Economy and Environment and Manufacturing & Technology and Technology

Regional partnerships called key to making it: Purdue urges state manufacturers to join supply chain

June 12, 2006

Growing global competition is bringing local manufacturers together. And the definition of local is changing from around the corner to within 500 miles.

Officials from Purdue University have conducted a series of manufacturing summits encouraging Indiana plants to tear down their separatist walls and become an integrated part of regional supply chains.

"Supplier-based manufacturing is based on long-term relationships in a 500-mile radius, so we need to think about Indiana manufacturing regionally," said John Sullivan, director of Purdue's Center for Advanced Manufacturing and a professor of aeronautical and astronautical engineering.

"Advanced Manufacturing V: The Future of Midwest Manufacturing," Purdue has pulled manufacturers together in recent months at regional meetings in South Bend, Elkhart, Anderson and New Albany.

"Indiana is at a regional crossroads in this global economy," Sullivan said. "We wanted to make our Indiana manufacturers aware of opportunities outside the state and to make national and regional policymakers and grant reviewers aware of Indiana manufacturing."

Gaining trust

Purdue isn't alone in recognizing that relationships among local and regional manufacturers in the United States must change for domestic manufacturers to survive the onslaught of global competition.

"It used to be domestic manufacturers were most concerned with competitors one state over," said Hank Cox, spokesman for Washington, D.C.-based National Association of Manufacturers. "Now, everything is changing. Competitors are coming at U.S. manufacturers from every corner of the globe."

That means manufacturers who used to consider themselves competitors for state and local tax credits, federal grants and workers are now more apt to become partners.

"You have to be able to trust your suppliers, and it helps if they understand your business and what you're trying to do," said Art Evans, president of Greencastlebased Dixie Chopper, maker of commercial-grade lawn mowers. "It helps if you're more than just another customer to the companies supplying you with raw materials and parts. You can get parts and materials just about anywhere."

And often, manufacturing experts said, parts and materials can be had cheaper from Asia and Mexico. Supplier relationships now encompass much more than delivering parts to manufacturers.

"To compete globally in terms of both quality and price means designing parts for manufacturability," Purdue's Sullivan said. "To accomplish this, suppliers and manufacturers must understand one another's products and businesses and employ strategies, such as product life-cycle management, to understand the stages-from inception to obsolescence-a product will

Interest among Indiana manufacturers in partnering not only with one another but with manufacturers from surrounding states has greatly intensified in recent years, Sullivan said.

" M a n u fa c t u r e r s sense that their world is changing dramatically, and not taking action could, and probably will, lead to their eventual obsolescence," Sullivan said.

State's economy

With more than 106,000 manufacturing jobs in Indianapolis alone and 572,900 statewide, according to Indiana Department of Workforce Development data, the manufacturing segment's health is paramount to the overall state economy.

But manufacturing jobs statewide have declined more than 185,000 in the last two decades due in part to growing global competition, manufacturing experts said, and that number could easily decline another 20 percent within 10 years if state manufacturers fail to remain competitive in the changing environment.

A 10-year study done by Manufacturers' News Inc., an Illinois-based publisher of annual manufacturers' directories, found Indiana lost more than 40,000 industrial jobs from 2001 to 2006.

There's almost no segment of manufacturing that wouldn't be strengthened by being part of a regional supply chain, Sullivan said.

"Auto parts flow to and from Indiana, Illinois, Ohio, Michigan and Kentucky," Sullivan said. "Our Indiana wood products producers deal with suppliers, wholesalers and retailers in surrounding states to compete globally."

More than 400 Indiana manufacturers, policymakers and academics gathered last month on Purdue's West Lafayette campus to hear Al Frick, the U.S. Department of Commerce's manufacturing czar, and other industry experts speak about the changing landscape of manufacturing.

In addition to its annual summit, go through over a period of time."

While partnerships between manufacturers within a certain region have been slowly growing for a number of years, the post-9/11 economic downturn and the influx of foreign competition has accelerated the trend, manufacturing experts said.

"Most of what we're seeing is the result of the serious downturn of 2002," said Leslie Galbreath, vice president of Indianapolis-based DGS Marketing Engineers, a firm that specializes in marketing and communications in the manufacturing sector. "With global competition grabbing people's attention, partnerships and collaboration are all becoming critical pieces to manufacturers' growth strategy."

Some manufacturers, however, still struggle with old-school thinking, Sullivan said.

"One of the lessons of the highly competitive global marketplace that we've learned since Purdue began holding these summits in 2002 is that even the most independent, strongest-willed small company cannot withstand global competitive pressures alone," Sullivan said. "And no protectionist wall or moat will keep those competitive pressures at bay for long."

Joel Trusty has seen what global competition has done to local manufacturers firsthand. He is president of Indianapolisbased Trusty-Cook Inc., which makes polyurethane hammers, spindle liners and hush tubes for part-making machines.

"The Chinese have become so masterful at copying things, they've become a tremendous force at almost every level of manufacturing," Trusty said. "One of our hammers lost shelf space at Home Depot to a Chinese manufacturer."

Trusty said it's critical for local manufacturers to make innovative products and to add value to their partners in the supply chain to survive. He added that communication among manufacturers, their clients and suppliers must work both ways.

"It's just as important to understand your suppliers' capabilities and limitations," Trusty said. "In our case, understanding our suppliers is even more important."

Trusty-Cook has thrived in the changing global marketplace by forging strong supplier relationships with companies in the Midwest and some along the East Coast.

"We bring in most of our raw materials from companies relatively nearby," Trusty said. "There's a lot at stake for us, and we're in a position to really be let down. Ability to deliver and customer service are critical for us."

Technology such as cell phones, e-mails and BlackBerries have shrunk the global business place and intensified competition among competitors near and far, said Andreas Weber, president of Rego-Fix Tool Corp., a maker of components for the metal working industry, with its North American headquarters in Indianapolis.

"Technology has brought response time globally down dramatically," Weber said.

Manufacturers who make products that are easily replicated and mass-produced are most in need of becoming part of a strong supply chain to survive, manufacturing experts said, but the majority of manufacturers are at some risk.

"All the players are a lot more connected than they used to be," said DGS' Galbreath. "To survive, manufacturers are finding it's better to sell a solution than to sell piecemeal products."
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