newer subdivisions were on the upper end, with homes in the $250,000 to $300,000 range. Again, keep in mind where we are (for now) – the outskirts of a major metropolitan area.

Knowing full well that land is not a site but that land, with proper investment can become a site, a brief eyeballing indicated to me that industrial properties could be possible if the suitable infrastructure was there or could be there. Always big ifs.

But when I raised the specter of industrial use with our city managers, you would have thought that I was suggesting an alien space invasion. Both made it very clear that retail was their highest and really only priority.

What Retail Offers

And I understand that, even if I do not necessarily agree with it. Stores bring in sales tax monies, monies that go to the coffers at City Hall, giving our city managers more play dough, or, to be kinder, more budget breathing space. In short, sales tax dollars can fuel the pump.

(And in Texas, sales tax dollars can enrich certain qualifying local economic organizations. I know of single person ED shops with millions in the bank.)

Retail can also add to the quality of life. It’s no fun driving 10 miles in the middle of the night for a stick of butter because your wife is baking a cake and is demanding you to get hopping. (Trust me, I know something about this.) A well placed grocery store or pharmacy can be a quality of life godsend to a small community.

For the two neighboring communities, I had to wonder why a manufacturing component was at least not being considered. I was there at the request of a friend, a real estate developer, who was planning for retail but wanted to see a manufacturing presence to essentially support the retail developments that he would sink millions of dollars into. In follow-up emails to city officials, I was probably too plainspoken in suggesting that pursuing a retail-only strategy was short sighted.

“But retail will never build wealth in local economy and or provide for quality jobs. Manufacturing jobs are high-quality, good-paying jobs. Manufacturing workers earn more than workers in other industries—about $77,000 compared to the average $60,000 in other sectors. Then there is manufacturing’s multiplier effect. For every $1.00 invested in manufacturing, another $1.48 of economic activity is generated elsewhere,” I wrote.

I should have pointed out, but didn’t, that retail has a much lower multiplier effect, generating only 54 cents for every dollar invested. Leave to say, my argument probably did not resound very well, as I received no reply.

And while I do not know for sure, I suspect our city officials may hold skewered views on what manufacturing is. Parents and educators also hold some misperceptions on manufacturing – believing that it offers only dirty, potentially dangerous and dead-end jobs. Nothing could be farther from the truth.

Deader Than Dead

But the truth will sometimes be damned. It is perceptions, particularly erroneous perceptions, that can so often kill a project deader than dead. As a site selection consultant, I want to take a corporate client only to those places where the company will be rightly viewed and welcomed as an investor, a job creator, and a corporate citizen within that community. This is particularly true if that client is a manufacturer.

If we’re not welcomed, we’re not coming. It’s as simple as that, even if all the other locational criteria and perimeters may point your way.

If a community doesn’t view manufacturing as a viable option in a strategy of wealth building within its local economy, you can bet that the chances are correspondingly great that they won’t be getting any or at least many looks. For starters, they are unlikely to have the ready-to-go sites as required by a corporate client that I or any other site selection consultant would represent.

Carve You Out a Spot

I was in another rural community recently, this one in Texas. The town, which was about an hour away from the nearest interstate, had come up with an interesting business development strategy by suggesting that it was essentially one big virtual industrial park. The message was, in short, this: “You just tell us what you need and we’ll find you the property and carve you out a spot.”

The problem is that it doesn’t work that way. Site selection is about viable sites, not land. More often than not, when a company needs a plant site, it needed it six months ago. It wants to move onto a prepared industrial site where the delays are few and the risks minimized. Raw land, even strategically located raw land, can never offer that.

This community reasons, wrongly, why should we spend the money on infrastructure when we don’t know what the needs are for a future industrial user? My answer to that is simple: By not offering viable “product,” you are taking yourself out of the ballgame. It’s that simple.

This is the whole reasoning behind the certified-site movement of recent years, a trend that will only continue to grow as communities seek to be more competitive in their efforts to attract manufacturing.  In short, it’s about addressing risk from the standpoint of the corporate end user.

You may want to take a look at a past blog that I wrote on this subject (and, yes, site certification is a service that I do offer) – “Site Certification: Saddle Up Old Kate.”

A Dirty Little Secret

If there is a dirty little secret to these two neighboring towns on the interstate and the Texas town an hour from the interstate, it may be this: They may not have the skill sets within their communities to attract the manufacturers of tomorrow, which essentially now demands that everyone on the plant floor be a problem-solving junior engineer.

The human element ranks up there with logistics and transportation as a key factor in where manufacturing capital is invested. That interstate highway is important because most manufacturers continue to ship product by truck. But people make it work (or not work.)

Manufacturing may need fewer people because of robotics and advanced technologies, but it surely needs smarter people – those equipped with technical skills to again solve problems and operate and maintain very sophisticated machinery that can cost in the millions, even tens of millions of dollars.

Unless he is attending tech school courses at night, Bubba working the counter at the bait shop probably need not apply. That goes for Sheila, who does nails, or Charlie, who works the grill at Burger Doodle. Without the needed skills, they will not fill the bill for the manufacturers of tomorrow.  It is sad but true.

Staunching the Bleeding

Much has been written about a manufacturing renaissance happening in this country. It seems like you cannot swing a dead cat without hitting a magazine story about a manufacturing revival that is supposedly happening. (Note: I do not pick up dead cats much less swing them. I actually like cats although few have ever liked me.) I guess if staunching the bleeding is a revival, then we have done that.

In his state of the union address to the nation on Tuesday, President Obama spoke of the creation of 500,000 manufacturing jobs in the past three years. Most economists think we may pick up 150,000 to 200,000 manufacturing jobs in the coming year. But keep in mind this, from 2000 to 2010, we lost 6 million manufacturing jobs, a full one-third of our manufacturing base.

A day after the president gave his speech, a more fascinating speech from my perspective, was given in Detroit by Jay Timmons, the president and CEO of the National Association of Manufacturers. He said, correctly, that all is not well with U.S. manufacturing.

“Unfortunately, manufacturing today is not where it needs to be,” Timmons said. “It is 20 percent more expensive to manufacture in this country than it is anywhere else in the world – a direct result of years of policy choices made in our nation’s capital.”

And that is what we are going to talk about in next week’s blog – our competitive standing in the world. It means a lot to every American, even to those who live in places where manufacturing is not on the radar screen.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas — www.barberadvisors.com He can be reached at 972-767-9518 or at dbarber@barberadvisors.com