Conexus Indiana

Advanced manufacturing and logistics continued to lead the way in putting Hoosiers back to work in 2011, according to job creation statistics released by the Indiana Economic Development Corporation (IEDC).

The IEDC reports 5,223 new job commitments from the non-automotive manufacturing sector last year, followed closely by automotive manufacturing with 4,650 jobs created. The logistics sector was the third-most productive source of new positions, with nearly 2,000 job commitments. Collectively, this means that the ‘AML’ industries accounted for more than half of all jobs attracted to Indiana through economic development deals in 2011.

Manufacturing has long been the bedrock of Indiana’s economy, and has more recently been the catalyst for its growth as well. In the 2011 Manufacturing and Logistics Report Card developed by Ball State University on behalf of Conexus, economist Michael Hicks noted that the state’s manufacturing employment has grown neatly 5% since the official end of the national recession, while the rest of the country has been plagued by a nearly jobless recovery. The Indiana Business Research Center predicts that manufacturing and trade will continue to drive Indiana’s GDP gains in 2012, projected to again top the national growth rate.

Millions of Americans are looking for work, and thousands of U.S. manufacturers are looking for workers.

The numbers are startling. While unemployment and underemployment remain stuck near 20 percent, more than 600,000 good manufacturing jobs have gone unfilled, according to the National Association of Manufacturers. While personal income has stagnated, these jobs pay wages much higher than the national average.

Where's the disconnect?

There's a simple answer to a complex problem: The majority of manufacturing jobs now require education beyond high school, and our workforce doesn't make the grade.

As manufacturers have raced to be more productive and innovative over the last several decades, they've demanded more out of their workers -- the skills to operate advanced computerized equipment and robotic systems, teamwork and troubleshooting capabilities.

The manufacturing workforce got smarter, but it also got older. Back in 1980, 70 percent of the nation's manufacturing workers were younger than 45. Today, half the workers are older than 45, and the percentage age 25 to 34 has dropped by more than a third.

As the baby boomer generation retires, jobs open up. But young workers are ill-prepared to step into the shoes of their parents and grandparents. According to the Organization of Economic Cooperation and Development, the U.S. is the only industrialized country where educational attainment among those just entering the labor market (25 to 34 year olds) is less than those about to leave the labor market (55 to 64 year olds).

Even in Indiana, the most manufacturing-intensive state in the nation, we haven't changed our academic approach since the rise of the assembly line. Post-high school training will be mandatory for 60 percent of all new jobs in manufacturing and logistics over the next decade, but we remain stuck in a bygone era when a basic high school diploma was sufficient to earn long-term employment at the local factory.

Conexus Indiana represents companies in the automotive industry, aerospace and defense firms, logistics businesses -- a wide spectrum of high-tech manufacturing and supply chain fields. We convene groups of them regularly to discuss critical business issues. The consistent message is that they all need skilled workers, but that despite high unemployment, the right kind of labor is scarce.

That's why we act as a bridge between private industry and higher education partners such as Ivy Tech, Vincennes University and Harrison College to ensure that quality post-secondary programs are available to prepare young Hoosiers for these challenging (and high-paying) careers. But we must do more, catching the next generation of manufacturing and logistics workers even earlier -- in high school.

It's clear that students begin seriously thinking about their career choices while still in school. Research by the ACT confirms that high schoolers who were fairly certain about their occupational choices by their junior/senior years are more likely to succeed in college and ultimately earn positions in their chosen field.

Conexus is now working with Indiana employers and the state Department of Education to develop an advanced manufacturing and logistics (AML) high school-level curriculum, a mixture of online and hands-on courses that will expose students to these industries and give them a solid foundation of knowledge to carry on after they earn their diplomas.

The AML curriculum was created in alignment with state standards and with broad-based feedback from industry, ensuring that it carries real value for students. It has been endorsed and is eagerly anticipated by school superintendents and technical education directors across the state who see the need to prepare their students to participate in a sector that today employs one of every four Hoosiers.

Conexus is completing private fundraising to finalize the curriculum and provide it to school districts at no additional cost. The private sector has embraced the opportunity to invest in this effort, a concrete demonstration of the demand that exists for a revitalized workforce pipeline. For too long, employers have been disengaged from the educational system; now, companies are realizing that they must push for relevant programs, work with local schools and put money into training efforts to develop the human capital they need.

Without qualified employees, advanced manufacturing and logistics companies can't grow; without good job opportunities, young people can't become productive taxpayers. The process of closing our skills gap will begin in classrooms and technical education centers across Indiana -- and it has to start now. It's up to us to make sure local high schools have the tools to engage and educate our future workforce.

Dwyer is president and CEO of Conexus Indiana, the state's industry-led manufacturing and logistics initiative; he formerly served as chief operating officer of Rolls-Royce North America.

Reaching young Hoosiers as high school students has been a key strategy in Conexus' push to revitalize our manufacturing and logistics workforce pipeline - getting students interested in these careers before they graduate allows an easier transition to post-secondary training and more time to make the right choices to compete in the job market. 

Conexus has worked to recruit teachers and counselors as 'champions' for manufacturing and logistics career readiness across Indiana to spread the word; today, we take this effort to the next level by announcing plans to implement a high school curriculum focused on foundational skills that employers require to enter these industries. 

Read the press release below for more:

(INDIANAPOLIS, November 22, 2011) Conexus Indiana today announced its intention to launch a high school-level curriculum focused on advanced manufacturing and logistics, two industries that collectively employ one of every four Hoosier workers. This innovative program will give Indiana students a head-start on careers in these increasingly high-tech fields.

Conexus, the state’s manufacturing and logistics initiative, identified the need for this effort in response to calls from industry for a higher-skilled, better-prepared workforce. Working closely with the private sector and educators, with input from the Indiana Department of Education, Conexus has developed a curriculum appropriate for high school students that teaches the fundamentals that manufacturing and logistics firms demand from new employees.

“Manufacturing and logistics jobs have changed rapidly over the last several decades,” said Conexus President & CEO Steve Dwyer. “The majority of U.S. manufacturing positions now require effective education beyond high school – you need critical thinking, information management and communication skills, as well as the technical know-how to manage computerized equipment, advanced robotics and supply chain management systems.

“But even though Indiana is the most manufacturing-intensive state in the country, we don’t have enough students pursuing the right education for these careers. It’s time to make a real connection between our students and the jobs that need to be filled in manufacturing and logistics – starting in high school.”

Indiana Superintendent of Public Instruction Tony Bennett agreed that more options for teaching an advanced manufacturing and logistics curriculum are a welcome addition.

“With the changing landscape in this arena, schools and teachers can benefit from innovative ways to teach pathways to good jobs,” Bennett said. “We owe our students career-focused programs that will make their diplomas relevant to these industries.” 

The curriculum will be a mixture of online, hands-on and project-based units that will expose students to key concepts in these industries, with dual-credit opportunities that will position them to successfully pursue relevant certifications, associate degrees or four-year programs after graduation.

The curriculum will be launched as a pilot program at no more than 10 high schools next fall, including the Excel Center (Indianapolis) and the Area 31 Career Center at Ben Davis High School, before it is made available for broader adoption by school districts around the state. The rollout can’t come soon enough, according to State Board of Education member David Shane, who also serves as the CEO of Indianapolis distribution and logistics holding company LDI, Ltd. LLC.

“More than half of the nation’s manufacturing workers are older than 45,” Shane noted. “Thousands of Baby Boomer workers reach retirement age every day, but there’s no concerted effort to prepare the next generation of employees to take their place. If Indiana can create an industry-driven program that meets their needs and captures young people’s attention in high school, it will be a clear competitive advantage for companies desperate for human capital.”

APICS – The Association for Operations Management – the leading professional organization for supply chain and operations management professionals, is also lending its support. APICS is offering a new certificate to students who complete the APICS Principles of Operations Management course, which is part of the manufacturing and logistics curriculum. 

“Hundreds of thousands of well-paying jobs are going unfilled nationally because of a growing skills and talent gap, despite high unemployment,” said Bob Collins, Director of Professional Development at APICS.  “Training the next generation of professional is of the utmost importance.  APICS is pleased to join the Conexus and the State of Indiana in leading this national effort to bridge the gap between what young people are being taught and what employers need.”

The curriculum has been endorsed and is eagerly anticipated by school superintendents and technical education directors across the state, who see the need to prepare their students to take advantage of these opportunities – especially considering that Indiana manufacturing employment has grown by 5% since the end of the recession, while a jobless recovery has been the norm nationally. 

Conexus is currently finalizing fundraising efforts to complete the curriculum and provide it to school districts at no additional cost. The private sector’s response has been eager and generous, according to Dwyer. 

“Employers have been quick to offer input on the curriculum and to help finance it,” he said. “Their willingness to contribute shows that the demand is real, and that bodes well for the future prospects of the students who will get involved.”

"When Allison was approached about supporting a manufacturing and logistics program for high schools, we looked at this program as an opportunity to be a part of the solution," said David L. Parish, Vice President of Operations for Indianapolis-based Allison Transmission. "Our employees are our largest source of productivity and innovation - the investments we make in getting young people interested in manufacturing and logistics will pay big dividends down the road."

For Dr. Bennett, the success of the new curriculum will be measured in career opportunities for students.

“Studies by ACT and others show conclusively that the earlier young people choose a career path, the more likely they are to succeed in higher education and, ultimately, in finding work,” he said. “With our College and Career Pathways, an Indiana high school student can declare his or her interest in an industry and pursue a dedicated curriculum that can carry them through post-secondary studies straight into the job market. This curriculum resource will help them do that. We hope it’s a model for future efforts.”

Preparing for the ‘Onshoring’ Wave from China

Last month in this space, I wrote about how free trade has boosted Indiana manufacturing – with exports and foreign investment at record levels, Hoosiers are winners in the fiercely-contested global marketplace. 

I recently read a report by the Boston Consulting Group (BCG) that gives me even more confidence in these assertions. Titled “Made in America, Again: Why Manufacturing Will Return to the U.S.,” it takes aim at a common perception among politicians and pundits here at home – that the flight of manufacturing to China has decimated our domestic industries. 

We’ve been down this road before. Back in the 1980s, Americans watched with concern as Japanese manufacturers captured a growing share of our markets – in cars, consumer electronics and steel. Publicity-seeking congressmen went so far as to smash Japanese-made TVs and radios on the Capitol lawn. But fast forward twenty years, and Japanese investment is universally recognized as a fundamental strength of Indiana’s economy. Foreign firms employ nearly 100,000 Hoosier manufacturing workers, with companies like Toyota, Honda and Subaru leading the way. 

Similarly, according to the BCG report, China is a formidable competitor – but trends are already emerging that are leveling the playing field with U.S. manufacturing.

First, Chinese operations face the prospect of 15-20% annual wage increases at the average factory for the near future. The Chinese population is rapidly aging, creating labor shortages that drive up costs; the younger generation is also more worldly and accustomed to relative prosperity than their parents and grandparents. They are refusing to accept low earnings and grueling hours, and are winning concessions from companies desperate for workers.

Electricity prices have also skyrocketed in China (up 15% since 2010), and industrial land is actually more expensive than many parts of the United States. (The national average is around $10.22 per square foot, compared with just over $5 in many parts of the U.S.) Add rising transportation costs to the mix, and the Chinese cost advantage will no longer look so daunting within five years or so.

Another key issue is China’s exploding domestic demand, as robust economic growth adds millions of households to its ‘middle class’ every year. This means that more and more of its industrial capacity will be devoted to meeting the needs of Chinese consumers, rather than producing goods for foreign markets.

All of these factors are coalescing to erode China’s position as the ‘default option’ for global outsourcing. Countries like India, Thailand, Vietnam and Mexico will compete for the share of manufacturing exports that China loses, but lack the infrastructure (human, physical and technological) to absorb it all.

This leaves the United States with an opportunity. U.S. manufacturers would naturally prefer to have production facilities closer to home, eliminating the managerial, operational and cultural barriers that come with overseas plants. As the U.S.-China cost discrepancy narrows (hastened by the weak dollar), an ‘onshoring’ trend is gathering momentum – companies like GE, Boeing, Caterpillar, Ford, Master Lock and Coleman have moved operations back to domestic factories over the last two years, and more and more firms could join the trend.

We will even begin to see more Chinese companies opening plants in the U.S., as manufacturing operations here become a more cost-effective way for them to serve our market. Today, Chinese companies invest only $1 in the U.S. for every $10 that U.S. firms invest in China. But with China poised to invest a projected $2 trillion overseas in the next decade, it’s clear that Chinese foreign direct investment will become an economic force in the United States, just as we’ve seen with Japan.

Much depends on how competitive the U.S. manufacturing sector continues to be. China’s costs are rising, our costs are dropping – but it is the productivity of our workforce that provides the true advantage. Our manufacturing output is two-and-a-half times greater than it was in 1972, and even in the midst of the recent outsourcing wave (1997 to 2008), the value of U.S. manufacturing increased by a third, to $1.65 trillion.

This is due to immense investments by manufacturers in information technology and robotic systems, as well as the adoption of new practices like total quality management, lean manufacturing and six sigma. But the best equipment and most novel business strategies are useless without workers who can adapt and succeed in a complex, fast-paced environment. Human capital makes the difference.

Today, half of our manufacturing workers are older than 45, and 8,000 Baby Boomers turn 60 every day across the U.S. Workforce development is job one, training younger workers to step into open positions without compromising productivity growth.

In short, the macroeconomics tell us that a wave of manufacturing reinvestment from China is headed towards our shores – but we need a new generation of tech-savvy workers to greet it. 

A month ago, Conexus Indiana and the Indiana Economic Development Corporation launched the Indiana Aerospace and Defense Council, a new industry-led initiative focused on making the state a more attractive destination for aerospace/defense investment, as well as helping existing companies in these sectors (and would-be contractors seeking to enter the market) be more competitive.

Over the past few weeks, this effort has moved forward quickly, organizing a statewide coalition of industry partners and soliciting input on critical issues like workforce needs and innovation.

Amid this activity, a new report from Ball State’s Center for Business and Economic Research shows why aerospace/defense was identified as such an important and promising segment of our manufacturing economy. According to economist Mike Hicks, Hoosier companies executed more than 9,000 Department of Defense and related federal contracts worth more than $4 billion last year, supporting more than 20,000 jobs.

The IEDC has further estimated that economic output from Indiana’s defense contractors more than doubled over the past decade, creating 1,800 new jobs since 2009.

Learn more about the Ball State report here, at Inside Indiana Business.

Indiana is more Main Street than Wall Street.  We aren't sitting on vast reservoirs of oil like Texas or North Dakota, and even though we're doing a better job attracting venture capital and producing high-tech innovation, we still aren't mistaken for Silicon Valley.

But our economy does have an advantage, a competitive edge that we're riding out of the trough of the last recession: Hoosiers continue to lead the way in engineering and producing durable goods, a fact that's reflected in recent state and regional Gross Domestic Product (GDP) data.

The Bureau of Labor Statistics released a regional look at GDP growth in 2010 last week, measuring economic activity by metropolitan area. For several Indiana cities, manufacturing continues to lead the recovery - durable goods manufacturing contributed 11.4 percentage points to the Elkhart-Goshen area, and more than 6 percentage points in Columbus and Kokomo. 

Nor was manufacturing’s effect confined to a few metropolitan areas. An earlier BLS study showed that Indiana’s GDP growth ranked third in the nation, behind only North Dakota (driven by a booming oil industry and no housing bubble to recover from) and New York (where Wall Street led the comeback). For Indiana, manufacturing was the catalyst – durable goods production contributed more to our GDP growth than any other state (2.3% of the 4.6% total increase).

Check out the state and regional GDP reports here and here, with coverage by Inside Indiana Business here.

Economic output from Indiana’s defense contractors more than doubled over the past decade; in the last two years alone, the Indiana Economic Development Corporation (IEDC) estimates that Hoosier defense and aerospace companies have created 1,800 new jobs.

A new industry-led forum organized by the IEDC and the Conexus Indiana manufacturing and logistics initiative aims to continue these positive trends, and make the state an even more attractive destination for aerospace and defense investment and employment. 

The Indiana Aerospace and Defense Council (IADC) held its first meeting Monday at the Governor’s Residence in Indianapolis, bringing together a group of industry leaders to begin creating a proactive strategic plan for growing this sector.

“We can be proud that Indiana-based companies are working together to bolster national security and support the military in our overseas commitments,” said Mitch Roob, Secretary of Commerce and chief executive officer of the Indiana Economic Development Corporation.  “As these firms help make our country safer, they’re also making our economy stronger.”

Four major defense contractors have operations in Indiana that, collectively, accounted for more than $2.6 billion in Department of Defense contracts in 2010 – AM General, Rolls-Royce, Raytheon, and ITT. 

“Indiana is a great place to do business, and we believe that the new Aerospace and Defense Council can help make it even better,” said Mark Rhodes, Rolls-Royce Vice-President of Engineering and Technology.  “We see opportunities to collaborate on common workforce needs, advocate for pro-growth public policy, and to encourage more supplier relationships in the state.”

Beyond the continued success of Indiana’s major aerospace and defense companies, the IADC will focus on broadening the state’s contractor base, helping smaller companies enter the market and compete for more contracts.

“For smaller contractors and suppliers to prime contractors, networking and knowledge are critical,” said Pete Bitar, President  of Xtreme Alternative Defense Systems, an Anderson-based firm that has pioneered ‘directed energy’ laser technologies with several military applications.  “We need venues to build relationships with potential partners and customers, and help navigating the procurement and contracting processes that exist with federal agencies – the Departments of Defense, Homeland Security, and NASA.

“If the IADC can provide these sorts of resources, it will quickly become a catalyst to diversify and grow Indiana’s defense and aerospace industries.”

The Indiana Aerospace and Defense Council is modeled after the successful Logistics Council created by Conexus Indiana in 2008.  The Logistics Council brought together industry leaders and solicited their input on a comprehensive strategic plan to strengthen the sector, and the IADC envisions a similar result with aerospace and  defense companies. 

“If you want a plan to help Indiana’s defense and aerospace companies be more competitive, you harness the expertise of industry first,” said Steve Dwyer, President & CEO of Conexus Indiana and former Chief Operating Officer of Rolls-Royce North America.  “These efforts work best not with academic studies, but with private sector leaders contributing ideas and working together to implement them.” 

The first meeting of the IADC included participants from AM General, Rolls Royce, Raytheon, ITT Communications, BAE Systems, Allison Transmission, Northrup Grumman, SAIC Inc., Tri Star Engineering, Ultra Electronics – USSI, Aero Engine Controls, Stimulus Engineering, Sherry Laboratories, Xtreme Alternative Defense Systems, Riverside Manufacturing, Praxair Surface Technologies, and Purdue University, along with representatives from the IEDC.

The IADC will be executed by Conexus with major funding from the IEDC, and staffed by Project Director Ryan Metzing, an Indianapolis attorney.  Courtney Zaugg, formerly Director of International Economic Development with DevelopIndy, will serve as Director of Industry Research for the Council.

Today, the largest Chinese business delegation ever to visit Indiana will take part in the Indiana-China Trade & Investment Symposium in Indianapolis at the J.W. Marriott today. The event is expected to attract more than 500 attendees of 250+ Chinese and Hoosier companies, and will feature remarks by Governor Mitch Daniels and Zhejiang Party Secretary Zhao Hongzhu.

This event represents another step forward in building stronger ties between the Hoosier State and China for the purposes of economic growth.  China is already Indiana’s fastest-growing export market. Last year’s U.S.-China Advanced Technology Vehicle Summit showed the tremendous potential for partnership between Indiana’s growing list of firms in the electric vehicle supply chain and China’s burgeoning EV sector (the country is projected to grow its global share of the electric vehicle market from 3% to 35% over the next decade).

Indiana scored an ‘A’ in this year’s Manufacturing and Logistics Report Card in the ‘Global Reach’ category – the state is attracting foreign investment at a record pace, and exporting more manufactured goods to every continent (except Antarctica). Developing relationships with growing international markets like China is key to continuing this momentum – the scope of the opportunity could be seen three years ago, as in this prescient editorial by CICP CEO Mark Miles, published in mid-2008:

Anticipating the wave of the future – Chinese foreign investment

Mark Miles

According to IBM’s annual Global Location Trends report, released last week, Indiana leads the nation in creating new jobs through foreign investment for the second consecutive year. It makes you think about the history behind some of our most valued international partnerships, and wonder how we can anticipate tomorrow’s opportunities…

Back in the 1980s, Americans watched with growing concern as Japanese manufacturers captured a growing share of our markets – in cars, consumer electronics and steel. There was an outcry against ‘unfair competition;’ publicity-seeking congressmen went so far as to smash Japanese-made TVs and radios on the Capitol lawn. Here in Indiana, Japan even became an issue in the 1988 campaign for Governor, with barbs about “giveaways” to Japanese companies. 

Fast forward twenty years, and the landscape has completely changed: Japanese investment is universally recognized as a fundamental strength of Indiana’s economy. Foreign firms employ more than 90,000 Hoosier manufacturing workers, with companies like Toyota, Honda and Subaru leading the way. The attraction of the Greensburg Honda plant is recognized as the signature economic development victory of Governor Daniels’ first term. 

Japan has turned from economic villain to valued partner. It’s an experience we should learn from as we look towards China, another Asian powerhouse that’s stirring protectionist fears. How can Indiana anticipate and take advantage of future investment from China, as its economy reaches the tipping point that Japan started to reach 20 years ago? I recently read an interesting report from Deloitte Consulting (“The Coming Investment Wave from China”) that starts providing some of the answers.

To be certain, with the country’s massive population and resources, Chinese companies are still focused on domestic growth, serving international customers through exports. But this is changing – in 2007, Chinese firms invested a record $37 billion in foreign countries, a 76% increase over 2006. In Zhejiang Province in eastern China, an epicenter of private development, nearly 900 private companies invested overseas in 2006.

According to the Deloitte report, the list of industries that will experience the first wave of Chinese foreign investment will be topped by the automotive sector, one of Indiana’s strong suits. Other key industries for overseas investment include pharmaceuticals and electrical equipment – other areas where Indiana has a significant base, existing workforce and fast-growing exports to China. 

The driving forces behind Chinese foreign investment are also likely to mirror the Japanese overseas wave, including the desire to get closer to customers and integrate distribution and supply chain functions. Indiana’s central geography and strong transportation infrastructure can serve us well in meeting these needs, just as with Japanese automakers and other international firms.

So what can Indiana do to stay ahead of the curve and maximize our potential for Chinese investment? 

Aggressive economic development efforts are critical, to forge connections that will serve us well in years to come. At the state level, Governor Daniels and the Indiana Economic Development Corporation have a proven track record of focused international outreach. In Indianapolis, Mayor Greg Ballard has taken a strong interest in Chinese culture and expressed an interest in future trade missions. 

We should also leverage Hoosier companies that are already operating in China with great success – like Columbus-based Cummins, which operates 21 sites and sees more than $2 billion in annual sales from China. Cummins’ global presence already adds tremendous value to Indiana’s economy, but could also help attract Chinese investment here in the future through its relationships and strategic alliances.

Building an infrastructure to accommodate future Chinese investment also means retaining a greater share of the Chinese-born or immigrated students currently pursuing their degrees at our universities. IU’s Chinese language program, which has grown 110% over the last six years and recently won a $120,000 federal grant to help high school teachers teach the language, is another key asset.

As with any new economic opportunity, the states and regions that are proactive will reap the greatest rewards as more Chinese companies begin to look outside their own borders to grow and serve global markets. Indiana can take the lead if we keep our collective eye on the ball, recall the lessons of Japan, and don’t let protectionist paranoia discourage us from seeking new investment and jobs.

Miles is President & CEO of the Central Indiana Corporate Partnership (CICP). Read more perspectives on Central Indiana’s economic opportunities at http://blog.cincorp.com/.

Conexus President & CEO Steve Dwyer continues to reinforce the need to upskill Indiana’s manufacturing workforce in this piece on Inside Indiana Business:

Indiana’s grade on manufacturing and logistics workforce: Incomplete.

Steve Dwyer – President & CEO, Conexus Indiana

Last month, Conexus Indiana and the Ball State Center for Business and Economic Research released our 2011 Manufacturing and Logistics Report Card. Each year, economists at Ball State pull together relevant economic data to ‘grade’ the vitality of Indiana’s manufacturing and logistics industries, analyzing a sector that collectively employ one of every four Hoosiers.

Manufacturing is leading Indiana’s economic recovery, and we score several A’s on this Report Card. We rank among the national leaders in per capita employment in both sectors. We benefit from a pro-growth tax climate, and are a winner in the global marketplace as measured by foreign investment and strong exports.

We’re barely average, however, in a critical area – Human Capital. The state’s ‘C’ grade is a step forward from last year’s C-, based on strong enrollment in community college programs and improved high school graduation rates. But Indiana’s adult population continues to rank among the least-educated in the nation, leaving Hoosier manufacturing and logistics firms struggling to find qualified applicants for available jobs as Baby Boomer workers leave the workforce in growing numbers.

This is especially troubling given the transition of manufacturing and logistics into the information-based economy. Once upon a time, employers grew their operations based on the availability of natural resources, proximity to other industrial centers and customers, and access to transportation infrastructure, with competitive tax and regulatory policies sweetening the pot. Indiana was well-positioned on all these, and prospered accordingly.

But global competition and market demands accelerated the push for productivity and innovation. The traditional assembly line (once a bold innovation in its own right) was gradually transformed by computerized equipment and robotic systems. Distribution centers evolved into modern supply chain operations, meeting the ‘just in time’ needs of customers around the world with track and trace technologies and enterprise management software.

As the industries changed, so did the jobs. And while location, infrastructure and business climate continue to be important factors, workforce readiness emerged as a top priority for growing companies. 

Manufacturing and logistics careers now demand advanced technical skills, technology savvy, troubleshooting and teamwork abilities. This means some education beyond high school – within the next decade, 60% of all jobs will require post-secondary education. The same trend holds true for manufacturing and logistics. Yet a recent study by Indiana University estimates that 60% of current Midwestern manufacturing workers have only a high school diploma, and Indiana’s plight is likely even worse.

So our ‘C’ grade in Human Capital does more than keep Indiana off the honor roll – it poses a direct threat to our competitiveness. We can (and do) have a great position as Crossroads of America, unparalleled access to highways, rail and maritime shipping, a strong manufacturing heritage, low taxes and an unprecedented hot streak on international investment. But if we aren’t preparing the next generation of Hoosier workers for high-tech manufacturing and logistics jobs, we’ll quickly lose our edge.

There’s a lot of good news in this year’s report. Indiana continues to rank among the most manufacturing and logistics-intensive states in the nation, helping us find our footing more quickly than many in this post-housing bubble, post-financial crisis economy. But it isn’t an exercise in self-congratulation – it’s a confirmation of the challenges we face in continuing to make and move products in the global knowledge economy.

The bottom line of this Report Card is clear – for Indiana’s younger workers, it’s time to head back to school and try to raise our manufacturing and logistics GPA.

(View the entire 2011 Manufacturing and Logistics Report Card at www.ConexusIndiana.com.)

Steve Dwyer is President & CEO of Conexus Indiana, an initiative focused on the workforce and other needs of the state’s manufacturing and logistics industries. He formerly served as Chief Operating Officer of Rolls-Royce North America.v 

Conexus President & CEO Steve Dwyer continues to reinforce the need to upskill Indiana’s manufacturing workforce in this piece on Inside Indiana Business:

Indiana’s grade on manufacturing and logistics workforce: Incomplete.

Steve Dwyer – President & CEO, Conexus Indiana

Last month, Conexus Indiana and the Ball State Center for Business and Economic Research released our 2011 Manufacturing and Logistics Report Card. Each year, economists at Ball State pull together relevant economic data to ‘grade’ the vitality of Indiana’s manufacturing and logistics industries, analyzing a sector that collectively employ one of every four Hoosiers.

Manufacturing is leading Indiana’s economic recovery, and we score several A’s on this Report Card. We rank among the national leaders in per capita employment in both sectors. We benefit from a pro-growth tax climate, and are a winner in the global marketplace as measured by foreign investment and strong exports.

We’re barely average, however, in a critical area – Human Capital. The state’s ‘C’ grade is a step forward from last year’s C-, based on strong enrollment in community college programs and improved high school graduation rates. But Indiana’s adult population continues to rank among the least-educated in the nation, leaving Hoosier manufacturing and logistics firms struggling to find qualified applicants for available jobs as Baby Boomer workers leave the workforce in growing numbers.

This is especially troubling given the transition of manufacturing and logistics into the information-based economy. Once upon a time, employers grew their operations based on the availability of natural resources, proximity to other industrial centers and customers, and access to transportation infrastructure, with competitive tax and regulatory policies sweetening the pot. Indiana was well-positioned on all these, and prospered accordingly.

But global competition and market demands accelerated the push for productivity and innovation. The traditional assembly line (once a bold innovation in its own right) was gradually transformed by computerized equipment and robotic systems. Distribution centers evolved into modern supply chain operations, meeting the ‘just in time’ needs of customers around the world with track and trace technologies and enterprise management software.

As the industries changed, so did the jobs. And while location, infrastructure and business climate continue to be important factors, workforce readiness emerged as a top priority for growing companies. 

Manufacturing and logistics careers now demand advanced technical skills, technology savvy, troubleshooting and teamwork abilities. This means some education beyond high school – within the next decade, 60% of all jobs will require post-secondary education. The same trend holds true for manufacturing and logistics. Yet a recent study by Indiana University estimates that 60% of current Midwestern manufacturing workers have only a high school diploma, and Indiana’s plight is likely even worse.

So our ‘C’ grade in Human Capital does more than keep Indiana off the honor roll – it poses a direct threat to our competitiveness. We can (and do) have a great position as Crossroads of America, unparalleled access to highways, rail and maritime shipping, a strong manufacturing heritage, low taxes and an unprecedented hot streak on international investment. But if we aren’t preparing the next generation of Hoosier workers for high-tech manufacturing and logistics jobs, we’ll quickly lose our edge.

There’s a lot of good news in this year’s report. Indiana continues to rank among the most manufacturing and logistics-intensive states in the nation, helping us find our footing more quickly than many in this post-housing bubble, post-financial crisis economy. But it isn’t an exercise in self-congratulation – it’s a confirmation of the challenges we face in continuing to make and move products in the global knowledge economy.

The bottom line of this Report Card is clear – for Indiana’s younger workers, it’s time to head back to school and try to raise our manufacturing and logistics GPA.

(View the entire 2011 Manufacturing and Logistics Report Card at www.ConexusIndiana.com.)

Steve Dwyer is President & CEO of Conexus Indiana, an initiative focused on the workforce and other needs of the state’s manufacturing and logistics industries. He formerly served as Chief Operating Officer of Rolls-Royce North America.

Indiana’s grade on manufacturing and logistics workforce: Incomplete.

Steve Dwyer – President & CEO, Conexus Indiana

Last month, Conexus Indiana and the Ball State Center for Business and Economic Research released our 2011 Manufacturing and Logistics Report Card. Each year, economists at Ball State pull together relevant economic data to ‘grade’ the vitality of Indiana’s manufacturing and logistics industries, analyzing a sector that collectively employ one of every four Hoosiers.

Manufacturing is leading Indiana’s economic recovery, and we score several A’s on this Report Card. We rank among the national leaders in per capita employment in both sectors. We benefit from a pro-growth tax climate, and are a winner in the global marketplace as measured by foreign investment and strong exports.

We’re barely average, however, in a critical area – Human Capital. The state’s ‘C’ grade is a step forward from last year’s C-, based on strong enrollment in community college programs and improved high school graduation rates. But Indiana’s adult population continues to rank among the least-educated in the nation, leaving Hoosier manufacturing and logistics firms struggling to find qualified applicants for available jobs as Baby Boomer workers leave the workforce in growing numbers.

This is especially troubling given the transition of manufacturing and logistics into the information-based economy. Once upon a time, employers grew their operations based on the availability of natural resources, proximity to other industrial centers and customers, and access to transportation infrastructure, with competitive tax and regulatory policies sweetening the pot. Indiana was well-positioned on all these, and prospered accordingly.

But global competition and market demands accelerated the push for productivity and innovation. The traditional assembly line (once a bold innovation in its own right) was gradually transformed by computerized equipment and robotic systems. Distribution centers evolved into modern supply chain operations, meeting the ‘just in time’ needs of customers around the world with track and trace technologies and enterprise management software.

As the industries changed, so did the jobs. And while location, infrastructure and business climate continue to be important factors, workforce readiness emerged as a top priority for growing companies. 

Manufacturing and logistics careers now demand advanced technical skills, technology savvy, troubleshooting and teamwork abilities. This means some education beyond high school – within the next decade, 60% of all jobs will require post-secondary education. The same trend holds true for manufacturing and logistics. Yet a recent study by Indiana University estimates that 60% of current Midwestern manufacturing workers have only a high school diploma, and Indiana’s plight is likely even worse.

So our ‘C’ grade in Human Capital does more than keep Indiana off the honor roll – it poses a direct threat to our competitiveness. We can (and do) have a great position as Crossroads of America, unparalleled access to highways, rail and maritime shipping, a strong manufacturing heritage, low taxes and an unprecedented hot streak on international investment. But if we aren’t preparing the next generation of Hoosier workers for high-tech manufacturing and logistics jobs, we’ll quickly lose our edge.

There’s a lot of good news in this year’s report. Indiana continues to rank among the most manufacturing and logistics-intensive states in the nation, helping us find our footing more quickly than many in this post-housing bubble, post-financial crisis economy. But it isn’t an exercise in self-congratulation – it’s a confirmation of the challenges we face in continuing to make and move products in the global knowledge economy.

The bottom line of this Report Card is clear – for Indiana’s younger workers, it’s time to head back to school and try to raise our manufacturing and logistics GPA.

(View the entire 2011 Manufacturing and Logistics Report Card at www.ConexusIndiana.com.)

Steve Dwyer is President & CEO of Conexus Indiana, an initiative focused on the workforce and other needs of the state’s manufacturing and logistics industries. He formerly served as Chief Operating Officer of Rolls-Royce North America.

Ivy Tech Community College President Tom Snyder penned this editorial in today’s Indianapolis Star about Hoosier manufacturing powerhouse Cummins – a company has that continued to invest and create jobs in Indiana, while at the same time dominating its global market and generating handsome returns for its shareholders.  Retired Cummins Vice-Chairman Joe Loughrey chairs Conexus Indiana, and the company has been a valued partner for the initiative since our inception.  Cummins demonstrates a far-sighted approach to addressing the manufacturing industry's human capital needs through its leadership of the Dream It. Do It. campaign in southeastern Indiana, among many other efforts.

Cummins helps power Indiana's economy

It may be a function of Hoosier modesty, or the old adage that admiration and familiarity are strangers, but it often takes an outsider's perspective to remind us about what's truly exceptional in our everyday lives. I was struck by this feeling leafing through Fortune magazine's latest annual Fortune 500 list.

At No. 186 was Cummins, the Columbus-based engine-maker. That's no surprise; Most of us are familiar with Cummins, and have some idea of its size and recent success. We regard Cummins as a valued partner in our effort at Ivy Tech Community College, as well as other organizations I'm involved with, like the Energy Systems Network and Conexus Indiana.

But as I read further, I was amazed by how this Indiana manufacturing stalwart stacks up against its peers.

From 2009 to 2010, Cummins climbed from No. 218 to No. 186 on the list of the nation's 500 biggest companies, boasting more than 22 percent growth in revenues. And that's just the beginning.

Over the past decade, Cummins boasts the best growth in profits of any U.S. company. An automotive manufacturer, outpacing dot-com juggernauts like eBay and Apple, insurance and health-care giants, biotech pioneers. It beats its nearest competitor by more than 10 percent in annual earnings-per-share growth. So it's no surprise that Cummins also represents the second-best investment for shareholders over the past five years.

Clearly, Cummins' growth is due to successive generations of visionary management willing to make aggressive moves. Cummins was a pioneer in exploring overseas markets in the 1960s, and today thrives in places like China, India and Brazil. The company also is on the cutting edge of green technologies: A Cummins engine powered the first diesel-electric hybrid truck in 2005; the company is a leader in putting hybrid busses on our streets, and a partner in the Energy Systems Network initiative to bring new energy innovations to market here in Indiana.

Through it all, Cummins has been unwavering in its commitment to southeastern Indiana. Over the past six years, the company has invested more than $300 million into new facilities and expansions in the region, projects that will account for more than 2,000 jobs.

Manufacturing is leading Indiana's economic recovery. While the nation as a whole suffers through a largely jobless recovery, manufacturing employment in Indiana has grown nearly 5 percent since the end of the recession. Clean technologies and renewable energy offer promising economic opportunities for our state. It's easy to forget that these macro-economic trends are based on the collective efforts of thousands of firms across the state, led by extraordinary businesses like Cummins.

Cummins has been a valued corporate citizen and a steady contributor to our state's economic growth, engaged in critical issues like workforce development. But even so, it sometimes takes a moment like reading the Fortune report to remind us of how fortunate we truly are to count Cummins among our home state headquarters.

In 1919, 40 years after Col. Eli Lilly decided to launch his own medical wholesale company 45 miles north in Indianapolis, a businessman named W.G. Irwin decided to help a self-taught mechanic named Clessie Cummins start his own diesel engine business. Out of such historical footnotes, economies are built -- and Cummins continues to support the vitality of Indiana's economy today.

Snyder is president of Ivy Tech Community College.

Yesterday, Governor Daniels marked the fifth anniversary of Major Moves, the massive infrastructure investment initiative made possible by the long-term lease of the Indiana Toll Road.  The Toll Road deal yielded $3.8 billion, nearly $3 billion of which was set aside in a special fund to finance critical highway, bridge and other infrastructure projects across the state.  Taken together with other planned projects, this gives Indiana an ambitious $12 billion, 10-year transportation strategy that will see more than 400 miles in new highways built by 2015, along with dozens of bridge and other improvement projects.

Conexus Indiana recognizes Major Moves as a strategic investment in the state’s logistics industry.  Indiana begins with an advantage that can’t be built or bought – a central location that puts us within a day’s truck drive of two-thirds of the nation’s people and businesses.  But without a first-rate transportation infrastructure, we squander this competitive advantage – Major Moves recognizes this fact and makes a long-term commitment.

What’s more, Major Moves has allowed Indiana to make these investments at a time when other states have retrenched due to the dire fiscal climate brought on by the national recession.  This has allowed Indiana to solidify our position as a national (and global) logistics hub. 

(Conexus Indiana releases an annual Manufacturing and Logistics Report Card that assesses the strengths and challenges of these industries – in 2011, Indiana scored an ‘A’ in Logistics for the first time, due in large part to continued movement up the state rankings in infrastructure investment.)

As Governor Daniels noted early in his term, “Government doesn’t create jobs – it creates the conditions that make jobs more likely.” While businesses survive and thrive largely based on the competition of the marketplace, public policy does matter – and Major Moves certainly has to our logistics sector.

Tom Easterday, the Executive Vice-President of Subaru of Indiana Automotive Inc, is “very concerned” about the state of Indiana’s manufacturing workforce, according to an interview with Inside Indiana Business.  Easterday’s comments provide yet another confirmation of the growing middle-skill workforce gap that Hoosier manufacturers are confronting – and come as Subaru continues to grow its operations in Tippecanoe County.  Check out the interview by clicking below:

(A version of this column was published in this week's Indianapolis Business Journal.)

To many economists, job creation is a matter of simple math: When the cost of hiring is exceeded by the employee’s expected output, the company will make the logical decision to expand.

So when it comes to putting more Hoosiers to work, it stands to reason that policymakers and industry leaders should work together to reduce the costs of employment in Indiana’s largest economic sector – manufacturing and logistics. 

Each year, Conexus Indiana works with Ball State’s Center for Business and Economic Research to release a Manufacturing and Logistics Report Card that assesses the state’s strengths and weaknesses in these industries, and how we stack up against other states.  This analysis gives us a sense of where our costs represent a competitive advantage – tax climate, worker’s compensation – and where they present potential barriers to employment – health premiums and long-term health costs, for example.

But by far most companies’ largest cost, and largest source of productivity and innovation, are their employees.  In this area of the Report Card, Human Capital, Indiana scores a ‘C’ based on our disappointing overall educational attainment rankings and middling high school graduation rates.  Human capital currently represents a threat to our future prosperity – but also can be a big opportunity to reduce costs and spur growth.

Over the last several decades, manufacturers and logistics firms have invested heavily in new technologies – like robotic automation, computerized equipment and supply chain management systems – to make their operations more efficient, productive, and globally competitive.  So new jobs being created by these employers demand increasingly advanced technical skills, problem-solving and teamwork savvy, to succeed in a modern factory.

With more and more Baby Boomers retiring from the workforce, manufacturers are finding the need for a whole new generation of employees with these skills.  But there are two issues complicating this task: First, too many younger Hoosiers fail to pursue vocational education beyond high school.  Second, there’s a tendency on the part of the companies themselves to embrace an insular approach to training. 

The educational attainment issue has been well-chronicled.  Indiana ranks 31^st among states in the percentage of our adult population with a high school degree or higher, and in the bottom half of states in younger workers with associates degrees (especially troubling given the large percentage of ‘middle skill’ manufacturing jobs that require a certificate or two-year degree).

But instead of getting engaged to solve to educational challenges faced by the state, too many employers seem resigned to finding their own narrow solutions.  Conexus Indiana recently conducted a statewide survey of manufacturing and logistics companies that illustrates this outdated attitude:  Nearly 70% of respondents indicated that they do not require education beyond a high school diploma or GED for hiring.  (A recent study from Indiana University notes that more than half of Midwestern manufacturing employees have only a high school diploma.)  Companies are shouldering the burden for training their own employees in-house – an inefficient and costly proposition for individual firms.

Third-party certifications exist – the Manufacturing Skills Standards Council’s Certified Production Technician, the Society of Manufacturing Engineers, the American Welding Society – and are well-regarded in many circles.  But in our survey, half of employers indicate that they don’t often use them for hiring purposes, saying that they don’t know enough about the programs, that they don’t reflect the skills needed for the jobs available, and that not enough applicants have these credentials to start with – a dismal trifecta.

This is our challenge – getting industry involved, aggressively soliciting their input to create a consistent, relevant system of industry credentials that meet their needs.  Such a system will reduce the need for expensive in-house training programs, cutting the costs of preparing employees for work.  And when it becomes known that employers truly value these industry certifications and base hiring decisions on them, it will be much easier to encourage young people to enroll – helping address Indiana’s educational attainment issue and raise the state’s ‘Human Capital’ grade.

Once again, it’s basic economics: If you raise the cost of something, you’ll get less of it.  Lower the cost, produce more.  In this case, creating meaningful credentials that truly meet the needs of industry allow employers to hire with greater confidence while spending less on training – and by cutting the cost of employment, we’ll help create more manufacturing jobs for Hoosiers.

While economists worry about a ‘jobless recovery’ nationally, here in Indiana manufacturing employment has risen nearly 5% since the end of the recession – but how do we keep this momentum going?

On Friday, Conexus Indiana and the Ball State Center for Business and Economic Research released the 2011 Manufacturing and Logistics Report Card, an annual analysis of the strengths, challenges and opportunities from two of the state’s most critical industries.

The Report Card predicts a ‘record year’ for Indiana manufacturing, noting that the state ranks among the national leaders in per capita employment in both manufacturing (2^nd among states) and logistics (9^th).  It credits strong export growth and foreign investment, a competitive tax climate and big productivity gains, but warns that our weakness in education/workforce readiness along with rising healthcare costs could jeopardize future success.

Download the 2011 Report Card here, and check out the press release below:

Indiana scores ‘A’s on 2011 Manufacturing & Logistics Report Card, but poor showing on workforce threatens future growth

(INDIANAPOLIS, Ind., June 10, 2011)  Conexus Indiana and the Ball State Center for Business and Economic Research today released the 2011 Indiana Manufacturing and Logistics Report Card, an annual “grading” of the strengths, challenges and opportunities impacting the two industries that collectively employ nearly one of every four Hoosiers.

This year’s Report Card confirms that Indiana’s strengths in ‘making and moving’ products have buoyed the state’s economic recovery.  Indiana continues to rank among the top tier of states in manufacturing and logistics employment, and Ball State economists predict that the next 12 months will be a “record year” for manufacturing in the state.  Indiana's manufacturing employment has risen by 4.6% since the end of the recession.

The Report Card gives Indiana overall ‘A’ grades in Manufacturing Industry (ranking first among states in share of the economy focused on manufacturing), Logistics Industry, Global Position (measuring manufacturing exports and foreign investment) and Tax Climate.  The educational attainment of the Hoosier workforce, however, continues to be a long-term concern.

The state’s ‘C’ grade in Human Capital is a step forward from last year’s C-, based on strong enrollment in community college programs and improved high school graduation rates.  But Indiana’s adult population continues to rank among the least-educated in the nation, leaving Hoosier manufacturing and logistics firms struggling to find qualified applicants for jobs that demand increasingly advanced skills.

“This year’s Report Card reiterates that Indiana must do a better preparing the next generation of manufacturing and logistics workers,” said Steve Dwyer, Conexus Indiana’s President & CEO.  “Today’s jobs aren’t about standing at assembly lines – they’re about running computerized equipment and robotic systems, about teamwork and problem-solving.

“We have to give introduce young Hoosiers to these careers early on, and give them opportunities to acquire the skills they need at all levels to create the pipeline of talent that manufacturing and logistics employers need to grow.”

As the state’s manufacturing and logistics initiative, Conexus Indiana is working with its corporate and academic partners to develop industry-endorsed educational programs, and marketing the careers to young people through its ‘Dream It. Do It.’ marketing campaign (at www.DreamItDoItIndiana.com).

The state’s ‘A’ in Logistics Industry was a first in the four-year history of the Report Card, up from a B+ in 2010 based on stronger infrastructure investment relative to other states.  Conexus Indiana has prioritized and advocated for critical investments through its Indiana Logistics Council, an industry forum that gathers input from logistics employers across the state.

“Indiana starts with a competitive advantage in logistics based on our position as the ‘Crossroads of America,’” Dwyer noted.  “But we have to keep making smart choices to keep our edge.”

Other key findings from the 2011 Indiana Manufacturing and Logistics Report Card:

·         Indiana ranks second among states in per capita manufacturing employment and 9^th in logistics employment;

·         Indiana ranks first in per capita income derived from foreign-owned manufacturing operations, 9^th in manufacturing exports per capita and 13^th in export growth;

·         Indiana scored a ‘C-’ in Benefit Costs, based on poor rankings in healthcare and fringe benefit costs;

·         Indiana generally ranks in the top tier of states in terms of tax rates – and the recently-enacted corporate income tax cut should bolster the state’s current ranking of 21^st in corporate taxes;

·         The state’s ‘C’ grade in Productivity and Innovation represents a mixed-bag of indicators, with strong rankings in manufacturing productivity (9^th) and R&D investment (15^th) offset by poor performance in patents-per-capita (32^nd);

·         With rankings of 31^st in percentage of the workforce with a high school diploma or greater, 42^nd in college-educated workers, and 26^th in younger workers with a two-year degree, human capital remains Indiana’s biggest long-term hurdle to future manufacturing and logistics growth.

“This year’s analysis shows that Indiana is clearly still a manufacturing state that is taking advantage of its central location and pro-growth business climate,” said Michael Hicks, Director of the Ball State Center for Business and Economic Research and primary author of the Report Card.  “But I’d echo the warning that every investor has heard – ‘Past performance is no guarantee of future results.’ Policymakers need to focus on areas like workforce development and healthcare costs to maintain our competitiveness.”

Launched by the Central Indiana Corporate Partnership, Conexus Indiana is the state’s advanced manufacturing and logistics initiative, dedicated to making Indiana a global leader.  Conexus is focused on strategic priorities like workforce development, creating new industry partnerships and promoting Indiana’s advantages in manufacturing and logistics.  Learn more at www.ConexusIndiana.com.

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Last Thursday’s edition of the Muncie Star Press included an interesting article, “Midwestern states see rebirth of manufacturing,” detailing the growth of manufacturing leading the economic recovery, and the diversification of the sector in communities like Muncie – where renewable energy components (Brevini Wind and Mursix) and locomotive manufacturers now thrive alongside the traditional automotive supply chain.

But economists from both Indiana University and Ball State leaven this optimism with cautionary notes about the weakness of the manufacturing workforce.  They assert that the poor educational attainment of Indiana’s adult population means that growing companies may not be able to find enough qualified applicants with the advanced skills needed to succeed in today’s high-tech factories and supply chain operations.

A recent IU report on Midwestern manufacturing states that 60% of manufacturing workers in Indiana, Michigan and Ohio – three of the nation’s most industrial states – have only a high school diploma.  This brings to mind two observations:

First, we must work to change this number.  The technical skills needed to operate cutting-edge computerized equipment and robotic systems, the communication and problem-solving skills needed to work in today’s team environment, simply can’t be fully taught at the high school level.  They require education beyond 12^th grade – vocational training, an industry certificate or even a two-year degree.  Conexus Indiana is working with industry and our higher education partners to develop relevant programs that meet these needs.

Second, we have to do more in high school to prepare graduates for manufacturing and logistics careers.  Even though a high school graduate may not be prepared to succeed in the workplace from day one, they can acquire the foundational skills that will prepare them for further training to become a productive employee.  Conexus is also working towards a high school manufacturing and logistics curriculum that conveys these basic skills, developed from statewide industry input.