In a century-old, red-brick building on Clevelands
near West Side, manufacturing old and new is woven into the fabric of the
city. There on West 25th Street, under the watch of a once coal-black water
tower, now covered in dark-green paint with crisp white lettering, Thermagon
Inc. produces polymer-based materials for the computer and electronics industries.
The water tower, raised above the streets rooftops on spiderlike black legs, is from a bygone era as is the rust-covered fence that meshes with a bright steel security gate surrounding the companys small parking lot and dock area. But here, in the building where the skilled immigrant labor force of Lion Knitting Mills Co. designed and produced olive-drab knitted caps and sweaters to keep the armed forces warm during the Depression, Thermagon is helping to define what is being labeled as the New Manufacturing.
Step inside Thermagons outer offices and nothing seems out of place: a few unadorned gray cubicles; gleaming steel ductwork that contrasts with the fresh white paint covering everything from the walls to the radiators in a small conference room. But take a closer look at the polished hardwood floors of the outer office and in a dark corner tucked high above the production area, and youll see the scars that remain from when Lion was producing luxurious sweaters of cashmere, lambswool and vicuna.
Lion, whose first product the
varsity letter sweater was knitted
on hand-operated machines, had upgraded to belt-driven ones by the 40s, and the mostly female labor force worked at row after row of individual wooden tables packed between support pillars on the shop floor. By the 1980s, it had even installed computer-controlled machines to make afghans, lap robes, throws and baby blankets. But in spring 1990, Lion closed down when it could no longer compete with the flood of lower-cost imports that hit the market.
Even though Thermagon has remodeled much of its 20,000-square-foot allotment of the building, evidence
of its past linger: deep gashes in the hardwood; patches of lime-green, 50s-style paint. Its atmosphere may not
suggest New Manufacturing, from the ordinary-looking 16-inch square sheets of salmon, sky blue and gray epoxy material used to dissipate heat generated in semiconductor devices, to its clean rooms, which use hepafilters
to purify the air and are occupied by employees wearing white lab coats, gloves and hair nets. But at Thermagon as in the New Manufacturing innovation is king. And innovation permeates every aspect of the manufacturing process today.
For Thermagon, that meant designing and manufacturing several pieces of equipment for its unique process for attaining high thermal conductivity materials; developing a family of products with thermal conductivity higher than any before reported; and marketing its product by giving free samples to potential customers for their own testing and evaluation.
With companies like Thermagon leading the way,
the New Manufacturing is designed for a new millennium, built on new processes
and new technology. Thus the first step to manufacturing growth in Northeast
Ohio is changing the way we view manufacturing itself, according to Edward Ned
Hill, senior research scholar for the Urban Center at Cleveland State University
and professor of urban studies and public administration at CSUs Maxine Goodman
Levin College of Urban Affairs.
No longer does manufacturing mean simply production. It integrates management, research and development, production, sales and marketing and logistics. Local manufacturers may perform just one, or a combination of any one of those components right here in Northeast Ohio, Hill says. For smaller firms, all five components take place right here.
So when you think about Northeast Ohio manufacturing, its not just the physical production, he emphasizes. You have to remember that a lot of value is added at Eatons headquarters or TRWs headquarters.
Obviously, manufacturing growth in Northeast Ohio means more than just adding jobs. Those jobs must be positioned at the upper end of the product-development spectrum if we are to compete in the global marketplace, Hill says.
In addition to redefining the boundaries of Northeast Ohios manufacturing community, we must also identify and nurture those industries that compose the core of our economy, says Hill. If you look at the competitive advantage of this region, its in materials, whether its steels or plastics or coatings, he says. All of these are tied to end-use industries such as automobiles or plastic products.
Hill cites the recent clusters study from the Greater Cleveland Growth Association, on which the Urban Center, among others, served as a consultant. The study identified five manufacturing-industry clusters and two emerging industries instrumentation and controls, and biomedical/biotechnical as truly world-class.
Naturally, metalworking including automotive/transportation parts manufacturing and machinery-components fabrication remains at the core of the local economy. However, other industries can also be considered world-class, Hill says.
The quiet giant of this area is chemicals and specialty chemicals, he says. We recognize names like Lubrizol, Ferro, Hall Chemical and State Chemical [Manufacturing], but we dont fully understand that chemicals and the paintings and coatings industry worldwide is a Northeast Ohio industry. In fact, you cannot find a consumer paint that doesnt have its roots around here somewhere.
While much of the actual production of chemicals and coatings has moved to the Gulf Coast, due to its close proximity to both raw materials and markets, much of the management, research and development and sales and marketing takes place right here in Northeast Ohio. As a community, we must begin to recognize the chemical industry as a separate entity, Hill says, so we can supply it with support for the various factors of production to keep it at the cutting edge.
If the chemical industry ever came together and established a presence and identity, it would simply blow us apart, he asserts. We need to continue to supply this industry with new talent, so it can develop new products. If it doesnt develop new products here, it could be gone.
Similarly, plastics and polymers represent another industry within which Northeast Ohio has a competitive advantage over other regions around the globe. In many cases, raw material stocks for this industry come out of the Gulf Coast and actual production takes place in other states where labor costs are cheaper. However, many of the products are designed and tested in Northeast Ohio, says Hill.
Two fields containing many attributes of the world-class community are instrumentation and controls and the biomedical/biotechnical industries. However, these fields are still maturing, Hill says. Instrumentation and controls is a nascent industry to watch, Hill says, noting that the two major players are Keithley Instruments and Parker Hannifin along with a bunch of start-ups. According to Hill, approximately 70 percent of this industrys products are exported outside the area. Heavy in computer applications, the industry also relies on outside contractors to help design and assemble products which in turn feeds the growth of smaller, start-up firms.
In the biomedical/biotechnical industry, huge research and development increases
in Clevelands health care facilities are fueling innovation that is heading
into the marketplace. Like instrumentation and controls, this industry cluster
has world-class leaders such as Invacare, STERIS and Picker International, as
well as a host of start-up companies.
With world-class industries firmly in place here,
the key to growth becomes innovation. Essentially, there are two ways to goose
a balance sheet, Hill says. The first: When you have older established products,
then its execution that really dominates how well a firm does. The second
is to build revenue with new products. In todays business environment, its
much easier to create new products by buying firms that develop new products,
he says, adding that for this region to grow, it must create a culture and
a rate of return where established companies are generating new products from
their existing base.
But the road to growth will have obstacles, Hill says, one of which will be education. In Northeast Ohio, we do a terrific job of educating the top 25 percent of students, he says. We do an OK job with the next 25 percent with the bottom percentages, were not doing what we can. If you think of it like a company, we just cant afford to throw away this product any more.
All students completing the secondary-school level need to be mathematically savvy as well as skilled in verbal and written communications. In todays and especially tomorrows workplace, traditional college-level skills are actually the minimal economic literate levels of skill, Hill says. And we have entire school systems that have difficulty producing that product.
And the problem is not restricted
to the inner-city schools or one school system in particular, he adds. Indeed, where the educational structure is dominated by the traditional blue-collar, lunch-bucket expectations, students are failing, Hill says.
There is some good news, however. The low cost of living and the high quality of life in Northeast Ohio allows companies to attract talent from outside the state. According to Hill, there has been a recent net increase in migration to this region, despite the flood of heat-seeking geezers moving south to retire. However, theres no substitute for homegrown talent.
Another impediment to growth is the tangible personal-property tax, Hill says, which directly impacts warehousing and distribution costs in Northeast Ohio because it taxes inventories.
Its a job killer and a value killer because it is a tax on capital, and capital is what you use to increase productivity, and productivity is what you use to increase earnings, says Hill. Look at what is happening to distribution in Northeast Ohio. Its going to free trade zone so companies avoid paying the tangible personal-property tax. Again,
if you think of production being just one of the five components of manufacturing, we have hurt ourselves because we pay tax on inventory in this state.
The final growth hurdle in Northeast Ohio, is the subject of a battle already being waged the expansion of Cleveland Hopkins International Airport. This is hurting our ability to compete globally, says Hill. Right now, cities like Pittsburgh and Cincinnati have an advantage over us because they have direct connections to Europe. Therefore, they are able to attract European companies shopping for a place for their U.S. regional headquarters.
Much has been written about the emerging service industries in Northeast Ohio and the impending demise of the manufacturer. And although support industries are critical to future manufacturing growth, Clevelands strength lies in its manufacturing community. Travel and tourism are very important for downtown, says Hill. They are also very important in terms of these core industries attracting new, higher-end talent. But its the cart not the horse.
Our competitive advantage remains high value-added, capital-intensive manufacturing,
says Hill. Thats our economic reason for being.