A new partnership with a national group will accelerate Indiana’s efforts to prepare young Hoosiers for high-tech careers in manufacturing and logistics.  The Manufacturing Institute (the non-profit research and educational arm of the National Association of Manufacturers) has announced a partnership with Conexus, Ivy Tech Community College, and our other four-year public universities to create nationally-portable manufacturing credentials.

Under the partnership, Conexus continues to act as the vital connection between industry and higher education, gathering feedback from employers to ensure that educational programs will teach the right skills and be relevant to available positions.  We’ve created a ‘skills template’ based on this input that has already been adopted by the Indiana Department of Education and Commission for Higher Education as the basis for future curricula in manufacturing and logistics.

The Manufacturing Institute brings a national perspective through its Manufacturing Skills Certification System, which also focuses on the core skills required by entry-level workers in fast-growing manufacturing industries like electronics, aerospace and pharmaceuticals.

By incorporating the nationally-based Skills Certification System as well as Indiana-specific industry insight into Ivy Tech’s statewide manufacturing curriculum and other higher education offerings, Indiana will be well-positioned to attract new manufacturing investment and grow the businesses that have already made us the most manufacturing-intensive state in the nation.  Manufacturers rank human capital and finding qualified applicants as top priorities, often struggling to fill open positions even during the economic recession due to a shortage of skilled workers.

Indiana becomes the 5^th state to adopt the Manufacturing Skills Certification system, moving forward aggressively in our efforts to build a world-class workforce.  The effort is supported by a $650,000 grant by the Lumina Foundation for Education (also based in Indianapolis).

Read more here.

A recent article in USA Today tracks an emerging trend among some U.S. companies – the “onshoring” of manufacturing operations from overseas back to the United States.  The piece (‘Some manufacturing heads back to USA’) reports on recent moves by companies like General Electric, Ford Motor Company, Caterpillar and NCR that are moving manufacturing work back from countries like China, India and Mexico.

The companies cite a number of reasons behind the nascent onshoring trend – rising wages in China (recently reported on this blog), poor quality from suppliers, the threat of intellectual property theft and the logistical complexities that come from a global supply chain (which can limit customer responsiveness).

This trend bears watching.  In June, Deloitte Consulting and the U.S. Council on Competitiveness released the annual Global Manufacturing Competitiveness Index for 2010.  The study (based on a survey of 400+ manufacturing CEOs worldwide) ranked access to educated workers capable of supporting innovation as by far the biggest determinant of success.  If the United States can successfully re-energize our technical education system and maintain a skilled workforce and innovation advantage, the onshoring movement should continue to gain momentum.

Indiana also stands to reap the benefits as well, with our inherent logistics advantages, strong manufacturing base, and leadership in exports and foreign direct investment.  Indiana has been a winner in globalization: If foreign manufacturers find the Hoosier State such a hospitable place to locate operations (and Indiana has led the nation in manufacturing jobs created by international companies two consecutive years), then we should be well-positioned to compete for U.S. corporate investment as companies look to relocate closer to home.

Trucks and commuters traveling through the greater Louisville area, including the southern Indiana communities of Jeffersonville and New Albany, frequently encounter bottlenecks that create long delays and threaten to strangle the economic potential of the region.

Thousands of I-65 travelers rely on the Kennedy Bridge, which is over 50 years old and under-maintained. Across the Ohio River in downtown Louisville lies “Spaghetti Junction”—where I-65, I-64 and I-71 merge—an interchange so congested it was recently named the nation’s 11^th worst bottleneck by the American Transportation Research Institute and the Federal Highway Administration.

Recognizing the need for improved infrastructure over the river, Indiana Governor Mitch Daniels and Kentucky Gov. Steve Beshear forged the Louisville and Southern Indiana Bridges Authority, a bi-state entity charged with financing and constructing two new bridges and redesigning Spaghetti Junction. Conexus Indiana identified this area as an item of vital importance for Indiana’s logistics future, and has been involved in encouraging progress on the Ohio River Bridges Project. The project is one of the nation’s largest transportation projects, also listed in a Presidential decree as one of the federal government's priority transportation projects.

As the logistics industry continues to grow in both states, the delays created at Spaghetti Junction and the Kennedy Bridge become more and more costly. Thousands of employers and hundreds of thousands of people throughout the Midwest depend on the interstates and bridges that run through Southern Indiana and Louisville. A pinch point such as the one that exists today puts too much of a strain on the bottom lines of essential businesses such as UPS, Ford, Toyota, and many others, and creates a major economic hurdle for Indiana, Kentucky, and other neighboring states.

More details on the Ohio River Bridges and their impact on the region can be seen in this video from The Bridges Coalition, a non-profit organization founded by business and economic development leaders in Southern Indiana and Louisville to encourage swift completion of the project.

The looming skill shortage in manufacturing and logistics has been well-documented in this blog – filling this gap is Conexus Indiana’s primary strategic objective, as we work to promote the careers available in these sectors while helping create ‘industry-approved’ educational programs that will prepare young Hoosiers to take advantage of these (often high-paying) opportunities.

We recently pointed out an article in the New York Times that offered a national perspective on this issue, chronicling the difficulties of manufacturers searching for qualified applicants to fill open positions, even as unemployment remains high.  Today’s manufacturing jobs require specialized technical skills, high-tech savvy and critical thinking abilities…a high school diploma, as we’ve said repeatedly, just won’t cut it.

Now comes another excellent piece in the Wall Street Journal on the struggles of employers to find the right human capital to match their growth plans.  As the chart below (reproduced from the Journal) shows, manufacturing has the largest gap between open positions and actual new hires over the last year:

This is an interesting story from the Indianapolis Star on the recent LogistXGames competition for employees of area logistics companies held on the north side of Indianapolis recently.  The piece illustrates the camaraderie and teamwork that develop in the fast-paced world of Indiana logistics, where Hoosiers work to find the best way to move millions of tons of freight across the state and around the world every year.

A true logistics competition should also measure technology skills as well as critical thinking abilities – two essential qualities for logistics workers today.

Manufacturing is an increasingly high-tech, innovative industry – it’s obvious walking through any modern factory, seeing the proliferation of computers and advanced robotic systems across the plant floor.  At Conexus Indiana, we hear it from our industry partners, who need employees with more advanced technology skills and problem-solving acumen to navigate these 21^st century facilities.

Now comes information from the National Science Foundation that reinforces the ‘high-tech’ assertion:  According to the latest NSF data, the manufacturing sector continues to lead the U.S. and the world in research and development investment.  Manufacturing industries spent $236 billion on R&D in 2008 worldwide, and $136 billion here in the United States – more than twice the investment of all ‘non-manufacturing’ industries combined.

R&D is an investment in new product development, in new and improved processes and technologies to enhance productivity and quality.  As long as manufacturers are investing heavily in innovation, the industry will continue to be on the cutting-edge of the knowledge-based economy – and a truly high-tech sector.

The Ports of Indiana is working to expand foreign trade zones around its maritime ports in Burns Harbor (northwest Indiana), Mount Vernon (near Evansville) and Jeffersonville.  With federal approval, businesses in these areas would be eligible for an expedited approval process to receive trade zone status within thirty days. 

Participating in foreign trade zones give businesses a variety of advantages in international trade, namely the elimination of certain duties and streamlined customs processing.

If the applications submitted by the Ports of Indiana are approved, Indiana would be one of the first states offering the faster approval process.

On the heels of the Brookings Institute’s ranking of the Indianapolis metro as a top twenty export region and the state’s ‘A’ grade in Global Position in the 2010 Manufacturing and Logistics Report Card, this proactive approach by the Ports shows that Indiana is solidly committed to competing – and winning – in the world economy.

U.S. manufacturing is leading the nation out of recession with a full year of positive growth, even as the construction and housing markets continue to struggle.

The latest report from the Institute for Supply Chain Management showed July marked the 12^th straight month of expansion for the manufacturing sector.  Manufacturing employment has also grown faster than many analysts expected, good news that helped spark a modest Wall Street rally on Monday.  (See this story in the Indianapolis Star for more analysis.)

This data dovetails with the Indiana-specific economic forecast included in the Conexus Manufacturing and Logistics Report Card, which predicts that the state’s total manufacturing compensation will grow by nearly $2.5 billion over the second half of 2010 and 2011.

The future looks bright for manufacturing nationally and especially here in Indiana, the most manufacturing-intensive state in the union, as we focus on fast-growing markets like electric vehicles and medical devices. 

The question that Conexus Indiana is focused on is this – as Hoosier manufacturers seek to expand, will they be able to find the skilled workers they need to grow and remain competitive?

Companies in the Indianapolis region are a collective powerhouse when it comes to getting their products into the hands of customers across the globe, according to a new report from the Brookings Institution.

The Indianapolis metropolitan area ranks 20^th among the top 100 metros in the value of exports produced in 2008 (the latest year with available data), and among the top ten (9^th) in the share of regional economy that’s attributable to exports. 

In this globalized era, exports are a key indicator of economic strength, and also show the continued vitality of Central Indiana’s manufacturing and logistics sectors.  The top three export industries in the Indianapolis region are pharmaceutical manufacturing, transportation equipment manufacturing and machinery manufacturing.  Companies like Eli Lilly, Rolls-Royce, Allison Transmission, Carrier Corporation and many more are aggressively pushing their goods into international markets.

The Brookings report notes that countries like China, Brazil and India represent the greatest opportunities for international export growth.  China is already the fastest-growing destination for Indiana exports, and recent efforts like the Energy Systems Network’s U.S.-China Advanced Technology Vehicle Summit in Indianapolis bodes well for Hoosier exports of high-tech automotive components into the Chinese market.  It’s also worth noting that Indianapolis places among the top ten metros in chemical (primarily pharma) exports to India.

Getting goods from the factory to the customer also demands a strong logistics sector, another competitive advantage for the Indianapolis metro.  World-class highway, rail and air infrastructure supported by an agile network of third-party logistics providers helps fuel the region’s export growth.

Conexus Indiana is working to expand our regional logistics capabilities even further.  We recently convened a meeting of the region’s airport directors to explore partnerships and policy changes needed to grow air freight capacity, and we’re working with the Indiana Economic Development Corporation, Ports of Indiana and CSX to expand intermodal rail service at the Avon railyards in Hendricks County.

Central Indiana’s export prowess is a positive sign, but we have to continue to work hard to maintain the region’s – and the state’s – position as a place with an economy powered by making and moving goods.

View the Indianapolis Star’s coverage of the Brookings report here, and download the full study by clicking here.

Political gridlock in Washington has led to a fiscal scenario that hasn’t been seen in over three decades – for the first time since the mid-1970s, the U.S. House of Representatives is unlikely to pass a comprehensive federal budget for 2011, relying instead on short-term budget resolutions. 

Election year maneuvering and the political consequences of facing up to the growing budget deficit are the driving forces behind the lack of a budget from Congress.  Unfortunately, simply coasting forward without a comprehensive budget plan could jeopardize strategic infrastructure investments – like new funding to repair Midwestern locks and dams along the Ohio and Mississippi Rivers and the Great Lakes.

Maritime shipping is vital to Indiana’s logistics industry; the state ranks 14^th in waterborne freight.  The three Hoosier ports along the Ohio River and lake Michigan saw 7% growth in freight tonnage in 2009 despite the economic recession.  Our waterways are an important transportation link, helping export agricultural products, steel, and other commodities and manufactured goods while bringing in raw materials to fuel our industrial economy.

Unfortunately, antiquated locks and dams put this flow of goods at risk.  The average age of locks and dams on the Ohio River is nearly 50 years old, and repairs and mechanical breakdowns put them out of commission for a collective 6,560 days in 2007 (I wrote about a notable 2009 failure at Markland Dam here).  To the north, the Soo locks and dams provide a critical link in the Great Lakes system; this infrastructure is more than forty years old and poorly designed for modern vessels (ships often become misaligned in the approach channel and strike the walls).

Improvements to the lock and dam system have already fallen victim to delays.  The Olmstead Lock and Dam construction project on the Ohio River near the Illinois/Kentucky border was recently pushed back, with completion scheduled for 2020 instead of 2014.  The six-year delay will result in an estimated $2.7 billion in lost transportation benefits. 

Both the Soo and Olmstead locks and dams are in jeopardy of catastrophic failure that would effectively bring much of Indiana’s maritime freight flow to a standstill.

Given the importance of navigable waterways to our transportation system, and its importance in turn to our logistics and manufacturing industries, further delays and funding uncertainties have very real economic consequences.  Our message to Congress is clear – don’t let political gridlock in Washington lead to freight gridlock in Indiana and across the Midwest.

(Here is a letter from the leadership of the Indiana General Assembly to the state’s congressional delegation, urging action on this important issue.)

Factory Jobs Return, but Employers Find Skills Shortage

By MOTOKO RICH

BEDFORD, Ohio — Factory owners have been adding jobs slowly but steadily since the beginning of the year, giving a lift to the fragile economic recovery. And because they laid off so many workers — more than two million since the end of 2007 — manufacturers now have a vast pool of people to choose from.

Yet some of these employers complain that they cannot fill their openings.

Plenty of people are applying for the jobs. The problem, the companies say, is a mismatch between the kind of skilled workers needed and the ranks of the unemployed.

Economists expect that Friday’s government employment report will show that manufacturers continued adding jobs last month, although the overall picture is likely to be bleak. With the government dismissing Census workers, more jobs might have been cut than added in June.

And concerns are growing that the recovery could be teetering, with some fresh signs of softer demand this week. A central index of consumer confidence dropped sharply in June, while auto sales declined from the previous month.

Pending home sales plunged by 30 percent in May from April as tax credits for home buyers expired. Fretting that global growth is slowing, investors have driven stock indexes in the United States down to their levels of last October, for losses as great as 8 percent for 2010.

As unlikely as it would seem against this backdrop, manufacturers who want to expand find that hiring is not always easy. During the recession, domestic manufacturers appear to have accelerated the long-term move toward greater automation, laying off more of their lowest-skilled workers and replacing them with cheaper labor abroad.

Now they are looking to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math proficiency than was previously required of the typical assembly line worker.

Makers of innovative products like advanced medical devices and wind turbines are among those growing quickly and looking to hire, and they too need higher skills.

“That’s where you’re seeing the pain point,” said Baiju R. Shah, chief executive of BioEnterprise, a nonprofit group in Cleveland trying to turn the region into a center for medical innovation. “The people that are out of work just don’t match the types of jobs that are here, open and growing.”

The increasing emphasis on more advanced skills raises policy questions about how to help low-skilled job seekers who are being turned away at the factory door and increasingly becoming the long-term unemployed. This week, the Senate reconsidered but declined to extend unemployment benefits, after earlier extensions raised the maximum to 99 weeks.

The Obama administration has advocated further stimulus measures, which the Senate rejected, and has allocated more money for training. Still, officials say more robust job creation is the real solution.

But a number of manufacturers say that even if demand surges, they will never bring back many of the lower-skilled jobs, and that training is not yet delivering the skilled employees they need.

Here in this suburb of Cleveland, supervisors at Ben Venue Laboratories, a contract drug maker for pharmaceutical companies, have reviewed 3,600 job applications this year and found only 47 people to hire at $13 to $15 an hour, or about $31,000 a year.

The going rate for entry-level manufacturing workers in the area, according to Cleveland State University, is $10 to $12 an hour, but more skilled workers earn $15 to $20 an hour.

All candidates at Ben Venue must pass a basic skills test showing they can read and understand math at a ninth-grade level. A significant portion of recent applicants failed, and the company has been disappointed by the quality of graduates from local training programs. It is now struggling to fill 100 positions.

“You would think in tough economic times that you would have your pick of people,” said Thomas J. Murphy, chief executive of Ben Venue.

How many more people would be hired if manufacturers could find qualified candidates is hard to say. Since January, they have added 126,000 jobs, or about 6 percent of those slashed during the recession. The number may understate activity somewhat, as many factories have turned to temporary workers.

Christina D. Romer, chairwoman of the Council of Economic Advisers, said the skills shortages reported by employers stem largely from a long-term structural shift in manufacturing, which should not be confused with the recent downturn. “I do think that manufacturing can come back to what it was before the recession,” she said.

Automakers, for example, have been ramping up and mainly filling slots with people laid off a year or two ago.

Manufacturers who profess to being shorthanded say they have retooled the way they make products, calling for higher-skilled employees. “It’s not just what is being made,” said David Autor, an economist at the Massachusetts Institute of Technology, “but to the degree that you make it at all, you make it differently.”

In a survey last year of 779 industrial companies by the National Association of Manufacturers, the Manufacturing Institute and Deloitte, the accounting and consulting firm, 32 percent of companies reported “moderate to serious” skills shortages. Sixty-three percent of life science companies, and 45 percent of energy firms cited such shortages.

In the Cleveland area, historically a center of metalworking and rubber production, more than 40,000 manufacturing workers lost their jobs in the recession, a 21 percent decline, according to an analysis of employment data by Cleveland State University. Since the beginning of the year, the region has added 4,500 positions.

Employers say they are looking for aptitude as much as specific skills. “We are trying to find people with the right mindset and intelligence,” said Mr. Murphy.

Ben Venue has recruited about half its new factory hires from outside the pool of former manufacturing workers. Zachary Flyer, a 32-year-old Army veteran, had been laid off from a law firm filing room when he applied at the drug maker last summer.

He spent four months this year learning how to operate a 400-square-foot freeze dryer that helps preserve vials of medicine. Monitoring vacuum pressure and temperatures on a color-coded computer screen with flashing numbers, Mr. Flyer said last month that he preferred his new work to the law firm, where he had spent seven years.

“I like jobs that are more hands-on, as opposed to watching paperwork all day,” he said.

Local leaders worry that the skills shortage now will be exacerbated once baby boomers start retiring. In Ohio, officials project that about 30 percent of the state’s manufacturing workers will be eligible for retirement by 2016.

“The new worker of tomorrow is in about sixth grade,” said John Gajewski, executive director of the advanced manufacturing, engineering and apprenticeship program at Cuyahoga Community College in downtown Cleveland. “And they need training to move into manufacturing.”

At Astro Manufacturing and Design, a maker of parts and devices for the aerospace, medical and military industries, Rich Peterson, vice president for business development, recently gave a tour to a group of eighth graders.

He showed off surgical simulators and torpedo parts, saying he wanted them to see the “cool” things the company makes. By the end of the tour, more than a third of the students said they might consider working at a place like Astro, which is based in Eastlake and has five plants in the Cleveland area.

For now, the company urgently needs six machinists to run what are known as computer numerical control — or CNC — machines. An outside recruiter has reviewed 50 résumés in the last month and come up empty.

The jobs, which would pay $18 to $23 an hour, require considerable technical skill. On an afternoon last month, Christopher Debruycker, 34, was running such a machine, the size and shape of a camper van parked on the factory floor.

Mr. Debruycker, who has been an operator for 15 years, had programmed the machine to carve an intricate part for a flight simulator out of a block of aluminum, and he monitored its progress on a control pad with an array of buttons.

“We need 10 more people like him,” Mr. Peterson said.

Recent data from Gallup shows U.S. “underemployment” at 18.3% for June.  This is a new low for 2010, and is therefore good news, reflecting the positive economic momentum.  But it also leads us to ask – what exactly is underemployment?

Gallup arrives at the ‘underemployed’ statistic by combining unemployed (those out of work – 9.2% of the labor force) with those working part-time but looking for full time jobs (9.1%).  Clearly the latter category include the working poor – those struggling to get by at a near minimum-wage job, or jobs.

It makes us think about how clear the division really is between those who are working and those who are unemployed.  Maybe it’s time to start paying more attention to the third category – those who have found work but are barely getting by, and need help to climb a few rungs higher on the employment ladder.

Education is the surest route to expanding career choices; the U.S. Bureau of Labor Statistics projects that more than half of all new jobs created over the next five years will require at least some college education.  The positions available to those with a high school diploma or less will be primarily lower-wage, higher-turnover positions in the service sectors.

Nearly a million Hoosiers are stuck in this category, high school graduates (or dropouts) without the more advanced skills necessary to compete in the 21^st century job market.  Even if they’re employed, they’re likely to fall into the ‘underemployed’ category – struggling with low wages and few opportunities for advancement.

Conexus Indiana is focused on creating a system that gets young people interested in high-tech careers in manufacturing and logistics, while communicating to them loud and clear that these positions demand post-high school training.  In doing so, we try to pull them along into industry-approved educational programs that leave them well-positioned to take advantage of the jobs being created by the recovering economy and new market opportunities like electric vehicles, or being vacated by retiring Baby Boomers.

Our efforts are aimed towards making Indiana’s two cornerstone industries even more globally competitive, productive and innovative.  But more broadly, we’re pleased to be part of what needs to be a more aggressive move to lift Hoosiers from the ranks of the underemployed to fully-invested in our knowledge-based economy.

Indiana’s manufacturing sector has gotten better at churning out an important product recently – new jobs for Hoosiers.

Last week, the Wall Street Journal reported that Indiana leads the nation in job creation this year, buoyed by  industrial growth.  A closer look at data provided by the state’s Department of Workforce Development shows that we’ve added nearly 12,000 new manufacturing jobs in 2010 (only the broad ‘professional business services’ category has added more positions).

This trend is consistent with the economic forecast released by Conexus Indiana as part of our annual Manufacturing and Logistics Report Card – economists from the Ball State Bureau of Business and Economic Research predicted a sharp manufacturing recovery during the second half of 2010 and 2011.  The state’s total manufacturing compensation is projected to grow by nearly $2.5 billion during this period, after falling or staying flat since mid-2007.

Once again, reports of manufacturing’s demise were greatly exaggerated:  The recession took its toll, but every downturn brings a recovery.  The domestic auto industry suffered plummeting sales, bankruptcies and bailouts – but Indiana has attracted international auto plants and seized high-tech opportunities in electric vehicles.  Global competition has challenged U.S. manufacturers – but Indiana has led the nation in attracting foreign manufacturing jobs.  Traditional jobs have disappeared – but high-skill manufacturing careers have emerged.

In short, every challenge is also an opportunity, and Indiana’s heritage of manufacturing strength and innovation prepared us to take advantage.

Recent positive stories like Chrysler’s $300 million investment in its Kokomo plants, EnerDel’s plans to double job creation in Central Indiana, and the recent acquisition of the vacant Delco Remy factory in Anderson by S&S Steel aren’t just isolated announcements, but part of a broader growth trend.  And it’s even more remarkable because we’re starting from a higher plateau – Indiana already has the most manufacturing jobs per capita of any state in the union.

But we can’t afford to be lulled into complacency by good news.  Long-term prosperity is achievable only if we’re willing to outwork and outthink the global competitors eager to challenge our success.

This means making the most of this recovery, maintaining a competitive tax climate and continuing an aggressive economic development effort to make Indiana an attractive destination for manufacturing investment.  We also have to look beyond the next business cycle and concentrate on the strategic issues that will determine our competitiveness for the long-term.

Human capital is clearly one of these issues.  Indiana’s high school graduation rate ranks in the middle of the pack, and we’re among the least-educated states in terms of college graduates in our workforce.  In all, just a third of Hoosier adults hold at least a two-year degree.   At a time when new manufacturing jobs demand high-tech skills and problem-solving capabilities, workers with a high school diploma (or less) just can’t make the grade.  And with Baby Boomer workers retiring in greater numbers (and the average age of the Indiana manufacturing worker hovering around 50), the state faces a looming shortage of qualified employees.

We can’t have sustainable job growth without a parallel focus on education.  Ultimately, trying to grow our economy without training our workforce only frustrates the ambitions of both the companies that can’t find skilled workers and the Hoosiers who continue to find themselves unqualified for better jobs.

Conexus Indiana is working with our industry and educational partners to create new training programs appropriate to emerging careers in manufacturing and logistics, while encouraging young Hoosiers to enroll in these programs through the ‘Dream It. Do It.’ marketing outreach campaign – learn more at dreamitdoitindiana.com. 

In any business you’re always either gaining or losing momentum – for the moment, Indiana is moving forward.  But to keep it up, we still need to make the education connection:  Filling manufacturing jobs doesn’t mean just matching workers with empty spots on an assembly line.  It means sending our workforce back to school – that’s how Indiana will keep our manufacturing edge. 

Steve Dwyer is President & CEO of the Conexus Indiana advanced manufacturing and logistics initiative.

A recent announcement by Cummins Inc. is another example of how it's more and more difficult to separate Indiana’s economy from the global economy.  The company expects to grow its sales in India by 40% this year, to meet skyrocketing demand for its diesel engines for trucks and buses as well as power generators.

While Cummins will be investing in new factories overseas, it is also recalling workers idled in its Columbus plants during the worst of the economic downturn.  Overseas sales mean more capital that can be put to work here in Indiana.

This announcement comes on the heels of last month’s U.S.-China Advanced Technology Vehicle Summit, which brought the largest delegation of Chinese automakers ever to visit the United States to Indiana for meetings with Hoosier automotive component manufacturers.  China is the world’s fastest-growing auto market, and the fastest-growing destination for Indiana exports, and the Summit opened doors for Indiana companies to sell high-tech parts for electric cars and trucks into this booming market.

These stories jibe with the broader trends reported in Conexus’ 2010 Manufacturing and Logistics Report Card, which saw Indiana earn a spot among the top third of states in export growth.  We’re one of the few states that exports manufactured goods to every continent in the world (except Antarctica), and have consistently ranked as a leader in local jobs and income created by foreign-owned manufacturers in recent years.

Globalization brings increased competition – but so far, Indiana manufacturers and Hoosier workers are winning.  Unfortunately, the dynamics of a worldwide market are unsettling to many Americans; recent surveys show repeatedly that we see foreign trade as a threat to our economy rather than an opportunity for growth.

This perception doesn’t equal reality, at least here at the Crossroads of America.  And regardless, it’s impossible to revert into a protectionist, insular economy – we can only push ourselves to be more productive, innovative and agile in our quest for new jobs, investment and business opportunities.

Indiana’s manufacturing sector is more diverse than most observers realize.  While the state’s image is focused on traditional automotive production, there’s much more than meets the eye in Hoosier manufacturing.

According to an analysis by Ball State University’s Bureau of Business Research, Indiana’s automotive and auto parts manufacturing industry employs more than 110,000 Hoosiers.  This is a tremendous number, but it represents just 16% of the state’s total manufacturing jobs.  Other areas, like medical device and pharmaceutical manufacturing, aerospace/defense and more are growing their share of Indiana’s industrial output.

Even in the automotive sector, Indiana is diversifying our base to include electric vehicle component development and production – high-tech industries with rapidly-expanding global markets.

One more opportunity is discussed in today’s Indiana Connections e-newsletter from Inside Indiana Business: Robotics is a growing industry that helps manufacturers be more productive…but also requires manufacturing operations to engineer and produce the robots themselves.  According to Jason Zielke of Precise Path, Indiana has a head-start in this growing field:

Manufacturing helps make robotics a high-tech sweet spot for Indiana

The term “robots” immediately conjures up futuristic images – of the empathetic androids that populate the worlds of Star Wars and Star Trek, or the novels of Arthur C. Clarke. 

But of course, the reality of robotics is that the future is now: There are nearly 9 million robots in use worldwide today, a population that’s nearly doubled in the last four years according to the International Federation of Robots.   These range from the simple to the massive to the sophisticated – the computerized vacuums that clean our floors on auto-pilot, the million-dollar behemoths that assemble cars, or the delicate instruments that help surgeons perform lifesaving procedures.

In all, robotics has grown into a $20 billion industry by conservative estimates, with applications across the economic spectrum – manufacturing, defense and homeland security, medicine, home maintenance, agriculture and more.  We believe that robotics and automation technology also represents a compelling growth opportunity for Indiana’s technology sector.

There is no established center for robotic or automation innovation.  A leading robotics research center at Carnegie Mellon has put Pittsburgh on the map.  And Boston benefits from institutions like MIT and Boston University, and as home to key defense contractors working on drone and other robotic technologies.  But there’s still ample ‘running room’ for Indiana to establish its niche.

A key reason is that robotics is an interdisciplinary field.  "Robotics is much more difficult than IT," explains Dan Kara, President of Robotics Trends Media. "It requires software engineering, mechanical engineering and electrical engineering, so it's much more difficult to build things for the real world."

Indiana brings the right mix of skills to meet this challenge.  We have a vibrant and growing information technology and software engineering sector.  We’re blessed with a massive pool of engineering and computer science talent, as world-class programs like Purdue, Rose-Hulman, Notre Dame and IU churn out new graduates and as experienced engineers already in the workforce, especially in the automotive sector, look for new and growing opportunities.  The state’s manufacturing heritage provides a solid foundation for robotics companies as well – we’re used to “building things for the real world.”

Indiana’s robotics developers also benefit from close proximity to a natural customer base.  Advanced manufacturing firms are aggressively incorporating robotic systems to improve productivity and stay competitive in a global economy.  It’s estimated that more than a million robots are currently at work in manufacturing facilities worldwide.

By per capita income and economic output, Indiana is the most manufacturing-intensive state in the nation.  Hoosier industrial automation firms therefore have unique access to a wide pool of customers, with the ability to form strategic partnerships and work closely with manufacturers to determine what really works on the factory floor.

The same goes for the health and life sciences.  Indiana ranks among the leaders in medical device and pharmaceutical manufacturing, fields where high-tech automation is necessary to meet the exacting standards of industry.  Indiana also has a growing defense and homeland security sector, a $4.6 billion industry involving 1,500 Hoosier companies that are active federal contractors.  The need for specialized robot applications for these companies also creates great opportunities for homegrown robotics developers.

Indiana’s high-tech community is seizing these opportunities.  Companies like Hurco, Beckman-Coulter, Flow Robotics, Kawasaki Robotics, Amatrol, Indiana Automation Inc., and many, many more are using robotic technologies to meet the needs of customers in a variety of sectors including manufacturing, life sciences, and distribution, to name just a few.  Our company, PrecisePath, has embraced the demand for ‘automating the outdoors’ by developing automated mowing equipment initially targeted for golf courses but with potential applications ranging from construction and landscaping to painting and snow removal.

Far from being a futuristic fantasy, robots are practical tools that are working around us every day, making our businesses more productive and assuming menial tasks to allow humans be more creative and innovative.  While Indiana’s robotics industry is far from established, we do several key competitive advantages that will enable this booming field to become an important pillar of our growing technology sector.

Jason Zeilke is President and COO of Precise Path Robotics - http://www.precisepath.com/. 

The June 2^nd Los Angeles Times included an interesting article – “China’s factory workers finding, and flexing, their muscle” – about large manufacturers in China offering substantial pay raises to workers who are increasingly vocal about poor wages and benefits.  Honda, for example, has extended a 24% pay increase offer to workers who walked off the job a few weeks ago in its Foshan factory in southern China.  Foxconn Technology Group has offered its Chinese workers a 20% raise amid a growing chorus of complaints about conditions in its factories, which produce iPods and Dell computer parts.

According to the article, the trend is attributable to at least two factors – a rapidly aging Chinese population leading to labor shortages, and the younger generation of Chinese workers – more worldly and accustomed to relative prosperity than their parents and grandparents – refusing to accept the low wages and grueling hours that have been commonplace.

The article is relevant to Indiana manufacturing.  It tells us that ‘cheap labor’ isn’t a sustainable competitive advantage.  Wages fluctuate, as do taxes and regulatory costs; it’s important to stay competitive in these areas, but they can’t be the only determinants of long-term success.

The lasting competitive edge comes from innovation and productivity, and these both come from a world-class workforce, with an educational system that continues to produce qualified workers with cutting-edge skills and a penchant for problem-solving and creativity.

That’s why Conexus Indiana places such importance on the Human Capital section of its annual Manufacturing and Logistics Report Card, released yesterday.  We can and should celebrate our excellent performance in Tax Climate, Global Position and the overall impact of these industries on Indiana’s economy – but without addressing weaknesses in human capital, it’s like building a house on sand.

Good companies manage costs well; great companies also make smart long-term investments.  Today, the smartest investment we can make is in our people.

Everyone knows that Indiana’s economy is heavily focused on manufacturing, and that our location makes us a natural logistics hub as well. 

But how do we really stack up against other states in these industries in terms of jobs and economic output?  What’s the outlook for Indiana manufacturing and logistics in 2010-2011 as the economy continues to recover?  And how can the state better position itself to take advantage of high-tech manufacturing and supply chain opportunities?

All of these answers can be found in Conexus Indiana’s annual Manufacturing and Logistics Report Card, which ‘grades’ the state in areas like global competitiveness, human capital, tax climate, productivity/innovation and more.  The Report Card is created by Dr. Michael Hicks and a team of economists at the Ball State Center for Business and Economic Research; the 2010 edition is being released by Conexus this morning.

Manufacturing and logistics combined employ more than one of every five working Hoosiers – Conexus believes it’s critical to monitor the health of these industries and anticipate the challenges we need to tackle to keep them as growing cornerstones of our economy.  You can download the full Manufacturing and Logistics Report Card here, and check out the press release here.

When Conexus Indiana releases our annual Manufacturing and Logistics Report Card on June 10^th, one area that we’ll be assessing is Global Position – our performance and competitiveness within the truly global economy.  We expect this category to again shine as one of Indiana’s strengths: Our exports of manufactured goods remains robust, and the state ranked number one two years running in creating new manufacturing jobs as international firms located or expanded operations here (according to IBM). 

These trends will remain strong thanks in part to efforts like the U.S.-China Advanced Technology Vehicle Summit, organized by our sister initiative, the Energy Systems Network.  As the following press release details, the Summit will bring Chinese government officials and automakers together with the growing group of Indiana manufacturers producing high-tech components for plug-in electric and hybrid cars and trucks.

China is the fastest-growing automotive market in the world, and is also the fastest-growing destination for Indiana exports.  The Summit is a historic opportunity to grow our state’s emerging electric vehicle industry and set the stage for future foreign investment and job creation here by Chinese companies – another reason for optimism about the future of advanced manufacturing at the Crossroads of America.

NEWS RELEASE

First U.S.-China Summit on hybrid and electric vehicles set for Indianapolis

Summit hosted by Energy Systems Network offers “unprecedented” opportunity for Indiana companies in global vehicle manufacturing market

(INDIANAPOLIS, Ind., May 24, 2010) Executives from Energy Systems Network joined Governor Mitch Daniels and officials from the Consulate-General of the People’s Republic of China (Chicago) to announce that Indianapolis will host the first U.S.-China Advanced Technology Vehicle Summit Thursday and Friday (May 27-28).

The Summit will bring together a delegation of Chinese automakers and Indiana manufacturers of components for hybrid and plug-in electric vehicles to share information and explore potential business relationships that could result in new opportunities for Hoosier firms and future foreign investment in the state.  The event is hosted by the Energy Systems Network, a non-profit organization focused on growth and commercialization within the clean technologies and energy sectors. 

China represents the world’s fastest-growing market for electric vehicles, projected to grow its global market share from less than 3% this year to 35% in 2020; all of the nation’s major state-owned and joint venture auto manufacturers as well as most privately-held companies are producing or have announced plans for hybrid and electric models.

“Last year, we took Indiana’s story to China for the first time.  Now, we’ll welcome our colleagues from the Chinese Ministry of Commerce and representatives from some of the country’s major automakers to Indiana for the first time.  Hoosier firms developing technologies and components for electric vehicles will have an unprecedented business development opportunity to discuss potential partnerships and joint ventures,” said Governor Daniels.

The delegation will be led by Mr. Wang Chao, Assistant Minister of Commerce of the People’s Republic and include nearly 100 Chinese government officials and automotive executives.  More than 15 Chinese auto companies will be represented at the Summit including:  FAW Group Corporation, Dongfeng, Chery, BYD, Geely, Guangzhou Automobile Group, Wanxiang Group and others, along with the Chamber of Commerce for Manufacturing Equipment and Electronics, and the China Association of Automobile Manufacturers. 

“This is the largest delegation of Chinese automotive company executives and officials to travel to the United States for a historic visit with American automotive parts manufacturers,” noted Assistant Minister of Commerce Wang Chao. “We are confident the visit will result in stronger business relationships between the Chinese and American automotive companies, especially for hybrid and electric vehicles.”

U.S. participants include Indiana manufacturers Cummins, Delphi, Allison Transmission, EnerDel, and Remy.  These companies represent a growing cluster of firms producing advanced batteries, engines, motors, transmissions and electronics for hybrid and electric vehicles; Hoosier manufacturers collectively attracted more than $400 million in vehicle electrification stimulus grants in 2009.

“To truly capitalize on the global market for vehicles, component manufacturers have to look beyond the U.S.,” added Joe Loughrey, Chairman of the Energy Systems Network and retired Vice-Chairman of Cummins. 

“Many of ESN's member companies already do business in China,” Loughrey continued. “We hope this Summit helps advance those relationships and set the stage for new ones that together result in Hoosier companies supplying more components to Chinese companies, creating great jobs in Indiana."

Daniels will speak at a delegation welcome dinner on Thursday evening at the Eiteljorg Museum, and the U.S.-China Advanced Technology Vehicle Summit will be held at the Indianapolis Marriott Downtown beginning at 9 a.m. on Friday.