Enterprise Minnesota Magazine - Winter 2021 by Enterprise Minnesota

VALUABLE LEGISLATIVE Bob Kill, Enterprise Minnesota’s president and CEO, sat down SUPPORT with Sen. Jeremy Miller to discuss Minnesota manufacturing.

Helping Manufacturing Enterprises Grow Profitably WINTER 2021

The COVID Effects After enduring a year of COVID-related uncertainties, manufacturers feel ready to take on a worsening worker shortage and unstable pricing.

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WINTER 2021

THE COVID EFFECTS

After enduring a year of COVID-related uncertainties, manufacturers feel ready to take on a worsening worker shortage and unstable pricing.

The Pandemic Fallout

Valuable Legislative Support

Manufacturers sound off.

Bob Kill, Enterprise Minnesota’s president and CEO, sat down with Sen. Jeremy Miller to discuss Minnesota manufacturing and Miller’s leadership role in the Minnesota State Senate.

Following Her Father’s Path

Automate with Purpose

Jo Reinhardt’s planning changed her expectations and her company’s future.

Automation is one way manufacturers can confront their labor shortage, but it’s not the only way.

2 Resilience and Resolve The COVID-era challenges affect manufacturers differently, but focus groups reveal a similar response.

Coloring the World

Century of Assistance

A Gift That Keeps Giving

Mercury Mosaics grows from a crafty sideline to a rising success, with guidance.

One hundred years and counting of needed financial services for manufacturers.

A scholarship program for students benefits manufacturing and offers a solution to the growing workforce issue.

Visit the Enterprise Minnesota website for more details on what’s covered in the magazine at enterpriseminnesota.org.

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Resilience and Resolve The COVID-era challenges affect manufacturers differently, but focus groups reveal a similar response.

his year’s State of Manufacturing® (SOM) survey, conducted during the second year of the COVID-era economy, reveals some of the most fascinating information that we’ve found compared to the 12 previous versions of our annual poll — especially when viewed in the context of the accompanying focus groups. Our annual SOM research always includes between 12 and 18 focus groups, composed of manufacturing executives from around the state. The hard data collected by Rob Autry’s survey research company Meeting Street Insights tells us what manufacturers are thinking. The focus groups tell us why. We learned the value of focus groups during our very first SOM project, which we conducted in 2009, when manufacturers were uniformly absorbing the magnitude of the Great Recesession. No company escaped its grip. The poll data told us they were surprised and shaken, but most were confident about the long-term prospects of their companies. The narrative of the focus groups provided a fascinating backstory to their reaction. Only a few participants had a woeis-me attitude about the economic upheaval. The large majority cooly described how they would use the recession’s “downtime” to retool, rebuild and refocus their companies so they could capture even more marketshare when the economy inevitably rebounded. This year, the focus groups confirmed that the many COVID-era factors — not all triggered directly by the COVID pandemic — are affecting all manufacturers differently. At the extremes, some look for ways to stay afloat while others struggle to keep pace with record-setting sales. But they are all responding with remarkable resilience and resolve, and this was a theme of the focus groups. They are ready to take on challenges, whether that is to stay in business in the face of the cruelly unpredictable supply chain, or to 2

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keep up with rising production pressures despite having fewer and fewer employees. They are just doing it. Another takeaway was that they are busy! COVID-era manufacturers no longer enjoy the luxury of thinking that execution is the sole obstacle to achieving the goals of their five-year plan. These days, they wake up every morning knowing they’ll have to play managerial whack-a-mole with supply chain disruptions, unpredictable price increases, and unimaginable HR issues, all while managing the expectations of their customers. (The good news, they say, is that most of their customers are facing the same problems.) So, I’m not surprised when poll data tells us, on one hand, that manufacturers intend to combat the worker shortage by improving productivity, and then, on the other hand, manufacturers admit they are taking less time to engage in productivity programs. They’re too busy! This also might explain why only 14% of manufacturers worry about cybersecurity. Our focus group probes about manufacturers’ vulnerability to hacking or data breaches would mostly result in silence … until one or two would disclose their own experiences. You could almost see the lightbulbs illuminate over the heads of other executives as they listened to these cautionary tales. I personally feel cybersecurity is a sleeper issue that will be with us years after we’ve shed the impact of COVID. It feels like when the shortage of available workers started to creep into focus group conversations in 2010 — way before the issue took on the market changing dominance it currently occupies. Time, and next year’s State of Manufacturing, will tell. Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably

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Publisher Lynn K. Shelton Editorial Director Tim Carey Creative Director Scott Buchschacher Copy Editor Catrin Wigfall Photographer Craig Johnson Writers Sue Bruns R.C. Drews Greg Langfield

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CONTINUOUS IMPROVEMENT

Preparing for Change Strategic planning helps Two Rivers Enterprises be proactive.

Two Rivers Enterprises created a plan to ensure unexpected changes wouldn’t limit growth.

strategic plan can push an organization to adapt, adjust and make changes when needed. That can lead to a brighter future. For Two Rivers Enterprises (TRE) in Holdingford, such a plan helped the company through anticipated and unforeseen challenges. TRE manufactures stainless steel equipment for food processing, food service, restaurants, pharmacies, and medical practices and “prides itself on its ability to innovate,” according to the company website. One such innovation is process improvement. With the help of Steve Haarstad, a business growth consultant with Enterprise Minnesota, TRE developed a plan to impact its continued growth.

Staying ahead of the curve

Since starting 20 years ago, Two Rivers Enterprises has expanded twice with another expansion possible. Like many companies that have had long-term success, TRE’s leaders realized the company might have to change its reliance on old practices to stay ahead of the curve, adapting to shifting markets and business needs. That includes possible changes in staff as well. “We have a skilled and mature workforce,” says Jessica Wells, TRE’s operations manager. “As an organization, we’ll have to fill the positions of anyone who decides to retire in the next five to 10 years.” Haarstad helped TRE develop one, three, and 10-year strategic development

plans that include continued evaluation, and other continuous improvement options. As a third generation of the founding family, Brian Warzecha says that

Effective plans can help a company succeed in a variety of ways. They can help a business set its course of action and inform employees about the company’s direction.

WINTER 2021 ENTERPRISE MINNESOTA /

includes a focus on accountability and communication — for both leaders and employees. Warzecha has seen how such a focus has produced noticeable results over the past two years. “The new team approach increases revenue, profits, and employee morale,” he says. That was one of the keys for Two Rivers Enterprises when it developed its business plan. “It will help them improve profits,” Haarstad says. “It gives them a filter that provides guidance on initiatives and direction.” Many Minnesota manufacturers don’t have a business plan. Few of them

“The plan helps our direction for the next year, as well as three years and a decade from now. It helps us set our goals, and this puts us on a path to reach them. It should help us be more efficient and lower our costs and labor expenses.” have a written strategy prepared. Those companies, like TRE, are relying on past practices to carry them forward. Effective plans can help a company succeed in a variety of ways — from helping a business set its course of action to informing employees about the company’s direction. That can provide guidance for day-to-day activities.

Effective SWOTs set a course of action

With Haarstad’s help, TRE developed a SWOT analysis, focusing on the company’s needs. 4

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A SWOT analysis looks at a company’s strengths, weaknesses, opportunities, and threats. The analysis helps identify what is being done well and ways to cut risks, improve, and enhance success. “Most of the things the SWOT pointed out aren’t a surprise,” Wells says. “It helps us focus on our issues, and it provides some guidance on how we can manage them.” “The plan helps our direction for the next year, as well as three years and a decade from now,” she continues. “It helps us set our goals, and this puts us on a path to reach them. It should help us be more efficient and lower our costs and labor expenses.”

An important community asset

Data USA’s 2019 analysis of Holdingford reported that the city has 660 residents. About 400 of them work in the city. That includes 66 people who work in manufacturing, with 38 of them working at Two Rivers Enterprises. “They’re an important employer in Holdingford,” Haarstad says. “Assisting them with their strategies was important. They are key to the city’s continued economic success, and the high quality of life there.”

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A history in Holdingford, with a plan for the future

“Bob and Dan started TRE in 2001,” Warzecha says. “They sold their shares in Lake State Industries in Rice. Both of them had over 25 years of experience in stainless steel fabricating. They saw an opportunity for a servicebased company that produces highquality products.” The plan is set to guide TRE, providing help to facilitate coming changes. That will help the company get to where it hopes to be in each step of the process. “Service and quality will continue to drive the future of TRE,” says Warzecha. That combination took the company to its 20-plus year milestone, and the new strategic plan will help TRE continue that progress. “We plan to continue to focus on those two things moving forward,” Warzecha says. “They will continue to be our primary focus as we grow the organization into the future.” WINTER 2021 ENTERPRISE MINNESOTA /

distribution model was replaced, and she became both manufacturer and seller.

Scaling up with a strategy

While COVID-19 presented challenges for the company, Austin is happy that she was able to continue operating her business. The pre-pandemic employee potlucks turned into virtual meetings designed to keep everyone connected. Such connections were important for Austin to make with the community as well. “If there is ever a need to help somebody through my art, I don’t give it a second thought,” she says. Mercury Mosaics often donates artwork to businesses. Austin hopes that having a unique piece of art on display will draw people to that business, which in turn helps the community.

Mercedes Austin, Founder and CEO, Mercury Mosaics

GROWTH STRATEGY

Coloring the World Mercury Mosaics grows from a crafty sideline to a rising success, with guidance.

ercedes Austin’s business, Mercury Mosaics, wasn’t an instant success. In recent years, it took a colorful turn from a fun hobby to a struggling, low-paying craft sideline to a successful business. Once the success started, though, it kept coming. And with a bit of guidance, the success is expected to continue. Because Austin wanted her day job to be as colorful as her art — and as fulfilling — she started doing artistic tile work about two decades ago. It all started as a one-person operation out of her studio apartment. Fast forward to today, her business now has two locations and is looking to expand into the international market. Mercury Mosaics designs and handcrafts custom ceramic tiles and mosaics for residences and commercial buildings across America. Austin’s unique, desirable, and functional tiles are works of art not only to her but her

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customers as well. And requests for her product are on the rise.

From struggles to a dream job

In 2002 while earning her living as a waitress and commercial painter, Austin was creating what she calls “home accessories” — which included picture frames made with tiles, mirror surrounds, and ceramic switch plate covers. She describes her early craft work as a “journey of supplemental income.” While her first paying tile job brought in less than $1,000, Austin was convinced she could earn money doing what she loved, and she continued her one-person operation. Mercury Mosaics was born. In those early days, Austin relied on friends to help her fill orders. While her work was available from about 120 distributors and showrooms, the company’s success resulted in Austin scaling Mercury Mosaics up. Her old

“Mercury Mosaics gave me the chance to create the tile art I always wanted to produce. With our growth, we need to have a strategic plan for sustainable growth. Our work with Enterprise Minnesota set us on the right path for such continued growth.” “Giving back is what fuels our business model,” she says. “I look at it as payback to the community that got me and Mercury Mosaics where we are today.” Today the $3 million business produces a variety of products. From subway tiles to Moroccan fish scales and quirky round and bubble shapes, the pieces are handmade and glazed in a wide range of colors, textures, and finishes. In 2014 Austin participated in Scale Up!, a WomenVenture program that helped her develop her current business model. As a member of Scale Up!’s first partner group, Austin worked with other female business owners who were also

looking to grow their companies and create jobs. Recognition continues. The National Association of Women Business Owners recognized Austin as the “Achieve! Emerging Woman Business Owner in the Million Dollar-Plus Category.” The next step for Mercury Mosaics is to create a sustainable mosaic making

model. Next year will be the company’s 20th anniversary, which Austin sees as a time to celebrate the company’s return to the office and its old business goals of success combined with sustainability. She also believes that will put Mercury Mosaics back on track with her dreams for the company’s growth. —Sue Bruns

Mercedes Austin’s company, Mercury Mosaics, and its workers are turning drab clay into works of art that are displayed across America.

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John Wanner, Senior Vice President of Operations, Wanner Engineering

INNOVATIVE SUPPORT

Continuous Improvement Wanner Engineering reached out to Enterprise Minnesota for continuous improvement help that will allow them to compete with larger companies.

anner Engineering is a company built on ideas by a world-class thinker. That man, William Wanner Sr., had an impressive group of peers with whom it’s safe to assume ideas were exchanged. Even after decades of success, the company’s leaders still see the value of that process. Wanner started the business with his son, William Jr., in 1973. By that time, he had already worked with some of the greatest thinkers ever, the likes of which included Howard Hughes, Albert Einstein, Niels Bohr, and J. Robert Oppenheimer. “I remember him telling us he worked with them,” company CEO William Jr. says. “I even met Bohr myself. It was amazing.” Wanner Engineering manufactures highpressure, sealless pumps in downtown Minneapolis. They’re marketed under the brand name Hydra-Cell, a leader in pump

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manufacturing with offices in London, Hong Kong, and Shanghai. The pumps sell worldwide, yet the local site only employs 144 people. Even with its global reach, Wanner Engineering’s leaders know there’s always room for improvement. Shipping delays and trouble maintaining stock of key components were challenges the company needed to remedy. “While larger companies often have continuous improvement departments, peer groups help companies of Wanner Engineering’s size find areas of continuous improvement too,” says John Wanner, senior vice president of operations and William Wanner Sr.’s grandson. “We know we will always have to adapt and improve to stay competitive,” John continues. “We’re lucky because we have a proprietary product. We know that if we

want to continue to be profitable though, we must explore new processes.”

A life of pumps and progress

William Wanner was a scientist and a world-class inventor. He had degrees in chemistry, math, and physics. One of his earliest achievements was the creation of solar turbines. He patented that invention, which is one of many patents listed in Wanner’s name. It is now owned and still used by Caterpillar. Additional achievements include helping Hughes develop an exhaust manifold, used in the first jet engines. It was a valuable jetengine component developed for military fighter jets. “He was a brilliant man,” William Jr. says of his father. “He was an inspiration to me and a lot of people.” During World War II, William Sr.

worked on the Oppenheimer-led Manhattan Project — the code name for the American-led effort to develop a functional atomic weapon. He told his family he was working at Clinton Engineering, the dummy company set up by the government to keep the building of the first atomic bomb secret. After the war, William Sr. invented a rotary snowplow and some of the first agricultural pumps. That set him on his long association with pumps that led to the start of Wanner Engineering. William Sr. knew that conventional, high-pressure, positive displacement pumps didn’t stay lubricated. That caused problems with packings that led to leaking. William’s sealless design was able to handle abrasive liquids, including fertilizer, without harming the environment like the conventional pumps did, according to William Jr. The Hydra-Cell pump maintained a precise balance of oil behind the diaphragm. As the piston’s forward stroke pressurized the oil, the diaphragm flexed, which drove the pumping action. In 1972, William Sr. patented his HydraCell pump

While larger companies often have continuous improvement departments, peer groups help companies of Wanner Engineering’s size find areas of continuous improvement too, says John Wanner, senior vice president of operations and William Wanner Sr.’s grandson.

design. While the new pump design was innovative, William Sr. was not a salesman. He gave the patent to his son William Jr., a lawyer, and in 1973 Wanner Engineering was born.

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Desalinization pumps become “PUR”

The father and son team continued to be innovators in the pump industry. On a trip, William Jr. came up with an idea for another innovative pump — a small pump that purifies and removes salt from seawater. He took the idea to his father who designed the pump in about a week. Today, the handheld desalinization pumps are in life rafts and used by the U.S. Navy and other militaries around the world. That notoriety put the company, which went public, on the cover of People magazine, and introduced the product into the consumer market. In the 1990s, it was sold to Procter & Gamble and can be found under the “PUR” brand name.

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A key to ongoing success

After being introduced to Enterprise Minnesota and conducting a Lean Assessment, Wanner Engineering plans on continuing the relationship for future guidance. “We’re going to contact them for more continuous improvement help,” John says. “These are all baby steps, but this is a way for us to have the same advantages as those bigger companies.”

WINTER 2021 ENTERPRISE MINNESOTA /

Brothers Arlen Nordin (COO/ President) and Ron Nordin (VP Sales/Marketing) were instrumental in creating manufacturing jobs that kept people in their small hometown.

COMMUNITY INVOLVEMENT

Leadership Development A family’s dedication and manufacturing innovations benefit their small town.

ancaster is a small town located near the Canadian border. With a population of 334, it’s one of Minnesota’s smallest communities. But it struggles to offer employment opportunities, even in an employee-starved environment. The Nordin family, and 12 siblings, noticed the lack of work was forcing many neighbors out to find employment elsewhere. Their small town was getting even smaller. In 2002, the family founded PoDCo — a powder coating and dye sublimation manufacturer — to change the trend.

A small town with a big need

Lancaster is located in Kittson County, one of the least populated counties in Minnesota with about four people per square mile. PoDCo is the largest employer in the town. The company was created after Arlen Nordin, the local grocery store owner, 10

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discovered a new manufacturing process called powder coating. He and three of his siblings saw a powder coating business as a way to generate income and keep people in the community.

A process that protects and enhances

Powder coating uses a purpose-built printer to print a pattern of dye onto a special film. The dye produced is then infused into a powder-coat that permeates below the surface, protecting what is coated from water and rust. Materials with the coating are baked at 425 degrees Fahrenheit. For manufacturers looking to print patterns on bare metal, it is an invaluable process. An early powder coating project of PoDCo’s involved printing camouflage patterns on paintball markers for an Indiana manufacturer. The company also worked with an area door manufacturer and took on custom jobs.

“It wasn’t easy finding customers in those early days,” Arlen says, “but we found work. We needed to do more to keep the work coming in and the business running.” Dye sublimation was the perfect complementary process. PoDCo connected with Decoral System SRL, a metal finisher in Italy whose machines blend decorate aluminum. Decoral was looking for a U.S. partner, and PoDCo’s purchase of a Decoral machine made it the first company in the U.S. to have one at that time. Ron Nordin, the company’s vice president of sales and marketing, says there are around 60 Decoral machines in America. Three of them are at the Lancaster company.

Automation and lack of training are big issues

In the last 18 months, PoDCo increased staffing from 40 employees to 60 and has also had annual building expansions. But

the company has not been able to use its new $300,000 Decoral machine that was purchased last March because no one can operate it and training doesn’t seem to be available. “We’ve got the business for it, but nobody can run it,” Arlen says. He jokes that the machine’s warranty will expire before it produces its first batch of blended, decorated aluminum. Despite this training gap, business is booming, and PoDCo needs a second factory. The limited space has resulted in PoDCo turning away prospective clients this year. And with the limited number of employees in Lancaster, the company will have to build its second location in another community. But the company’s initial goal of keeping

workers in town was successful. Now there is a need for more workers than the small town can provide. Sign-on and referral bonuses, full benefits packages, and more have been offered as recruiting incentives. PoDCo has also investigated the federal H-2B Temporary Non-Agricultural Worker Visa program, which allows the company to bring in foreign nationals, but that’s a difficult task. Arlen admits he doesn’t know where they’ll find workers. Next year, on Memorial Day, the

company will celebrate its 20th anniversary. Ron says his family’s efforts to make Lancaster a viable home for the next generation have so far been successful, as the town’s population has kept steady. “This is our town,” Ron says. “Everything we’ve done has benefited our community and that’s great. We’re not about to change that policy.” PoDCo has received many purchase offers for the company, and all have been rejected. Any sale of the company would require the company to stay based in Lancaster for at least a decade. “We’re standing by our commitment to our city,” Arlen says. “We started this company so people would have jobs. We didn’t start this to have it moved.” —R.C. Drews

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best practices. “With technology changes, and continuing workforce issues, there is an increased need for financial and accounting services,” says Powers. Manufacturers are working to control increasing and changing economic demands. A financial and CPA firm can help them maintain and grow their profit margins and help them remain competitive while changing and adjusting to workforce practices. Such practices include helping companies find the best ways to leverage technology to increase production, reduce costs, and increase safety, improving lean practices by finding ways to continuously better the organization, and shoring up policies that boost social responsibility and sustainability. “That’s not unique to manufacturing,” says Hennen. “Financial service providers can offer support that many manufacturers did not realize were needed. Company leaders are coming to them to find help reducing costs, increasing efficiency, and maximizing profitability.”

A variety of recommendations for manufacturers Olsen Thielen employees celebrate the company’s milestone.

CONTINUOUS IMPROVEMENT

Century of Assistance One hundred years and counting of help for manufacturing.

lsen Thielen’s services to manufacturers have evolved dramatically since it opened its first accountancy in 1921. The company that began by offering accounting services to Minnesota’s telecommunications industry quickly expanded its services to the manufacturing industry when company leadership realized this was an area that could use its services. Today, many manufacturing leaders are using financial services that they’ve never used in the past, and that’s helping them

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stay on track with business improvements. “If there’s one thing we’ve discovered,” says Adam Hennen, a principal in Olsen Thielen’s Audit and Accounting Department, “it’s that many manufacturers are seeing the value in these services. Whether they come from us or another financial advising firm, they’re discovering there’s value in that help.” Patrick Powers, Olsen Thielen’s president, says their business depends on the company’s ability to meet needs, and how well it can advise clients on

According to Hennen, manufacturing leaders use Olsen Thielen and other financial advisors to improve the value of their companies. Through facility walkthroughs and an evaluation of financial practices, underperforming products that often go overlooked when a company self-evaluates are identified. “We will come in and look at products or product lines that are losing money, and we’ll advise companies on whether it’s wise for them to continue to invest resources on those lines,” Hennen says. “I don’t think many companies look at what they’re doing that’s profitable and what’s leading to their lower profit margins,” he continues. “There are benefits to those evaluations.” Practice evaluation often results in improved profitability and better management of productivity. That comes from improved understanding of performance measures, making correct assessments of operations, and correctly evaluating the cost of inventory.

Meeting client needs requires help in often overlooked areas

“Manufacturers are coming to us more for the commonly used services, includ-

ing business valuations, state and local tax issues, and ownership transition planning. Many of them now also want our expertise in peer counseling, tax planning, and issue resolution,” says Brett Olsen, who is also a principal in the Olsen Thielen Audit and Accounting Department According to both Hennen and Olsen, CPA and tax services continue to be their company’s focus. They help clients modify practices and adapt them to tax law changes, while also showing them how they can manage their profits and margins better. Not overlooking additional financial management services and considering a relationship with a trusted financial counseling company could be essential in overcoming unforeseen financial challenges. Olsen Thielen provides consultation

Pat Powers, President, Olsen Thielen

on taxes, from evaluation of sales and use taxes and property taxes to controlling international tax issues. The company’s general consulting services include benefits, compensation, and recruitment; internal control assessments; forecasting and budgeting; and evaluation of business systems and recruitment. “This 100th anniversary is significant,” says Powers. “A company doesn’t survive this long without specializing services to meet the needs of the industries it assists. I believe that’s what most financial advisors who assist manufacturers are discovering. “Proper management of the challenges manufacturing companies face can help control their impact and help manufacturers overcome them.”

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Kari Rusing is Enterprise Minnesota’s newest business development advisor.

Inside Enterprise Minnesota

An ongoing series.

RELATIONSHIP BUILDING

Expanding Our Reach The addition of Rusing helps Enterprise Minnesota double its coverage in the Twin Cities metro area.

usiness development advisor Kari Rusing has joined Enterprise Minnesota and is doubling the organization’s support of manufacturers in Hennepin County, a key area of manufacturing in the state. Rusing describes Enterprise Minnesota’s services as relationship development, helping clients achieve positive outcomes. For Rusing, it’s about becoming a partner with manufacturers and helping them

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do great things — which sets Enterprise Minnesota apart from a regular service provider. “We have one goal,” Rusing says. “We want to help manufacturers improve and reach their goals.” Rusing graduated with a Bachelor of Science degree from the W.P. Carey School of Business at Arizona State University. She has an MBA from ASU’s Thunderbird School of Global

Rusing graduated with a Bachelor of Science degree from the W.P. Carey School of Business at Arizona State University. She has an MBA from ASU’s Thunderbird School of Global Management. Management. She has worked in sales since 1996, first with Ernst & Young in Texas and later as a partner at O’BrienSexton Associates in the Twin Cities. “Six years ago, I left a company because it became too sales focused,” she says. “The companies I worked with needed more. They needed support, and they

weren’t always getting that. That’s one thing Enterprise Minnesota provides clients.” “We care about improving manufacturing, helping companies increase revenue and helping them grow positively,” she adds. Rusing joins Joel Scalzo in Hennepin County, doubling the support available for local manufacturers in the metro area.

Rusing’s experience is a vital asset in an important area

There are over 4,000 manufacturers providing almost 175,000 jobs in the Twin Cities, according to the Minnesota Department of Employment and Economic Development’s (DEED) 2019 Census of Employment and Wages.

“We are delighted to have Kari join us. In the short time she has been with us she has already proven to be a great addition to our team.” According to DEED, manufacturing in the Twin Cities accounts for almost 10% of employment in Minnesota. The agency also reports that over half of all manufacturing jobs in Minnesota are in Minneapolis and St. Paul. Her focus is on helping manufacturers improve, reach their goals, and increase their profits. Rusing has worked in the Twin Cities metro area for more than two decades. Her past clients included Target, Best Buy, and Menards. She consistently helped those companies and others reach annual sales of up to $23 million. The strategic plans for those companies increased sales and improved product innovations and brand creation. “We are delighted to have Kari join us,” says Bob Kill, Enterprise Minnesota’s president and CEO. “In the short time she has been with us she has already proven to be a great addition to our team.” “Manufacturing is important to Minnesota,” Rusing says, “and many manufacturers are doing well. Sometimes they can do better though, and their improvements can help everyone.”

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Four Questions

INNOVATIONS

Debby Hoel, president of Lakes Area Manufacturers Alliance (LAMA)

nterprise Minnesota has just released the results of its latest State of Manufacturing® survey. What is the significance of this data? This survey provides incredibly valuable information to manufacturers in every part of Minnesota. It gives us perspective on what is happening in our industry. I work in northern Minnesota. The interesting thing for us is that the issues we have are like those faced by manufacturers in southern Minnesota and the Twin Cities.

Debby Hoel

Debby Hoel has worked for the past 30 years in business and human resources management. She currently serves as president of the Lakes Area Manufacturers Alliance and as a benefits and human resources advisor for Trinity Business Partners. The alliance works to encourage students to consider manufacturing careers while also providing networking opportunities for manufacturing leaders in the area.

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Everyone will agree that the worker shortage is a huge concern — and that isn’t likely to change anytime soon. We knew there were enormous numbers of baby boomers ready to retire, along with decreasing numbers of students entering the trades. That was bound to create workforce challenges. The COVID-19 pandemic accelerated those retirements, but the problem has been looming for some time. Initiativetaking manufacturers began recruiting and hiring additional workers to backfill before retirement occurred while at the same time incorporating robotics to supplement. The number of people we were able to recruit used to be related to the size of a community. It has always been more of a challenge to get workers and supplies in smaller communities, and shipping for manufacturers in those areas can be challenging too. Such challenges are happening throughout manufacturing, and everywhere in Minnesota. We must work together to find solutions. The survey gives us a chance to exchange ideas. This information has always been important, but it might be as valuable now as it ever will be. The solutions might be different depending on each manufacturer’s situation, but the issues are similar. The more information we share, the more likely we are to find solutions that work for everyone. The State of Manufacturing survey gives us a great opportunity to share such information. How does your background impact your perspective about manufacturing? I was an unlikely candidate for manufacturing. I began my career in trade association management. A business venture with my husband in the early 1980s thrust me into manufacturing. After moving to northern Minnesota in 2001, I was fortunate to join Pequot Tool & Manufacturing in Jenkins. When I

began thinking about retirement, I set a target retirement date. I always knew my retirement would be active. Our Lakes Area Manufacturers Alliance group had retiring members too. I worried that their leaving would create a leadership void. New members needed time to adjust to their roles. I knew it would be important to continue with LAMA for at least a year, providing mentoring for newer members. I have worked closely with Trinity Business Partners, a team of professionals in Baxter that specializes in employee benefits and business consulting services.

The solutions might be different depending on each manufacturer’s situation, but the issues are similar. The more information we share, the more likely we are to find solutions that work for everyone. The State of Manufacturing survey gives us a great opportunity to share such information. It gave me an opportunity to provide human resources support and benefits for manufacturers. That background gives me a good idea of what’s happening in manufacturing, especially in our area. Your organization sponsored one of the focus groups that supplemented the State of Manufacturing research. Why was this important? We learn so much when we share experiences and talk about the challenges and how each of us is tackling them. As manufacturers, it is important to make our voices heard. The State of Manufacturing

gives us great information. These focus groups give us an opportunity to influence the ongoing discussion. The Brainerd Lakes Chamber and LAMA have sponsored focus groups for our area for years, and I always felt it was a valuable exchange of thoughts and ideas. When we share concerns and hopes for the future, we grow professionally. It really wasn’t hard to recruit participants for the groups. We composed a list of potential participants and sent out invitations. Everyone responded immediately. That’s an indication of how important it is right now to share information. The State of Manufacturing results are that important to our industry. In your experience, what factors help manufacturers thrive in Minnesota? I would tell them to invest in learning opportunities for their management, leadership, and operations teams. That’s crucial. Networking is also critical. While our manufacturing group in the Brainerd Lakes Area may be smaller in numbers than other regions, we are always networking. We all benefit from these alliances. Also, invest in training. Give your employees the skills they need to succeed. Everyone benefits from an investment in training. I would also suggest supporting local professional and trade organizations so that they can continue to work on your behalf. We must find creative ways to attract younger workers to manufacturing. It’s one step at a time, but the more we do to expose students to manufacturing will benefit the industry. We will eventually overcome the worker shortage. The manufacturing community in our area has been a huge supporter of the Bridges Career Exploration Day, which is held each year at Central Lakes College. It’s a one-day event that attracts about 2,500 high school students. The event’s manufacturing area has been a success each year. Bottom line, there is no magic bullet. It will take effort and an exchange of ideas to make a difference. That is why the State of Manufacturing is so important right now.

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The COVID Effects

After enduring a year of COVID-related uncertainties, manufacturers feel ready to take on a worsening worker shortage and unstable pricing.

/ ENTERPRISE MINNESOTA WINTER 2021

espite unprecedented uncertainties that continue to roil the COVID-era business economy, the 2021 edition of the State of Manufacturing® survey has revealed that Minnesota’s manufacturers are far more optimistic about their companies’ prospects than they were after they experienced the first wave of the pandemic. Fully 51% of manufacturers expect an increase in gross revenues for the coming year — a stark improvement over last year, when just 21% expected an increase. “It’s a remarkable turnaround in expectations,” says Bob Kill, president and

Manufacturers have soured on Minnesota’s business climate. A plurality (46%) believe it is worsening, continuing a 300% downward spiral in just two years. CEO of Enterprise Minnesota. “The worker shortage, supply chain uncertainties, and unstable pricing could provide challenges. But most manufacturers seem confident they can overcome factors that might constrain their path to profitable growth.” More than four in 10 manufacturers (41%) expect to see profits increase as well. That’s 17% higher than last year. An increase in capital expenditures is anticipated by 44% of survey participants, a 19% jump from 2020. In addition, the COVID effect has meant a huge spike in the number of executives who are concerned about attracting employees. It has also meant that employers are spending more on salaries and benefits. Capital expenditures are at a historical high. Pollster Rob Autry and his team at Meeting Street Insights, a survey research WINTER 2021 ENTERPRISE MINNESOTA /

Fig. 1 Minnesota Initiative Foundations The State of Manufacturing survey did an oversample of 50 interviews with manufacturers in each of the six Minnesota Initiative Foundation regions.

Northwest Minnesota Foundation

Northland Foundation

West Central Initiative Initiative Foundation

Southwest Initiative Foundation

company, interviewed a random sample of 400 Minnesota-based manufacturing executives from Sept. 8 to Oct. 7, 2021. The survey was limited to owners, CEOs, CFOs, COOs, presidents, vice presidents, and managing officers. It has a margin of error +/-4.9%. Autry added an “oversample” of 50 manufacturer interviews in each of the six Minnesota Initiative Foundation regions 20

/ ENTERPRISE MINNESOTA WINTER 2021

Southern Minnesota Initiative Foundation (shown in Figure 1). As in other years, Enterprise Minnesota complemented its State of Manufacturing research by conducting 13 focus groups from Sept. 14 through Sept. 30, 2021. Of them, nine were held via Zoom, four were in person. Kill says the 2021 focus groups revealed extraordinary insights into the survey’s data. “The survey delivers objective hard

data about what manufacturers think about their challenges and opportunities, but the focus groups show us why they feel the way they do. “Our focus group participants have become remarkably candid.”

An optimistic outlook

• Manufacturers remain confident that their companies will continue

to succeed, with 87% saying they were optimistic that their companies would continue to do well. • Fears of a potential recession on the economic horizon dropped to 18%, or exactly half of the respondents compared to last year’s survey who said they feared a recession. Forty-four percent predict a flat economy in 2022, while 35% anticipate economic expansion. That compares to 20% in the previous year.

Fig. 2 Recessionary fears have dropped over the past year, but opinions about the economy are quite mixed.

Recessionary have dropped over the past year,anticipate “Thinking about thefears upcoming year, in 2021, do you but opinions about the economy are quite mixed. economic expansion, a flat economy, or a recession?” “Thinking about the upcoming year, in 2021, do you anticipate economic expansion, a flat economy, or a recession?”

Economic Expansion 56%

A whopping 69% of respondents reported that their companies are not instituting or planning for additional safety measures or changes in production practices as a result of COVID-19 and the Delta variant. northeast, 87% in the west and 85% in the northwest. • Companies are evenly split (48% to 48%) on the long-term negative impact they believe the pandemic will have on the economy. • A whopping 69% of respondents reported that their companies are not instituting or planning additional safety measures or changes in production practices because of COVID-19 and the Delta variant. Companies with revenues less than $1 million are less likely to take additional measures (78%).

55%

49%

32%

26% 8%

19%

December January 2008 2010

10%

January 2011

January 2012

34%

37%

7% March 2013

March 2014

64%

48%

42%

49%

32%

42%

15%

Recession

58%

54% 46%

40%

34%

The COVID-19 effect lingers

• Almost all manufacturers (94%) say COVID-19 had an impact on Minnesota’s economy and business climate, similar to last year when 92% thought the pandemic had a negative economic impact on the state. In both years, about two-thirds of manufacturers characterized the impact as “major.” • Manufacturers in northern and western Minnesota thought it was slightly less impactful: 88% in the

53%

Flat Economy

28% 32%

15%

13%

March 2015

March 2016

March 2017

March 2018

40%

39%

44%

Flat

35%

36% 20%

Expansion

18%

Recession

5% March 2019

Sept-Oct Sept-Oct 2020 2021

Fig. 3 We do see an upward trend in key business metrics from a year ago. We do see an upward trend in key business metrics from a year ago. Percent of manufacturers expecting increases in 2021 for… Percent of Manufacturers Expecting Increases in 2021 for… Gross Revenue

51% 44% 36%

2008

2010

47% 41% 31%

24%

19% 17%

2011

Capital Expenditures 55%

39% 32%

23%

Profitability

32%

45% 35%

45%

44%

60%

59%

47%

45%

51%

37% 30% 32%

27%

28%

27%

25%

23%

2012

2013

2014

2015

2016

2017

2018

Revenue

44% 25%

31%

41%

Cap Exp Profit

24% 21%

2019 Sept-Oct Sept-Oct 2020 2021

Fig. 4 Supply chains are now at the top of list of concerns. Supplymanufacturers’ chains are now at the top of manufacturers list of concerns. Concerns ranked by %

Concerns Ranked by % Concern (8-10) (Highlighted Issues Have Increased 10%+ Since 2020) 67%

Supply chain

61%

Attracting qualified workers 50%

The costs of health care coverage Retaining qualified workers

49% 46%

Costs of employee salaries and benefits

40%

Economic and global uncertainty

35%

Federal government programs resulting from pandemic State government programs resulting from pandemic

32%

Developing future leaders

30%

Cybersecurity Getting your products to market

25% 12

20%

Change Since 2020 Not Asked

+25 ±0 +13 +22 +1 +12 +6 +2 -5 +5

WINTER 2021 ENTERPRISE MINNESOTA /

Fig. 5 Manufacturers want to be known as having a great work environment. “When thinking about attracting and hiring new employees, what does your company want to be known for?” “When thinking about attracting and hiring new employees, what does your company want to be known for?”

Manufacturers want to be known as having a great work environment. Great work environment

69%

Competitive salary

61%

Work-life balance

58%

Values employee safety

57%

Flexible shifts

47%

Career growth

45%

Great benefits

45%

Industry leader

42% 19

Fig. 6 Six out of 10 say their company is having capacity issues.

“Is your company currently having capacity challenges? WouldSixyou your are mostly related to issues. workforce, outsay of ten say issues their company is having capacity suppliers/materials, equipment/production, shipping/logistics, Is your company currently having capacity challenges? Would you say your issues are mostly related to workforce, suppliers/materials, equipment/production, shipping/logistics, customers, or something else? customers, or something else?” Workforce issues

36%

Suppliers/materials issues

33%

Shipping/logistics issues Customer issues Equipment/production issues

11% 4%

59%

Having Challenges

Not having challenges

39%

Something else

Don’t know

1% 22

Companies with revenues greater than $5 million are most likely to require vaccines (14%). • Thirteen percent of manufacturers require masks for unvaccinated employees; 12% require masks for all employees; 8% require employees to get the COVID vaccine; and 6% offer incentives for employees who get the vaccine.

Heartburn issues

The survey asked manufacturers to rank the factors they fear most in 2022. • At 67%, the supply chain topped the array of factors that concern Minnesota’s manufacturers. That 22

/ ENTERPRISE MINNESOTA WINTER 2021

issue is new to the list. Regionally, the supply chain occupied even greater concern in the northwest and the southwest (75% of respondents in both regions listed supply chain issues as their major concern). • Worker shortages are also listed among manufacturers’ anxieties. Attracting qualified workers was named by 61% of respondents. That’s a 25% rise over last year’s poll responses. Retaining workers was chosen by 49%, which is a rise of 13% over the previous year. The issue appears most chronic in the west central region, at 73%.

• Employee salaries and benefits are a concern for 46% of respondents, an increase of 22% over 2020. • Respondents also mentioned government pandemic-related programs ending as a source of concern: 35% for federal programs and 32% for state programs. • A shortage of workers rocketed to the top when respondents were asked which of the challenges is most likely to impact future growth. It was listed by 50% of manufacturers, which is 18% more than in 2020. Large companies are most worried about the availability of workers, making the top concern list of 69% of companies with revenue greater than $5 million and 73% by companies with more than 50 employees. • At 48%, the increasing cost of materials came in a close second and was slightly more of a concern for small companies.

EDITOR’S NOTE: Full results of the State of Manufacturing® survey can be viewed at www.enterpriseminnesota.org. They will include the survey’s top-line results, a selection of cross-tabulations, and edited transcripts of all focus groups.

Fig. 7 About a quarter say they are instituting changes because of the Delta variant.

“Is your company currently instituting or planning to institute additional safety measures and changes in production About a quarter they are changes because and of thethe Delta variant. practices assay a result of instituting the COVID-19 pandemic surge caused the Delta “Is your company currently institutingby or planning to institutevariant?” additional safety measures and changes in production practices as a result of the COVID-19 pandemic and the surge caused by the Delta variant?” Requiring masks for unvaccinated employees

13%

Requiring masks for all employees

27%

12%

Requiring employees to get the COVID-19 vaccine

Offering incentives to employees who get the vaccine

Taking Additional Measures

CDC guidelines/increased cleaning

Social distancing/limiting contact

No additional measures being taken

69%

Something else

Don’t know

2% 24

• The cost of health insurance, which has been a major concern for many years, dropped 17 points to 9% in 2021.

Growth

• Six out of 10 executives say their companies are experiencing capacity issues, with workforce issues as the top reason (36%), followed by supplier/material issues (33%), and shipping/logistics issues (11%). • Similarly, 50% of manufacturers say that hiring new employees will be the most important driver to growth. Finding new customers was named by 38%, which is a decrease of 21% from the 2020 survey. • Most manufacturers (62%) say they have unfilled positions at their companies. Eighty-seven percent say they are having difficulties attracting candidates (55% say it’s very difficult; 32% somewhat difficult).

Cybersecurity

• Most manufacturers are relatively unconcerned about the rise in cybercrimes. • Only 15% say their company has been hacked or experienced a breach of some kind. • Similarly, 84% feel their company is secure from hacking, data breaches or other technological

Fig. 8 Most are looking to hire and having a very difficult time finding candidates. “Does your company

“Overall, how difficult do you think

Most are looking to hire and having a very difficult time finding candidates. have positions to difficult attracttime qualified Mostcurrently are looking to hire and havingita is very findingcandidates candidates.

that are open for hiring?”

how difficult do you think it is toyou?” attract to“Overall, manufacturers like “Overall, how difficult do you think is to attract qualified candidates to manufacturers likeityou?”

“Does your company currently have positions that “Does are youropen company currently and are hiring?”have positions that are open and are hiring?”

xx%

38%

62%

qualified candidates to manufacturers like you?”

55% xx%

55%

87% 87%

Difficult Difficult

32%

62%

Yes

32%

Yes

27 27

threats. That level of confidence falls to 74% among companies that have had a breach. The number rises to 86% for companies that have not experienced a breach.

Other issues

• More manufacturers than ever (55%) say they work from a formal strategic plan. • At 50%, the number of manufacturers who have a succession plan has dropped down to its lowest level yet. • Manufacturers believe workplace

Very Somewhat Not Too Not Difficult Somewhat Not Too AtNot DifficultVery Difficult Difficult All Difficult Difficult Difficult Difficult At All

reputation is their strongest attribute to recruit new employees: 69% listed “great work environment” as their top aspiration. That was followed by “competitive salary” (61%); “work-life balance” (58%); and “employee safety” (57%). • A majority (46%) of manufacturers believe Minnesota’s business climate is worsening. They believe that has been an alarming trend that began in 2019, when only 15% agreed. That number grew considerably in 2020, to 35%. WINTER 2021 ENTERPRISE MINNESOTA /

FOCUS GROUP

THE

PANDEMIC FALLOUT Manufacturers sound off.

/ ENTERPRISE MINNESOTA

WINTER 2021

ow have mask wearing and mandates become part of your HR apparatus at the office? Have you had an employee say if you make me get a shot, I’m going to work across the street? • I think there are a lot of people who feel that way. They are vocalizing it. • For us, the mask and vaccination issues have become very divisive. Very few of our employees fall on the side of wearing masks. I would say a few others agree the vaccinations are necessary, but a lot of our employees don’t believe they are necessary. If that mandate is carried out, I think it would be a big detriment on our employee base. We’d probably lose quite a few employees. • I think the general feeling in our region is that we’re far enough north so people aren’t too concerned with the vaccination mandate. It hasn’t really been much of an issue. At worst, it has been a hassle just dealing with putting up the signs and having all the PPE and all that other stuff in place. But beyond that, I haven’t had any real issues with our employees. • We’re a small company. We’re all vaccinated. We’re not really concerned about masks. For us, it hasn’t been an issue. All of us follow the science, so we’re not objectors in any way, shape or form. We’re not wearing masks, but we’re not really concerned about it because everybody’s vaccinated.

Editor’s Note: Enterprise Minnesota conducted 13 focus groups of manufacturers who provided subjective commentary to accompany the objective data found in its State of Manufacturing® survey. Nine were held via Zoom and four in person. What follows is a highly edited transcript of a Zoom focus group conducted Sept. 15. Participants were encouraged to respond under the reassurance that their names and references to any person or company would be kept confidential.

• I don’t know how many employees have been vaccinated. We’re not keeping track, but I suspect a pretty good number aren’t vaccinated. We’ve had a few people who have been in and out with COVID over the past year and a half, but everybody recovered. When things were mandated by the governor, we required masks, but we also required everyone to keep their distance from each other during the greater part of that time. I don’t expect we’re going to be forced to do anything, but it probably would be a problem if we were forced to have employees vaccinated.

“We have some folks who really want everybody to be vaccinated and some folks who are more on the ‘how dare you suggest that’ side.” I think with masks we might be able to work around that. It hasn’t been a problem. We’ve been continuing business as usual. • We have about 35 to 40 employees, and we have some who are vaccinated, some who aren’t, and some who have strong opinions on one side or the other. We keep up with the current policies, and we try and educate our workers. • We have about 60 full-time employees, and probably 45 to 50 temp employees. I would say that it’s a 50-50 mix with most of our office employees on whether or not they’re vaccinated. During the high COVID time last year, everybody was wearing a mask to comply with the mandate. Right now it’s more don’t ask, don’t tell. If you wear a mask, we assume you’re not vaccinated. No one is really asking questions though. People are very opinionated about this in the community. I anticipate that if we had to comply with everyone getting vaccinated, there would be issues. We have some folks who really want everybody to be vaccinated and some

folks who are more on the “how dare you suggest that” side. We’re a CNC machine shop and more of a job shop type business. We’re not producing our own parts. Machinists are very sought after, especially in our area in northern Minnesota. Some of our employees told us that if we do mandate vaccines, they will have no problem finding another job. I think they’re correct. • There are some individuals who have asked us if we are going to require a mask. And honestly, I’d say we probably know that 90 to 95 percent of our workforce got vaccinated. So, we’re fortunate there because they asked for help finding the vaccine when it was first coming out. Our HR person helped them find clinics that offered the vaccination. We did have a COVID outbreak here, so we did close in December. I think that prompted many of our employees to get the vaccination because we ended up closing for about five days. No one will deny that this has been a weird pandemic-inspired year in terms of the manufacturing economy. As you look at the next year, the next 12 months, what would you say is the biggest challenge that you face as a manufacturer? • Supply chain security. It’s been difficult just making sure things are available. A lot of our stuff has to be made in America. The sourcing of some of those components and parts has become a little bit more of a challenge. There are other delays that come in that are directly tied to COVID and what COVID has done to certain parts of our supply chain. Our ability to get needed parts has been delayed a bit, but our purchases are not very time sensitive. We’re lucky because our customers and our client base are both very understanding. It hasn’t impeded our business yet. • We’re a seasonal company. In the winter months, we haven’t produced as much product, and therefore we don’t need to buy as much inventory. This year, we’re going to have to continue buying the same amount of inventory that we do throughout the summer. We’re going to have a lot of dollars’

WINTER 2021 ENTERPRISE MINNESOTA /

New Reality: “Supply chain security. Just making sure that things are available.” worth of supplies just sitting there all winter. • There were points during COVID when we were having to ration what we were giving to specific clients. “Well, if you don’t buy this product, we’re not going to be able to give you as much of this product.” I mean, just internally, but it had to be done because we only had so much of everything, and we couldn’t get the containers with our supplies off the ocean. Some of them were circling for four months or longer with products or parts that we needed. • One major thing holding us back is finding the skilled employees we’re looking for. I think everybody’s fighting wage increases and the challenge that brings, especially if you do any long-term contract work. That is our biggest challenge. Thankfully in our industry we haven’t been hampered too much other than international shipping. We’ve had a few containers that took four months to get in, but it wasn’t a material shortage. It was just the labor shortage at the port. • The only thing I would add is, if you look at tubing, steel tubing, for example, the price has doubled. Our future material costs are uncertain. We’re not only concerned about cost, but also the availability of materials. The bid might be there, but it might not be there when you need it. The result is that, even though you might have more work in progress, you might have to wait for something to finish a project. I think the labor shortage is a problem for 26

/ ENTERPRISE MINNESOTA WINTER 2021

everybody. However, I think the material shortage is worse. • The material increases are just out of control compared to the last 20 years. We’ve had to review quarterly pricing, where we never used to have to give increases as frequently. We’re looking at doing that right now, due to the lumber and plywood material increases that occurred during the last year. Our clients are not able to get parts, and we are pushing their ship date out. That is impacting our scheduling. • Labor is one of our top issues. We’ve also increased our wages by a little over 20% this year, which is more on the low end. On the other side of the coin, we’re competing with McDonald’s. I mean, we’re at the entry level. It’s pushing a button on a machine, and it’s automated. It’s not hard work, but people can find that work anywhere. So, we do struggle. We’ve had issues with third shifts and keeping people on third shifts. We used to run more weekends, and that’s non-existent at this point. We have supply chain issues too. • I would say supply chain is our number one issue, as well as employees. Also, just getting the materials we need and just following up with our vendors. • Materials are a huge issue — getting the stuff we need. We never used to have a problem getting the components to complete our assembly. We make track systems for industrial lights. Some of the rings we need are American made, and we’re having difficulties

with steel. We have issues with stuff coming through the ports, and we’ve had these problems the last six months. Even if you did have the materials, would you have enough people to complete those orders? • That would be another problem, and one that we would have to figure out. I’ve been fortunate to grow our workforce. We’re working with local school boards. They’re trying to bring in STEM-related fields, manufacturing, and they’re trying to get youngsters involved. If they succeed, we should

“I think everybody’s fighting wage increases and the challenge that brings, especially if you do any long-term contract work.” be able to get the people we need for future work. We’re working with colleges, workforce centers, and the state. Everybody is struggling, and I think I’ve been just a bit luckier because we’ve been able to bring on a couple of people. I spent quite a bit of time trying to recruit. I think I’ve done a little more than some folks. Is the worker shortage here to stay? Is this problem something that you as

manufacturers are going to have to confront every day forevermore? • I think so. I think we need to start thinking that way. We’re doing a lot to train from within. We’re getting qualified people with no skills, and we’re training them. If we train 10 people, that’s a lot of money. We’re not that big of a business. We have to nip away at it year by year. Our growth rate, as bringing on employees goes, does not match the growth rate potential. That will be a big problem in the long run. How much will automation play into your ability to make up productivity efficiencies in view of the fewer employee numbers available?

our plan is, and we have a policy that has increased in the past few years. What about the increasing incidences of things like fake invoices and things like that snaking through your systems? Are you seeing examples of that in your own experience? • Yeah, all the time there are things like that. I think some of these things are preventable and some are unpreventable. The idea would be to implement a framework so cybersecurity doesn’t become an afterthought. It’s part of our culture. I think the biggest cybersecu-

• We started automating machines every so often, but robots are terribly expensive and that requires a lot of programming, time and energy. But yes, I do think automation is here to stay.

Last year, one of the most surprising results from our focus groups was the number of people affected by cybersecurity issues. Is that on your radar now?

• We’re going through it because we are a defense business. We haven’t had any incidents, thankfully, but they can be a big cost drive. • We do a cybersecurity annual test. We increased our security last year with passwords, renewals, and expirations, as far as timelines go. We had one incident where an employee’s email was hacked and information was sent out. Our insurance has us go through what

• Our concern is being shut down again. We are retail, so when stores shut down that impacts our business. We are investing in automation, which is something that could offset the labor issue. I think for us, the biggest problem going forward will be the supply chain. In the 13 years of doing these focus groups, the number one issue of concern facing manufacturers has always

“Some of our employees told us that if we do mandate vaccines, they would have no problem finding another job. I think they’re correct.”

• I agree. We’re actually right in the middle of spending about $25,000 for a very minuscule automation project. But the reason we have to do that is the shortage of people.

• I just went through our business insurance renewal. That was an issue our insurance rep mentioned. If we want to be able to go out to market next year, we needed to increase our cybersecurity. We met with our IT company, and we’re going to a whole new level of security. That’s something I never thought we’d have to do.

makes us as a group a little bit more wary right now with the state of things. The question is whether it’s going to get worse before it gets better.

rity problems are phishing and social engineering attacks. We can educate folks to have a skeptical eye when they’re looking at an email, when they look at a text message. What’s your sense of where the economy is going and how it will affect your ability to plan and your profitability? • I think there are a lot of things going on with the economy, and that becomes somewhat of a geopolitical conversation. I think we’ve seen some challenges and risks, and they are impacting what many of us have come to assume was normal business. That

been the same thing, no matter what’s happening in the marketplace — the cost of health care. Is that still an issue? Or is it just a cost of doing business that you can’t do anything about? • It’s still an issue. We’ve continued to see double digit increases every year. You can’t stay ahead of that without pricing yourself out of the market. It’s impacting our margins and our strategies. That’s another reason to push for more automation. The robots don’t need much insurance. • I’m just waiting every year for the cost of health care to go down, but it just never happens. WINTER 2021 ENTERPRISE MINNESOTA /

Q&A Bob Kill and Sen. Miller shared their views on our state’s manufacturing industry.

Valuable

Legislative Support Bob Kill, Enterprise Minnesota’s president and CEO, sat down with new Minnesota State Senate Majority Leader Jeremy Miller, who is also a co-owner of Miller Scrap, to discuss his new leadership role and our state’s manufacturing industry.

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maybe some of the issues that were caused by COVID? Certainly workforce and labor shortages are an issue across the board, regardless of what industry it is. Those have been the big challenges in the last year. They were starting to be a challenge preCOVID, and they’ve continued to be a challenge. We hope we’re moving beyond COVID now, but they could become an even bigger challenge. One of the reasons is that the government, especially the federal government, offered so many incentives for people not to work. In my view, it should be the exact opposite. The federal government should be providing incentives for people to go back to work. I think that’s first and foremost one of the things government can do to improve the labor shortage. The workforce issues that companies are facing across the board should be dealt with at the state and federal level. I was touring a long-term care facility recentCertainly, there are ly. They’re dealing with a very interesting situworkforce and labor ation. They’re getting applications, but many shortages across the of the people who apply have absolutely no intention of working. Most won’t even return board, regardless a phone call or show up for an interview. They of what industry apply just to maintain unemployment benefits. That tells me that the system is broken, and it it is. Those are big needs to be reformed. I think that’s something challenges. They good that can come out of the COVID pandemic. What we’ve learned can help us re-evaluate were starting to be a what works and what’s broken. One repair challenge pre-COVID, might be to provide more incentives for people to work instead of offering money not to work. and they’ve continued

en. Jeremy Miller, Minnesota’s newly named Senate Majority Leader, is the first manufacturer to serve in this position. The co-owner of William Miller Scrap Iron & Metal Company, a family business based in Winona, he brings a first-hand understanding of how the COVID-era economy has confronted manufacturers with particular challenges and opportunities. Bob Kill, Enterprise Minnesota’s president and CEO, sat down with Sen. Miller to discuss the findings in this year’s State of Manufacturing survey and get his perspective on the concerns voiced by manufacturers. Miller also provided his take on the issues and challenges that may arise in the upcoming legislative session beginning on January 31, 2022. Kill: Sen. Miller, the last time we were in your office was about two years ago. Today, we’d like to talk to you a bit about manufacturing, and the successes and challenges the industry faces. We’d like to get your thoughts and perspectives on manufacturing and the industry’s position as one of the backbones of Minnesota’s economy. Miller: I’m hearing from employers throughout my district — from manufacturing to longterm care facilities to the food and beverage industry — and they’re all having the same issues. I think you must look at each challenge, how it affects that industry, and how it affects our community and business environment. We are all impacted. The real question is, how can we keep these things from remaining an ongoing problem? If we can find ways to improve just one of these challenges, maybe that can help us build on that success as we tackle the other problems. I think the one thing that prepares me best for my role in the legislature is my small business background in manufacturing. There are many topics that we deal with, from regulatory issues to taxes to employment issues. My experience will be helpful when discussions about those issues come up.

to be a challenge. One of the reasons is that the government, especially the federal government, offered so many incentives for people not to work.

Photos by Craig Johnson

You come from manufacturing. You know many manufacturers around here, and they all know you and your organization. How will that sharpen the ideas you bring to this new leadership position? My experience is in the scrap and recycling industry, and that’s certainly a nontraditional type of manufacturing, but it is manufacturing. Our business is sort of at the end and the beginning of the supply chain for many manufacturers. In the legislature, there are many topics that we deal with, from regulatory to taxes to employment issues. My background should be helpful in those discussions. As part of our 13th annual State of Manufacturing survey, which we just completed, we spoke with about 500 manufacturers and held 13 focus groups all around the state. We discussed the challenges manufacturers face, including those in their workforce. What kind of issues come to mind pre-COVID, and

When you think about that senior housing situation, and as a manufacturer and employer, do you think this workforce challenge will impair future growth? The long-term care situation was just one of many examples I’m hearing. Employers throughout the communities I represent tell me that workforce issues are a major concern. Whether the industry is long-term health care, food and beverage hospitality, retail, or manufacturing, you name it. They’re all having the same issues. I believe every challenge creates opportunity. There’s no doubt COVID has been a challenge for everyone, but it also presents opportunity, and I always try to look for opportunities. We must ask ourselves how we can improve on what we’ve been doing well. We’re trying to take employee care to a whole new level too by paying very competitive wages with top-notch benefits. We pay for 100% of employees’ health care. Our retirement plan is great. We have paid time off and there are several other ways we can provide incentives for employees. We’re always trying to find ways to do more for workers. I think employers across the board are trying to do more. They want to bring on new workers, but they know it’s important to take care of the employees they have so they don’t lose them. There are several very small communities in your district, but the district is thriving. How have industries throughout the district been impacted by wage inflation, and all the other issues? Is the competition of getting above a positive, livable wage WINTER 2021 ENTERPRISE MINNESOTA /

becoming a challenge? It’s always a good idea to let the free market work. When we debate bills at the legislature, we try to look at the short- and long-term benefits programs offer. Several bills trying to increase the minimum wage have been introduced. My view is that the free market is working. Wages are naturally increasing. There are only so many workers, and manufacturers are competing for them. A worker can leave one employer and go to another. That’s not helping the workforce issue. We need more people. Manufacturers are busy, but we must find ways to help them bring in workers. This COVID pandemic has been challenging, especially in Greater Minnesota. Down here in southeastern Minnesota there are only so many workers. Companies are competing for the same workers. Workers can easily go from one employer to another, and that’s not necessarily helping companies address their labor issues. We need more workers. We’re busy and that’s a good thing. Our challenge is figuring out the best ways to bring more people into the workforce to fulfill the need. Consistently improving incentives might not be the best long-term answer for the industry. You represent a unique community in southeast Minnesota, with both a twoyear technical college and four-year colleges. Does that help your community? Winona is a higher education hub. I think the technical and community college can play a major role in the advancement of manufacturing. I think technical colleges could adapt a bit quicker than the fouryear schools to the workforce need. One thing that is positive is that the technical college and four-year schools all have great relationships with manufacturers and other employers, as well as the Winona Area Chamber of Commerce. Those relationships are good for every employer in the region. Any thoughts on how technical schools can help advance manufacturing? They’ve already developed a lot of partnerships, both with the high schools and area employers, including the small, medium, and large companies. There are ongoing discussions. I think those will be important for our area’s institutions, especially the technical college. How do you help advance manufacturing? You collaborate. You build partnerships and you work together with people in the community to meet the needs 30

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of employers and potential employees. I think those relationships are important. They help the schools, the businesses and the community adapt and improve. That can help us do a better job of meeting the needs of the employers and their employees. Do you sense that manufacturers are looking at technological advancements and automation more now than before COVID? Manufacturers have been forced to examine those options. I don’t think that’s a bad thing. As I said before, every challenge presents an opportunity. Any business that looks at this as an opportunity to explore automation is doing the correct thing. Just

because you’ve done something one way for many years doesn’t mean you can’t adapt and change and find a way to do it better and more effectively. I think companies are going to investigate technology more and more, especially in manufacturing. The pandemic forced many companies to look at all their options. How do you do more with less? One option is improving technology. I think you’re going to see more manufacturers looking into that. The early stage of our survey said manufacturers are bullish about their companies. It also told us that they’re feeling challenged by some of the things happening with the economy. Any thoughts on what those concerns, other than COVID, might be that are outside

of their control? I’m concerned about the cost of doing business. It’s getting more expensive, and that’s a result of some of the things being discussed at the federal level, including higher taxes and additional regulatory burdens. Inflation is a real thing that is going to affect all of us, whether we’re an individual or a company. Look no further than your last trip to the gas station or grocery store. We’re paying more and getting less in return. Costs are getting passed on to the consumer. How much can we take? So, I’m concerned. I think the outlook is strong, but these things are going to weigh us down, and we won’t be as strong as we need to be. Many of those things are

a result of what’s coming down from the federal government. Manufacturers are saying that the business climate in Minnesota is more challenging now and less positive than it was five years ago. That opinion is very concerning to me. If folks feel the business climate is worse, we need to do something to figure out why they’re saying that. We need to work together to find solutions. The legislature has done several things to provide tax relief for businesses and individuals, and we’ve done several things to hold the line on regulatory burdens. I believe we must do more to create a pro-business environment. We’re all dealing with COVID-related issues, and the labor shortage. We must

figure out how to work together and pursue solutions. There probably isn’t a short-term fix. I look at what the Winona Area Chamber of Commerce did. They have a Reach Program, which allows them to work with manufacturers throughout their community. With that program, they bring students to manufacturers. That gives students hands-on learning experiences, and many of them walk away with a renewed interest in the industry. That is a way to engage students and show them there are career options beyond a four-year education. That partnership can be incredibly valuable for the business and the students, and it might be a step toward a solution to some of the labor shortages we’re seeing. By getting these potential employees into the businesses, seeing the job options, we can provide them with a new perspective for their future options. Programs like that create a win-win. Sometimes, it’s about being creative. That’s a good lead into another topic we’d like you to comment on. We’ve preached for a long time that the technical schools and manufacturers must work together. If you look back a decade, they certainly are working together more aggressively today. One of the challenges is helping manufacturers get their stories across to elected officials. They feel as if they’ve been ignored. They feel they are an industry that provides a livable wage and more should be done by elected officials to help them. Is there anything more that can be done to make manufacturing more visible to elected officials? Manufacturing is the strength of our economy. That’s true not only in Minnesota but across the country. I’ve always said that farming and agriculture provide the heartbeat of our economy, and manufacturing provides the strength. I find it very concerning that manufac-

very serious. I believe a group of legislators are working on cybersecurity. I don’t know what can be done to help small businesses defend themselves in cybersecurity issues, but I believe we should have more conversation about it.

Left: A view of the Miller Scrap plant; center: Sen. Miller and his father, Jerry Miller, who is Miller Scrap’s chairman and president; right: Miller Scrap’s new, updated employee lounge.

turers don’t think their voices are being heard. I’m guessing a lot of this has to do with COVID. Frontline workers have been working incredibly hard, and they’re not getting the attention they deserve. They’ve taken risks to keep other people safe. Manufacturers have been right there too, doing whatever they can to keep the economy moving. They deserve a tremendous amount of credit. I would encourage manufacturers to reach out to elected officials — at the local, state, and federal levels — and tell them how important the industry is to our economy and society. Encourage them to have meetings, provide tours, and do whatever they can to help their legislators understand how important manufacturing is. How about cybersecurity? We hear about it more when the bigger companies get hacked, and less when a smaller company gets hacked, but it’s going on all the time. Is there anything that can be done in the legislature to help small companies? They’re just as vulnerable as larger companies. Cybersecurity is very important, and

Is there anything else you would like to tell us about your experience as both a manufacturer and a legislator and how you view the upcoming session? When you look at manufacturing in Minnesota, you see a big difference in the legislative districts. My district probably has more manufacturers per capita than anywhere else in the state. Then there are those districts where you would have trouble finding one or two manufacturers. That makes manufacturing less important for the legislators from those districts. I mentioned it before, but manufacturing is very important to Minnesota’s economy, and there are important topics across the board that have to be addressed. You can’t have manufacturers who aren’t operating at full capacity. It’s important to talk about what’s happening. If there are reasonable proposals out there that address the workforce and supply chain issues, we have to explore them. With everything going on in our economy and the dynamics in the legislature, this is going to be a difficult session. Employers don’t need more mandates. There is a tremendous amount of mandate fatigue, and not only because of COVID. This next legislative session worries me because of all these issues. I think there are some good things the legislature could get done this next session, but I think it’s just as important to play defense. I think it’s very helpful for the legislature to understand how important small business manufacturing is for our state. I believe my experience and background can help other legislators understand the key role manufacturing plays in Minnesota. WINTER 2021 ENTERPRISE MINNESOTA /

Lean Manufacturing

Following Her Father’s Path Jo Reinhardt’s planning changed her expectations and her company’s future.

By R.C. Drews

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ong before Jo Reinhardt took over Industrial

Louvers, she had goals. With a plan in place to achieve them,

Achievement Award from the National Association of Women Business Owners, the group’s Gold Eclipse Award for Outstanding Company Culture, and the 2014 bronze award for Manufacturing CEO of the Year from Twin Cities Business.

“I always felt I had a lot to prove, especially to my father. I never thought he believed in me until around 2006. I had to earn his respect and confidence.”

she became a key leader in her family’s business. But she had to overcome low expectations to get there, including some from her own family. Reinhardt is the CEO and president of Industrial Louvers, a metal louver manufacturer based in Delano. In her leadership role, Reinhardt is responsible for the company’s strategic planning and operations. As a leader in the industry, Reinhardt’s accolades include the Lifetime

A PATTERN OF FAMILY LEADERSHIP

Industrial Louvers started in 1971 as part of Louver Manufacturing. The parent company manufactured commercial, residential, and industrial metal louvers.

Jo Reinhardt, CEO and President, Industrial Louvers

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Some of Industrial Louvers’ recently completed projects include: (top) a sun control louver at the College of St. Benedict; (right) customized sunshades at Dickinson College; (far right) decorative screen at St. Paul College; and (below) an equipment screen at Zenith Condominiums, Minneapolis, Minn.

But its industrial division was struggling, and the company was relocating from Eden Prairie to Little Rock, Ark. A small group of investors, including Reinhardt’s father James Sterriker, bought the company. After the sale, they opened the plant in Delano. In 1982, Sterriker’s then 28-yearold daughter Reinhardt applied for a job. She was hired for a six-month position as a part-time drafter, which then led to a career with the company in different positions — and Reinhardt recognizing changes to the company’s traditional manufacturing views were needed. “I thought that lack of change was hurting business,” she says. “Sometimes it felt like pulling teeth to get management to accept new ideas.” In 1988, Sterriker started cutting back his role with the company and announced

company. While she had strong analytical skills, Sterriker felt she had issues relating to people. To prove her father wrong, Reinhardt completed a degree in operations management and took communication classes. Reinhardt continued working at Industrial Louvers while in school. She

The organization identified aging equipment to replace, drafted a 10-year plan to double the company’s revenue — which included changes to machinery updates — and detailed needed changes and updates to focus on sustainability. his retirement. While Reinhardt hoped to obtain a leadership role to make the changes she felt were necessary, her father didn’t think she was ready for the responsibility. Instead, he promoted another advisor. Sterriker also decided his daughter needed more training to lead the 34

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moved into the marketing department and helped the company develop its first website. After 11 years, the company needed another president. Sterriker still didn’t think his daughter was ready, but Reinhardt’s mother felt differently and convinced him she was. Reinhardt took

over the CEO and president role in 1999. To this day, she remembers her father’s advice that she’d have to work twice as hard as everyone else to prove herself. “I always felt I had a lot to prove, especially to my father,” she says. “I never thought he believed in me until around 2006. I had to earn his respect and confidence.”

A PLAN TO IMPROVE THE BUSINESS

By 2014, business was growing. Reinhardt was ambitious, optimistic and had a vision for the company, but it still needed help. Julie Amundson, the director of operations, called Enterprise Minnesota to conduct a lean manufacturing review. According to Amundson, Enterprise Minnesota’s role as a neutral third party was important. The organization identified aging equipment to replace, drafted a 10-year plan to double the company’s revenue — which included

changes to machinery — and detailed out needed changes and updates to focus on sustainability. Industrial Louvers stopped using chromium-based pretreatments in the painting process and other harsh chemicals too, which aligned better with the company’s more intentional environmental practices. Other changes included a major addition to the Delano building. The company spent $7.5 million to add a 40,000-square-foot paint and finishing space for Vetra, Inc., an architectural metal finishing company and an

As a leader in the industry, Reinhardt’s accolades include the Lifetime Achievement Award from the National Association of Women Business Owners, the group’s Gold Eclipse Award for Outstanding Company Culture and the 2014 bronze award for Manufacturing CEO of the Year from the Twin Cities Business. Industrial Louvers subsidiary that shares the Delano plant. The size of the building grew to 110,000 square feet and now

includes a rainwater collection system on the roof that fills 60,000 square feet in underground storage. The system filters the water via reverse osmosis to improve Vetra’s wash process. It also reduces the company’s draw on municipal water lines. Improvements were also made to the manufacturing floor after inefficiencies were identified that contributed to a waste of money and time. “We reduced our workforce by 20%,” Amundson says, “and we did it through natural attrition.” The COVID-19 pandemic created challenges in shipping and transportation, according to Reinhardt. Lead times with longtime suppliers went from three weeks to as long as six months. Reinhardt says they are looking at ways to adapt that deal with the pandemic disruptions. “Making the needed changes won’t be easy,” she says, “but we’ll look at our processes and see what we can do to improve.”

“If you’re leading a business, Enterprise Minnesota Peer Councils are an invaluable tool to create a network of help.” Joe Plunger President & CEO Midwest Metal Products, Inc. Winona, MN

Exclusive to Minnesota manufacturing executives. Effective advice from your peers. Essential strategies to grow your business. Visit our website to learn more | EnterpriseMinnesota.org

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Productivity

AUTOMATE WITH PURPOSE

Automation is one way manufacturers can confront their labor shortage, but it’s not the only way. By Greg Langfield

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utomation is vast in terms of its applications, implications and opportunities, and while it isn’t always the end game, it is one viable solution for a productive workforce and to ensure the best return on your investment. Automating with purpose requires a longview perspective, not a short-sighted approach like an on/off switch. It requires year over year thinking across the organization by focusing on specific process details. These details include understanding the amount of value-added steps within the process as well as the amount of variation present. Insight and understanding of these process details ensure success when implementing automation. As the saying goes, “there is nothing worse than automating process waste.”

Automation challenges

It’s important to look at automation as an integrated part to overall workplace productivity. Instead of looking at a lack of automation as a challenge, it’s more helpful to ask: How do we get our workforce as productive as possible and let automation play a role in that productivity leap? When thinking about automation, the challenge is about building a sequence of small improvements to progress to full automation. We should start with a definition of automation and how most businesses look at it as a technology tool. While automation might bring to mind terms such as consistency, reliability, standardization, unattended manufacturing, labor reduction, increasing efficiency, or standardizing safety, a better definition of automation in more precise terms is as follows. “The application of a wide range of technologies, software and equipment that reduces or eliminates human intervention in both the transfer of data or information within a process and the control or monitoring of a process.” More specifically automation is the use of technology as a process aid that improves safety, quality and productivity. Within this narrower definition, “process aid” can be a very small part

of a process, or a large portion of a process — for example, implementing an ERP system or an automated paint line. Process aids are basically a tool to support the effectiveness of the overall process. And of the three improvement areas, historically productivity is far and away the focus of most automation improvements. And through productivity improvements, safety and quality will naturally follow.

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” Because automation requirements depend on a business’ unique needs, automation can solve challenges unique to each business — from flexibility in volume or production and labor shortage challenges to stability in operations and optimizing productivity.

Two paths to automation

Yogi Berra may not be known as an automation specialist, yet his quote, “when you come to a fork in the road, take it,” rings true when thinking about automation. There are two major paths that lead to automation opportunities. The first path might present itself as a solution to high volume, a strong business need, and/or having a standard industry application. This is historically where manufacturers might think about bringing in automation. The second path is more nuanced and involves a few more steps that are smaller in nature to arrive at full automation. This path has the most opportunities for many organizations but unfortunately is often not utilized as there is no “off the shelf problem/solution” as in the first path. This path’s automation solution might present WINTER 2021 ENTERPRISE MINNESOTA /

itself to unique and incremental challenges as a business grows and changes. Organizations need to be open minded for both paths, as they are exclusively not one or the other, but can be executed concurrently into a company’s overall automation strategy. Realizing that there are multiple paths will help organizations overcome challenges in thinking about automation and be prepared to support automation opportunities.

Automation opportunities

What opportunities exist to bring automation into your organization? The answer requires thinking differently about processes and gaining improved vision in seeing the details within these processes. Think of it as progressing down an eye chart to see if you can get to the smallest letters. Thankfully, there are two process methodologies that allow us to gain better insight into the details of our processes. 1. Lean Thinking – eliminating as much process waste as possible 2. Six Sigma – eliminating as much process variation as possible Automation opportunities start by finding small process improvements. Within each organization there are many opportunities to identify areas where process optimization is lacking. By doing so, a company can make small improvements toward workforce productivity, even before automation is considered. These small improvements provide the foundation for larger process improvements and can then be considered for semi-automation opportunities, such as bringing in a piece of equipment that automates part of a process. But what does a process improvement opportunity look like? First, it takes an understanding of the employee value add, which requires a perspective from the eyes of the customer by defining value in terms of transforming information or material that the customer is willing to pay for and is done correctly the first time. The end-goal is to understand employee productivity based on the amount of value-add tasks the employee performs throughout the day. Second, we evaluate equipment value add. The equipment value add is similar to employee value add. The same definition is used — equipment transforming information or product that is going to be valued by the customer and is done correctly the first time. Likewise for equipment, the end goal is to 38

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Greg Langfield is a business growth consultant at Enterprise Minnesota.

understand the amount of value-add time the equipment is performing throughout the day. When employee and equipment value add are identified, then those areas where value add is not occurring are the first opportunities for improvement. These tasks are considered non-value add. Nonvalue add are steps that consume time and energy without providing value. Look for areas where work should be performed but is not being performed. An example of this is the amount of time employees spend walking to/from their work areas. These are non-value steps in their process. When looking at the whole organization, the amount of time those employees took to take those steps is often equivalent to having three more employees. It’s important to get employees involved in understanding the value-add and non-value add tasks — if the walking could be cut down by half, that would make available at least one additional person to support the business, all without spending any capital on automation. You cannot eliminate all workforce inefficiencies. There are opportunities to reduce them, but you must identify them first. You must ask deeper questions about the causes of those inefficiencies and shrink the productivity gap. You must take an opportunity to address a productivity gap in the context of labor shortages. Are you optimizing your workforce? Do you have realistic targets for productivity or improvement? Are employees involved and invested in your productivity optimization plan? You must ask yourself, do answers to these questions identify opportunities for automation where they weren’t previously

identified as areas of obvious opportunity? Integrating employees and equipment adds value to overall organizational productivity and a clearer automation strategy if properly evaluated. Your business has process improvement opportunities. We all want to take a big step in automation, but that is not realistic. If you want to follow a realistic strategy, you must identify the little things, and make those business adjustments so that we can get to the bigger opportunities. It can be difficult to identify large opportunities. Often, you have to work for them.

Strategies for a productive workforce

The five steps to automation encompass foundational elements that help us develop plans on how to take full advantage of semi-automation and full automation. The first foundational elements are broken down into three steps: the Three P’s, consistent results accomplished manually, and touching “the product” once. 1. The Three P’s: Process, Process, Process. Continuous improvement thinking should be process focused. Tools used (including process flow, machine integration and material handling) should be utilized while thinking about the overall process they will support. 2. Consistent Results Accomplished Manually. Don’t automate if you can’t do the operation manually first. You must evaluate your processes and ensure they are stable, consistent, and

controlled from a continuous improvement standpoint. Establish what processes and outcomes are normal versus abnormal. 3. Touch the Product Once. Reducing the time and energy of product reorientation can reduce the cost of automation. Time and energy can be wasted trying to find the orientation of a part to allow your other processes to continue. Establish best practices to standardize and streamline the process to optimize productivity. The fourth step to the path of automation is semi-automation, which involves a human/machine interface. That’s a gateway to your continued process optimization. It’s task-focused with employee involvement. Significant opportunities exist in most organizations for this low-cost, low-risk step. Businesses must be willing to explore possibilities beyond their industry. Different processes have applications across industries. The fifth and last step is full automation. This requires an examination of the full-automation process. The cost of operations versus pricing must be considered. Think about the compromise between speed or flexibility, and accuracy or precision. Remember, we can’t accomplish it all. Think about what needs to be prioritized when implementing a full-automation approach.

Skills to support automation

Organizations must take a holistic approach when thinking about continuous improvement. It’s crucial that everyone, from employees to leaders, think about the process. Where is the value within the processes? That is what your customers are paying for and also where your employees achieve a sense of accomplishment and value add. Get rid of those tasks that rob employees of energy because they are not value test tasks. It’s necessary to make small improvements that make the process better. Take inventory of your value add and non-value add systems in the value stream. Use technical thinking and manufacturing engagement to analyze workflow. Include parts and features, labor, and material variances in the evaluation. Use your industry knowledge and application knowledge. That expertise can be transferred to process capability

knowledge and support successful automation implementation.

Strategies for a productive workforce — managing expectations

Investment expectations must be considered when examining what is needed when working towards automation. Investment expectations come down to application implementation and making sure you focus on the processes, have a stable and reliable process, and then optimize that process so it supports efficiency and productivity growth. To make the process effective, look at both continuous improvement thinking and automation when evaluating organization and managing expectations. Consider automation implementation as one possible solution to support a productive workforce. If you decide automation is a good option, make sure the processes already in place are stable, reliable, and

When thinking about automation, the challenge is about building a sequence of small improvements to progress to full automation. efficient. Ask yourself if they are crucial to the success of the automation strategy. Recent industry polling data reported that 59% of the various organizations that made robotic implementations had favorable responses. But 41% still hadn’t reached their robotic goals or didn’t realize them. The key to improving that success rate across all automation opportunities can be summed up by Bill Gates. “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” A productive workforce strategy includes a long view to find appropriate solutions. They should fit the needs of your unique manufacturing business and those of your customers. Automation that is properly applied is one of those

solutions, while taking the current state of your processes — both efficient and inefficient ones — into consideration. There are two paths to full automation. The one you choose depends on volume challenges, dedicated product output, and custom versus common application. Your goal should be to automate with purpose and develop a strategy that leads to a productive workforce.

Conclusion

Both paths to full automation require a focus. They focus on the processes already in place and those you will need to add value to when automation integration is applied. Equipment intelligence needs to be programmed with ongoing maintenance. For a machine to do the work required, it must be programmed. You must teach it what you want it to do. This contrasts with employee intelligence. Employees come with intelligence and need ongoing training and development. A process focus links them together, and that’s the glue that holds them together. Consider the differences between what employees and equipment offer. Equipment never calls in sick. Machines lack the growth potential employees offer. That’s why you must maximize both automation equipment and employees to their full potential. That’s critical. Think about small process opportunities. How do you link them together and build on a continuous growth mindset? Most manufacturers aren’t finding enough employees. As recently as last fall, Enterprise Minnesota’s State of Manufacturing survey found that attracting workers was the highest or the second highest concern among manufacturers across the state. It is no great leap to say that automation opportunities are seen as one solution to deal with the labor shortage. It isn’t just about deciding to automate. It’s important to automate with purpose and focus on the long-view strategy that leads to a productive workforce. Use a smallstep strategy to tailor automation to your specific manufacturing needs and the needs of your customers. Consider the challenges, opportunities, tools and skills of your equipment and employees. That can shrink the productivity gap. Figure out how automation strategies will set you up for success and maximize your growth potential. WINTER 2021 ENTERPRISE MINNESOTA /

Final Word

A Gift That Keeps Giving The Frandsen Family Foundation created a scholarship program that benefits manufacturing and brings us one step closer to a solution for a growing workforce issue.

n early October, a group of about 120 high school students celebrated Manufacturing Month by touring Pine Technical and Community College in Pine City. It’s not unusual for a group of students to visit a technical school to explore post-high school options. What was unique about this tour was that all the students are eligible for a full-ride scholarship, plus $1,000 in expenses to attend Pine Tech. The scholarship is the brainchild of Dennis Frandsen, a business executive who is constantly looking for ways to help local communities. His family foundation created the program to help train students to land manufacturing jobs and, it has the potential to bring new employees into an industry that desperately needs them. Eligible students are graduating seniors from high schools in Braham, Pine City and Rush City in

“Hopefully this creates a pipeline of skilled workers in positions manufacturers are desperate to fill. It’s really good for manufacturing in our region and state.” —Joe Mulford, President of Pine Technical and Community College

/ ENTERPRISE MINNESOTA WINTER 2021

Lynn Shelton is vice president of marketing and organizational development.

Minnesota and in Frederic and Luck in Wisconsin. Students accepting the scholarship receive two-year tuition at Pine Tech and $1,000 to cover books, tools, and supplies. Almost 200 scholarships have been awarded to date. Frandsen built his success off hard work, with much of it in manufacturing. He’s been a dairy farmer, a lumberman, and he has interests in several manufacturing companies. In addition to the Frandsen Family Foundation, Dennis also leads Frandsen Bank and Trust. “Hopefully this creates a pipeline of

skilled workers in positions manufacturers are desperate to fill,” says Joe Mulford, president of Pine Technical and Community College. “It’s really good for manufacturing in our region and state.” In an interview with ABC News when Dennis launched the scholarship program in 2018, he said he wanted to help students who didn’t think they could pay for their education after high school. Franzen was inspired, in part, by the growing need for skilled workers at his own companies. “I realized there’s a lot of opportunity for students,” he said. They just needed a way to prepare for those jobs. Frandsen’s manufacturing companies include Plastech Tool & Engineering in Rush City; Plastech Corporation in Rush City; Miller Manufacturing in Glencoe; and Industrial Netting in Maple Grove. Dennis’s son Greg, who is Frandsen Corporation’s president and the president and CEO of Industrial Netting, says it was his father’s thinking that led to business success and innovations like the scholarship program. “He always wants to try new things, and just see if they work.” All those who work with manufacturers and support this job creating and retaining engine of Minnesota’s economy may want to look at the success of the Frandsen scholarship and ask what can be done in their own local communities to support students who might just choose manufacturing as their career calling.

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