Hubs: A Guide to the Future of U.S. Manufacturing

Washington’s newly touted “Hub” initiative seeks to rejuvenate American manufacturing and restore lost jobs to an industry which has experienced significant losses in recent years. President Obama first called on Congress in his 2013 State of the Union to create a network of manufacturing hubs across the nation. And he once again called for them in yesterday's address.

Manufacturing hubs will bring industry leaders, universitie, and federal research together under one roof to help develop the next generation of American manufacturing. The idea is that the regional level is the best place to work on technology-based development. Each region then needs to be anchored by hubs to solve our toughest problems.

The first hub was launched in Ohio last year to develop and train workers in 3-D printing technology. Just last week, a new hub in Raleigh, North Carolina, is slated to develop what are known as wide bandgap semiconductors. Simply put, semiconductors are at the heart of every piece of electronics we use daily and wide bandgap semiconductors use up to 90 percent less power and can operate at higher temperatures than normal semiconductors. The result is manufacturers being able to make products smaller, faster, and cheaper. 

The program is currently being funded with $200 million in existing federal money, and two new hubs are expected to be announced in the coming weeks. It is unknown if these hubs will actually spur job creation or drive the American manufacturing renaissance forward. Proponents to the program believe that there are other economic alternatives the government could be doing, such as lowering the corporate tax rate or speeding up the permitting for shale and oil production, which would bring down the cost of energy and attract energy-intensive manufacturing. 

No matter what the solution is, harnessing American innovation through a program of collective experts is the right step forward.

Tim Murphy is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.

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Survey Finds Indiana’s Manufacturers Ready to Compete

The certified public accounting firm of Katz, Sapper & Miller LLP today released the results of their annual Indiana manufacturing survey. This study of small- to medium-size manufacturing companies was commissioned by Katz, Sapper & Miller and developed in partnership with Indiana University's Kelley School of Business – Indianapolis, Conexus Indiana, and the Indiana Manufacturers Association.

The results from this year’s survey, 2012 Indiana Manufacturing Survey: “Halftime” for Indiana Manufacturing, indicate that Hoosier manufacturers are stronger this year than at any point since the Great Recession, and are well positioned to compete in the coming years.

“Fundamental changes are continuing to take place across manufacturing in all kinds of capabilities,” said Scott Brown, partner-in-charge of Katz, Sapper & Miller’s Manufacturing and Distribution Services Group. “Businesses are starting to invest for growth, including facilities and automation, with an eye toward providing customers increasing quality at lower prices. While many Hoosier manufacturers have managed to survive the effects of the recession, challenges remain. Of course, not all manufacturers have found the perfect winning strategy, but many are heading in the right direction and some are excelling during these challenging times."

Other key findings reveal:

  • Hoosier manufacturers have largely shaken off the effects of the Great Recession and have stabilized their businesses. A significant majority of Indiana's manufacturers now report that their business is either "healthy" or "stable” with tougher times behind them.
  • Survey results indicate that the past's relentless rounds of downsizing are over, and while that approach worked well when mere survival was paramount, it is hardly a winning strategy for the future.
  • Many Hoosier manufacturers now recognize that the winning strategy is targeted investment aimed at growth. Over 70% of respondents reported that their goals were increasing investment in areas either essential for revenue growth, or across the entire business.
  • Indiana remains well positioned to lead American manufacturing. Hoosier manufacturers are highly competitive in a broad variety of industries and products, and, in fact, one in 10 of the companies in this survey are planning to open a new facility in Indiana in the near future.
  • A significant number of respondents report that they are onshoring manufacturing back to the United States. Indiana’s competitive advantage remains the fact that nowhere else in America allows manufacturers to position themselves closer to their customers and markets, or offers greater advantages in terms of suppliers and workforce quality.
  • Successful manufacturers are continuing to rely on process improvement programs such as "Lean" and "Six Sigma" for implementing change, as well as increasingly taking advantage of advanced automation or smart manufacturing technologies to remain competitive.

Download the complete results of the 2012 Indiana Manufacturing Survey: “Halftime” for Indiana Manufacturing.

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Clean Energy Incentives Manufacturers Should Consider

In a move to accelerate investments in industrial energy efficiency, and to reward states and business that engage in such investments, President Obama signed an executive order August 30, 2012: Accelerating Investment in Industrial Energy Efficiency. The order builds on prior efforts of the administration to reduce overall energy consumption and harmful emissions in the United States, and aims to “put more people back to work and build an economy that lasts." The order claims that the industrial sector, which accounts for 30 percent of all energy consumed in the United States, may save a combined $100 billion in energy costs over the next 10 years via the proposed reduction in energy use. 

One goal specifically relates to the use of combined heat and power (CHP). In fact, the order seeks to deploy 40 gigiwatts of cost effective CHP within the United States by 2020, which the administration argues would save energy users a combined $10 billion per year. CHP systems are used by manufacturers in place of conventional electrical power to save energy and costs through means of heating water to create turbine-spinning steam. To learn more about CHP technologies, visit the U.S. Environmental Protection Agency's CHP Partnership page, or the United States Clean Heat & Power Association's site.

As evidenced by this order, the current administration plans to support states that encourage building CHP and offer tax incentives to companies that install CHP. Clean energy incentives already in place include the Production Tax Credit and the Advanced Energy Manufacturing Credit. Under the Production Tax Credit, companies using eligible energy systems can receive a credit of up to 2.2 cents per kilowatt-hour of power (kWh) used in operations through specific clean energy sources. The Advanced Energy Manufacturing Credit provides a tax credit of up to 30 percent of investments made in qualifying advanced energy projects, such as properties using wind, sun, geothermal, and fuel cell technologies.

Trent Gerbers is a staff accountant in Katz, Sapper & Miller’s Business Advisory Group. For more information, contact Trent at tgerbers@ksmcpa.com.

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Manufacturing Can Thrive in U.S.

Over the past decade, many news stories have covered the movement of manufacturing jobs out of the U.S. and into other countries. However, there are still companies that see the value in keeping their manufacturing productions stateside. This value is seen through the technology that can be employed and the quality of the products that are developed. Value is also seen in the amount of experience that the workforce in a location has been able to obtain through years of manufacturing a product. That experience has created efficiencies that did not diminish the quality.

Reuters reports that Proctor & Gamble is an example of a company that follows and has found success in this philosophy.

Justin Hayes is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.

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Executives See Manufacturing Returning to US

Industry Week reports that a survey of C-level and VP-level manufacturing executives see the possibility of certain manufacturing operations returning to the U.S., with 37% citing overseas costs as the major reason. Logistics concerns were cited by 19%, while 36% stipulated other reasons, including economic/political issues, quality and safety concerns, patriotism and overseas skills shortages for highly technical manufacturing processes.

The survey identified low-volume, high-precision, high-mix operations, automated manufacturing and engineered products requiring technology improvements or innovation as the primary forms of manufacturing returning to the U.S.

Justin Hayes is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.

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Manufacturing in the New Age

In June, 2011, President Obama announced the launch of the Advanced Manufacturing Partnership (AMP). The AMP is an effort by the federal government to partner with manufacturers in industry and academic experts to invest in ways it improve or "advance" the U.S. manufacturing industry. The plan calls for more than $500 million to help start the efforts. President Obama announced the following key steps are being taken by the government to ensure the success of the AMP:

  • Building domestic manufacturing capabilities in critical national security industries
  • Reducing the time to develop and deploy advanced materials
  • Investing in next-generation robotics
  • Developing innovative energy-efficient manufacturing processes

Over the past few years, many Americans have lost jobs with strong manufacturing companies. Professors at Massachusetts Institute of Technology (MIT) are hoping that the efforts of the AMP program are able to restore many of these jobs. The goal is to create an environment through partnerships with government, academia and private industry to create new means of manufacturing more for less, therfore increasing manufacturing profitability.

MIT political scientist Suzanne Berger says, “This isn’t just about ways of moving widgets around. What we’re talking about is a whole new set of technologies.’’

The work at MIT and other universities is already beginning to impact the current manufacturing environment. MIT labs sparked the idea that created the lithium-based batteries that are now beginning to truly impact the auto manufacturing sector. MIT has created a strong working relationship with five other universities with the hope that the more academia involved, the more impact there will be.  Only time will tell how successful the AMP initiative will truly be, but as Jason Miller, assistant to President Obama, states in  a recent speech at MIT, it's not about the past. It's about the future.

"It's not about some desire to return to a romantic notion of the past, of what manufacturing was," Miller said. "It is about a fundamental recognition that without a robust and vibrant manufacturing sector, it's going to be difficult for us to sustain a robust and innovative economy."

Justin Hayes is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.

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Retired Boomers Could Create a Shortage for Manufacturers

A recent article from AccountingWeb reported concerning results from a recent survey commissioned by Advanced Technology Services, Inc. (ATS) and was conducted by The Nielsen Company. The survey confirmed the concerns of many in the manufacturing industry of the shortage in skilled workers that will be created as Baby Boomers retire. The article notes that the top three findings from the survey were as follows:

  • Manufactures with revenues of $1 Billion or more will be hit the hardest by the Baby Boomer retirement at an estimated cost of $100 Million or more over the next five years
  • 45% of respondents said that they are trying to encourage their older workers to stay on the job (seems to be a short-term fix, not a long-term solution)
  • 50% of the respondents stated that their company has 11 more openings for skilled workers, with 31% having over 20 slots.
Jeff Owens, president of ATS, stated, "This is an essential time to be in manufacturing considering other sectors are seeing hiring slow downs. Many young people overlook the opportunity and high wages that careers in manufacturing afford. As you can see form the rebound and the shortage of skills that manufacturing is experiencing, opportunities for profession growth and excellent wages are plentiful for people with technical skills required."

Justin Hayes is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.
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Next Technology Executive Roundtable - Bring Your Own Topic

Katz, Sapper & Miller, LLP, and KSM Business Technology, LLC, have partnered with TechPoint to present the KSM Executive Roundtable. TechPoint will be continuing this quarterly series throughout 2010, focusing on major issues hi-tech CEOs are facing. The series offers information that cannot be easily found elsewhere, in a format with a free exchange of ideas with other qualified technology CEOs. Previous topics of discussion have included capital access, tax and accounting, technology, and legal issues.

The next roundtable, to be held June 23, will be an interactive format designed for attendees to exchange ideas with peers. The format will allow the attendees to:

• Share the chief challenges and/or opportunities people are facing in today's marketplace
• Hear what colleagues are thinking about most as they lead their companies through the economic recovery
• Affirm, question or speak out against trends in industry sectors

Confirmed attendees include Mark Hill of Collina Ventures and TechPoint Board Chair, Christopher Clapp of ANGEL Learning, Chris Baggott of Compendium Blogware, and Mike Simmons of T2 Systems.

This event is by invitation only. For more information about the KSM Executive Roundtable or to RSVP, visit TechPoint's Web site.


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