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Maryland Manufacturing Strategic Plan

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  • 1. Maryland Manufacturing in the Global Digital Economy Maryland Advisory Commission on Manufacturing Competitiveness January 2007
  • 2. Table of Contents
    • Executive Summary
    • Purpose and Overview: Manufacturing in Maryland
    • Advanced Technology Manufacturing
    • Cluster Overview and Benefits
    • Cluster Identification, Development, and Support
    • Recommendations and Next Steps
    • Appendix
      • Current Situation of Maryland’s Manufacturing
        • Competitive Advantages
        • Challenges
      • Cluster Background
        • Cluster Classification
        • Cluster Policies and Pitfalls
  • 3. Executive Summary
    • Maryland manufacturing contributes significantly to the development of the knowledge economy in the global digital arena
    • Maryland’s manufacturing sector is being transformed throughout the state; and although it appears to have experienced a steady decline…
      • The traditional manufacturing workforce in 2003 was 5.9% compared to more than 9% in early 1990s
      • Gross State Product (GSP) related to traditional manufacturing was 7.2% in 2001 compared to approximately 10% in early 1990s
    • …And despite a drop in the job growth and GSP, the manufacturing sector has actually
      • Steadily increased the total output since 1992
      • Created significant earnings and jobs in other sectors
      • And provided a strong foundation for managing the global supply chain
    • In addition, traditional metrics and classification schema do not fully capture the full breadth of manufacturing and related capabilities in the state and across the globe
    • Research and analysis into the multiplier effect across the manufacturing sector in Maryland revealed that the following industries have traditionally provided the most economic value to the state
      • Food and beverage manufacturing
      • Printing and related support activities
      • Transportation equipment manufacturing
      • Chemical Manufacturing
      • Furniture and related product manufacturing
  • 4. Executive Summary (Continued)
    • To foster manufacturing growth, Maryland should continue to support targeted traditional manufacturing clusters:
      • Traditional: Food and Beverage Manufacturing, Printing, Aerospace and Defense, Modern Agriculture, and Distribution and Warehousing
    • More importantly though, Maryland should emphasize a manufacturing transition that supports the knowledge economy and the commercialization of Maryland’s core research competencies:
      • Strategic technology: Bio-technology, Information Technology, Nanotechnology, Miniaturization, Transportation Systems, Energy, Aerospace & Defense, Advanced Agriculture, and Craft Manufacturing
    • The focus should be on growing those manufacturing capabilities that leverage Maryland’s unique position in the realm of disruptive research competencies and process innovation
    • Maryland should follow a rigorous approach to promote the creation, development, and maintenance of clusters—especially those that leverage the global supply chain for Maryland manufacturing
  • 5. Purpose
  • 6. Purpose The State of Maryland: Has proximity to major markets Unparalleled access to state and national governments A base of natural, technological, and transportation resources A strong history of innovative manufacturing This suggests manufacturing should have a favorable future in Maryland by leveraging its disruptive research competencies and manufacturing process innovation to enhance its ability to manage the global supply chain The purpose of this report is to provide a critical understanding of where and how the state should focus its key resources
  • 7. Overview: Manufacturing in Maryland
  • 8. Manufacturing in Maryland has reached a critical inflection point The strong role manufacturing has traditionally played in Maryland’s economy has been declining since the early 1990s
    • Its contribution to the state’s Gross State Product (GSP) declined from 10% to 7.2% in 2001
    • Employment dropped from 9.3% of Maryland’s workers to 5.9% in 2003
    Though this decline appears to paint a dire picture, it is largely due to faster growth in other sectors, process automation, and increased productivity… … Maryland’s manufacturing output and growth rate have actually been expanding.
  • 9. Though Maryland’s manufacturers have seen steady growth, not all types of manufacturers have grown at the same rate
    • Traditional manufacturing is well established and has served Maryland well in the past, but has limited growth potential and does not capture new industries nor leverage many of Maryland’s strengths
    • Advanced technology manufacturing involves more risk but offers more growth potential as it supports and aligns with industry throughout the global knowledge-based economy
    In addition to offering strong rates of growth, research shows advanced technology manufacturing provides an additional benefit to the State economy through strong multiplier effects… (Source: Stern School of Business, NYU, January 2005) Manufacturing can be broken into the following groups: 34.00% Miniaturization 25.00% Nanotechnology 11.32% Furniture and related product manufacturing 19.46% Bio-technology 7.75% Food and Beverage 12.59% Information Technology 7.58% Transportation equipment manufacturing 11.57% Energy 2.92% Printing and related support activities 8.94% Transportation systems 2.04% Chemical manufacturing 8.47% Aerospace and Defense 1.21% Tobacco Growth Rate Advanced Technologies Growth Rate Traditional
  • 10. Advanced technology’s higher growth rates and stronger multiplier effects can significantly increase economic activity in Maryland Traditional Benefits to MD* Jobs** Growth Tobacco $1.92 2.0 Low Food and Beverage $1.92 2.0 Medium Printing $1.94 1.1 Low Transportation Systems $2.01 2.13 Medium Information Technology $2.06 1.42 High Biotechnology $1.96 N/A High The State’s existing base of traditional manufacturers is relatively established and slow growing * Benefits to MD: each $1 activity in the industry generates X amount of activity in other industries. ** Jobs: based on the direct-effect multiplier of employment, each job added in that industry adds an additional number of jobs in the area. Advanced Tech. Benefits to MD* Jobs** Growth Example Multiplier Effects Supporting the development of higher-growth industries will allow Maryland to increase its economic base without disturbing traditional manufacturing businesses Time Emerging Industries Traditional Industries Economic Activity Higher Growth Potential
  • 11. While Maryland has much to offer high-growth advanced technology manufacturers, challenges remain to be addressed… Strengths
    • Proximity to the Federal Government provides opportunities to enhance lobbying efforts
    • Access to 92 million consumer base within 500 mile radius provides opportunities to be close to wide range of customers
    • Access to the port of Baltimore, one of the busiest ports in the US offers assembly opportunities at the dock before exporting
    • Intensity in R&D demonstrates commitment to innovation and process improvement
    • Vibrant economy that has ample access to venture capital and the value generated by IPOs
    • Highly educated workforce provides a skilled workforce base
    • Manufacturing assistance programs focused on enhancing manufacturing through tax incentives, sharing of technology and resources
    Challenges
    • Manufacturing image suffers an outdated reputation and fails to communicate modern aspects of the manufacturing environment
    • Significant drop in the manufacturing workforce does not bode well with the manufacturing businesses
    • Gap in education of the manufacturing workforce results in lacking in basic skills and higher training costs
    • Infrastructure issues such as traffic congestion and high cost of housing makes it difficult to attract employees
    • Taxes and Government regulations lead to a high cost of doing business
    • Low export dollar per capita and lack of significant FDI indicates a lack of openness to globalization and makes economies less competitive
  • 12.
    • By addressing the evolution of traditional manufacturing into world class competencies and emphasizing the emerging knowledge economy, Maryland can improve manufacturing’s image
    • Messaging should be directed at customers, service providers, and the perception of the general public
    • The approach will necessitate aligning and connecting customers to resources, as well as sharing results throughout the manufacturing industry and with the public
    To emphasize the role of the emerging knowledge economy and traditional manufacturing, one must address the manufacturing image Focus on Public Perception Identify Key Audiences Develop successful approaches for changing perceptions Develop advocates for industry’s public perception Assess Impact Communicate Results Focus on Companies Establish meaningful relationships with manufacturer Connect Appropriate Solutions Focus on Business Competitiveness and growth (Supply Chain) Assess Impact Communicate Results Focus on Service Providers Identify Key Service Providers Coordinate Among Providers Align Various Programs of value to the Industry Make it a customer friendly system Reduce costs through cooperation Assess Impact Communicate Results
  • 13. The Pappas Commission Report has identified near-term actions Maryland should take to support the growth of advanced technology The report’s recommendations are intended to:
    • Make Maryland more competitive in attracting and growing technology companies
    • Increase the commercialization of research and development (R&D) being created by the many government laboratories and universities within Maryland’s borders
    • More effectively market Maryland as a center of valuable R&D and as a home to many leading technology companies
    The following pages provide specific recommendations to enhance Maryland’s ability to attract high-growth manufacturers
  • 14. To make Maryland more competitive in attracting and growing technology companies…
    • Increase state pension funds investment in private equity
    • Raise investment by Maryland banks in Small Business Investment Companies
    • Restore and increase funding for investment financing programs
    • Encourage foundations in Maryland to invest in technology companies
    • Use State tax incentives to affirm that Maryland welcomes and encourages advanced technology investments
      • Promote investment in advanced technology equipment and construction materials
      • Align Maryland’s tax policy for capital gains on technology investments to be similar to Federal tax policy
      • Increase research and development credits for businesses
      • Provide investment tax credits for early stage investors
    • Survey CEOs on regulatory processes
    • Invest in the Business/Technology Case Management Program
    … Maryland should:
  • 15. To increase the commercialization of R&D being created by the laboratories and universities within Maryland’s borders…
    • Establish a permanent State Chief Technology Officer
    • Increase utilization and effectiveness of Maryland Technology Councils
    • Encourage entrepreneurial initiatives and technology transfer
    • Support the State’s incubator network with capital and operating funds for best practices
    • Allow State higher education institutions greater leeway under State personnel and procurement rules for activities that are not directly supported by State General Funds
    • Increase state funding for academic research
    • Encourage Maryland research consortia to compete for large federal funding opportunities
    • Create alternative financing vehicles to create more laboratory space at Maryland’s Universities
    • Promote increased coordination at University and college technology transfer offices
    … Maryland should:
  • 16. To more effectively market Maryland as a center of valuable R&D, and as a home to many leading technology companies…
    • Increase state pension funds investment in private equity
    • Leverage the Office of the Governor to encourage and sustain Maryland’s advanced technology enterprises
    • Develop a comprehensive marketing strategy to “brand” Maryland as a leading home for technology business and innovation
    • Create a central database of Maryland academic and federal laboratory technology resources
    • Pursue targeted international investment in Maryland
    • Create an Executive Job Corps
    • Create a Governor’s Science Advisory Board
    To effectively capitalize on its manufacturing strengths and overcome existing weaknesses, Maryland must focus its limited resources on strategically supporting key manufacturers. The following section provides a model for identifying these opportunities and optimizing use of the State’s resources. … Maryland should:
  • 17. To this end, Maryland should marshal its manufacturing resources from around the state and across the globe to reinforce this transformation The approach outlined herein is intended to:
    • Make Maryland more competitive in attracting and growing manufacturing companies that emphasize disruptive innovation and research
    • Increase the emphasis that Maryland places on manufacturers who provide creative advances in processes
    • Encourage manufacturers who aggressively engage customers beyond the current customer set, particularly in terms of leveraging the global supply chain
    The following pages provide specific recommendations to enhance Maryland’s ability to attract high-growth manufacturers in the new IT – “Innovation and Transformation”
  • 18. Cluster Overview and Benefits
  • 19. Promoting industry clusters is an effective means for a state to foster economic growth
    • Core companies form the basis for the cluster and the impetus for the value from the cluster
    • Supporting companies and institutions (e.g., universities) provide crucial support to the core and may include customers, suppliers and partners to the core companies
    • Related businesses provide a more indirect support to the core by enabling supportive companies or providing services to the core companies
    • Impacted businesses are affected by the cluster but do not directly relate to the activities of the cluster, such as restaurants or real estate support
    A Cluster and its Levels of Interdependency Clusters are geographically related networks of businesses that promote efficiency with varying degrees of interdependency Core Supporting Related Impacted
  • 20. Clusters provide economic advantages to business, which in turn drive benefits to the state
    • Higher Employment
      • Retention of existing companies and jobs through high switching costs
      • Creation of new jobs in growing industries
      • Creation of new jobs through spillover and multiplier effects
    • Higher Incomes
      • Increased demand for labor
      • Higher average skill level
    • Increased Tax Revenue
      • Higher personal incomes
      • Higher corporate incomes
      • Increased economic activity (sales tax, gasoline tax, telecom tax, per capita tax, property tax, etc.)
    State Benefits Business Benefits
    • More Efficient Access to Inputs:
      • Raw materials
      • Industry-specific suppliers
      • Skilled labor
    • More Efficient Processing:
      • Fast diffusion of knowledge, innovations, benchmarking, etc.
      • Economies of scope and scale
      • Industry-specific services (e.g., legal, finance)
    • More Efficient Access to End Markets:
      • Existing customers
      • New customers
  • 21. Having a skilled labor force is one of the key factors for the success of clusters
    • North Carolina, hosiery industry strengthened the buying power against major customers such as Wal-Mart by negotiating collectively
    • Increases competitiveness and profitability of its member firms
    Shared Vision and Leadership
    • Entrepreneurial energy was one of the key reasons for the success and expansion of the Silicon Valley
    • Small firms rely on research institutions, associations or other special services in order to remain competitive
    • Entrepreneurs highlight benefits of the cluster and will attract new members
    Entrepreneurial Energy
    • The Industrial Technology Institute in Ann Arbor, MI was established to support the modernization of the auto industry
    • Hosiery cluster in North Carolina also encompasses yarn, needle, dyestuff and packaging materials suppliers
    • Proximity assists the cluster in organizing events for exchange of knowledge
    • Specialized optics and imaging institutes and active professional associations provided channels for developing an optics and imaging cluster in Rochester, NY
    • Specialized skills were vital to the development of the semiconductor in the Silicon Valley
    Example
    • Specialized services provide functions tailored to industry and are integral to cluster’s success
    • Proximity of suppliers assist in reduced inventory carrying costs, innovation, and delivery time
    • Quick dissemination of information between cluster members and knowledge sharing reduces product development and R&D costs
    • Availability and accessibility of research centers and expert individual researchers to provide cutting-edge research and solve pressing problems
    • Most important determinant for a cluster’s success
    • Knowledge of the industry supplemented by formal education drives the cluster and attracts new members
    Value to Clusters Access to Specialized Services Proximity of Suppliers R&D Capability Skilled Labor Force Success Factors
  • 22. Cluster Identification, Development and Support
  • 23. Clusters can be classified in six main groupings… While there is no set criteria by which to classify clusters, there is value in assessing them to determine which have the potential to add the most value to the state economy Using the taxonomy discussed above, emerging clusters should receive first attention followed by strategic and potential , as these are most likely to promote manufacturing growth Clusters which add diversity to economy, such as tourism or business services Stabilizing Clusters with low or no employment growth Mature Clusters with some core competency that might be developed, such as environmental technology Potential Clusters which are small but vital to region’s interests Emerging Clusters with high growth rates, such as biotech Strategic Clusters with scale, such as Hollywood, Silicon Valley, or Detroit Competitive
  • 24. Maryland should focus on developing strategic clusters which are well-positioned for strong growth
    • Manufacturing can be broken-down in into two main groups:
      • Traditional Including mature , competitive and stabilizing clusters
      • Advanced Technology Including emerging , strategic and potential clusters
    Traditional Manufacturing
    • Food and beverage
    • Tobacco
    • Printing and related support activities
    • Transportation equipment manufacturing
    • Chemical Manufacturing
    • Furniture and related product manufacturing
    Advanced Technology Manufacturing
    • Bio-technology
    • Information Technology
    • Nanotechnology
    • Miniaturization
    • Transportation systems
    • Energy
    • Aerospace and Defense
    • Advance Agriculture
    • Craft Manufacturing
    If Maryland can establish itself as a leader in advanced technology manufacturing, it will be well-positioned for future prosperity
    • Traditional manufacturing is well established and has served Maryland well in the past, but needs to find way to grow and remain profitable
    • Advanced technology manufacturing has risk but much more growth potential because it supports new technology and industry throughout the global knowledge-based economy
  • 25. Maryland has multiple characteristics that make it attractive to strategic technology manufacturing
    • Industries such as Bio-technology, Information Technology and Aerospace & Defense require a highly educated workface
    • A strength in R&D is also critical in emerging industries such as Nanotechnology and Miniaturization
    • Venture capital is critical to developing new technologies, products and industries
    • Highly educated workforce provides a skilled source of labor
    • Intensity in R&D demonstrates commitment to innovation and process improvement
    • Vibrant economy that has ample access to venture capital and the value generated by IPOs
    • Proximity to the Federal Government provides opportunities to enhance lobbying efforts
    • Access to 92 million consumer base within 500 mile radius provides opportunities to be close to wide range of customer
    • Access to the port of Baltimore, one of the busiest ports in the US offers assembly opportunities at the dock before exporting
    • Manufacturing assistance programs focused on enhancing manufacturing through tax incentives, sharing of technology and resources
    Maryland Strengths These strengths will also help support the transition of Maryland’s existing manufacturing base to benefit from the global knowledge-based economy
  • 26. Maryland should not solely focus on advanced technology to the detriment of the traditional manufacturing base
    • Both traditional and advanced manufacturing clusters can be cataloged and characterized
    • One valuable analysis tool assesses traditional and advanced manufacturing based on importance to Maryland and potential industry growth
    High Low Low High Value to MD Economy Growth Potential Advanced Traditional
    • Clusters beyond the “Investment Threshold” are prioritized for support and development
    • Clusters near or below the “Investment Threshold” can be developed to transition to higher value
    High Value Medium Low Value Medium Investment Threshold Value Threshold Chart
  • 27. With proper support, traditional clusters can transition to advanced technology clusters or high value clusters
    • Driven by company strategy and goals
    • Structured root cause analysis turns problems into projects
    • Knowledge is captured into the program
    • Complete set of training materials
    • Comprehensive project definition and planning process
    • Chooses tools based on the problem to be solved
    • Embedded project management requirements
    • Results sustained through ongoing iterative program
    • Project status monitoring and reporting
    • Incentive compensation program
    • Job descriptions
    • Metrics and goal setting
    The Operational Advantage TM framework can be used to identify and execute operational process improvement initiatives based on their alignment with corporate objectives
  • 28. The Operational Advantage TM Program features a comprehensive, easy to use toolkit Processes, diagnostics and tools are simple to understand and use and contain numerous examples so employees with little familiarity can successfully participate Participants identify the company strategy 1 Operational Advantage TM processes guide the selection of the highest priority Operational Objectives and Improvement Initiatives 2 Comprehensive diagnostics drive to the identification of the root causes of performance issues 3 All necessary analytical tools link directly from the diagnostics 4
  • 29. The Operational Advantage TM Program has defined five major strategy-level improvement objectives focused on profitability and growth Improve Quality Develop New Products & Services Improve Customer Service Reduce Costs Enter New Markets Strategic Objectives are tied to critical business metrics, providing the initial links in the accountability chain Grow Revenue Increase Gross Margin Reduce Working Capital Increase Operating Earnings Improve Return on Assets Profitability Growth
  • 30. Each Strategic Objective is further decomposed into Operational Objectives that focus on a company’s specific transitional needs Profitability Growth Operational Objective Strategic Objective Reduce Cost/ Low-Cost Provider Improve Prod. Quality/ High Quality Provider Improve Cust. Service/ High Service Provider Improve SG&A Improve Engineering Processes Improve Inventory Management Processes Improve Sourcing Processes Improve Production Processes Improve Scheduling & Production Control Processes Improve Maintenance Processes Improve Accounts Receivable Improve Asset Management Processes Improve Safety Improve Quality of Engineering Improve Quality of Production Improve Quality Processes Improve On-Time Delivery Improve Customer Service Processes Develop New Products & Technology Enter New Markets Improve Mfg. Flexibility Improve Product/ Technology Development & Launch Improve Sales Pipeline Processes Improve Marketing Capabilities Improve Field Service Processes Reduce Cost through High Quality Improve Dispatch & Transport. Processes
  • 31. Identifying and developing clusters requires a similar systematic and disciplined approach
    • Identify major companies in the area
    • Conduct survey with select companies
    • Identify trends across major industries
    • Develop selection criteria
      • Promising Technology
      • Economic Benefit
      • Competitive Advantage
    • Identify impact on strategic technology manufacturing sector
    • Develop cluster strategy for each of the clusters
    • Prioritize clusters
    • Identify gaps in the clusters
    • Allocate resources, funds and efforts based on prioritization
    • Develop minimum requirements to qualify for state sponsorship
    • Conduct quantitative and qualitative evaluation
    • Develop a committee of government and private sector
    • Take measures to formalize cluster communications
    • Organize committee for each cluster
    • Carefully plan and manage processes designed to diversify a culture
    • Develop detailed execution plan
    • Attributes of the execution plan
      • Project management team
      • Project timelines
      • Communication plans
      • Legal documents
    • Develop Communication Plan
      • Improve manufacturing image
      • Facilitate manufacturing education initiative
      • Facilitate risk taking for entrepreneurs
    Profile Manufacturing Industry Classify Manufacturing Industry into Clusters Develop a Cluster Specific Strategy Establish Policy for State Sponsorship Formalize Cluster Communication Recruit Companies to Fill Gaps in Cluster Develop an Execution Plan Develop Communication Plan        
  • 32. Maryland has ample data available to identify traditional and emerging advanced technology manufacturing clusters
    • Maryland’s manufacturing sector has experienced steady decline
      • Workforce in 2003 was 5.9% compared to more than 9% in early 1990s
      • Gross State Product (GSP) was 7.2% in 2001 compared to approximately 10% in early 1990s
    • Despite a drop in the job growth and GSP, the manufacturing sector has
      • Steadily increased the total output since 1992
      • Created significant earnings and jobs in other sectors
    • Research and analysis into the multiplier effect across the manufacturing sector in Maryland revealed that the following industries provided the most economic value to the state *
      • Food, beverage and tobacco manufacturing
      • Printing and related support activities
      • Transportation equipment manufacturing
      • Chemical Manufacturing
      • Furniture and related product manufacturing
    • However, advanced technology manufacturing offers significant opportunity for Maryland to invest in the future
    * The multiplier effect accounts for the total impact of the manufacturing sector on Maryland’s output, employment and earnings, indicating that it is larger than the direct manufacturing measures indicates Profile Manufacturing Industry
  • 33. Promising technology and economic benefits are key criteria for developing clusters Qualitative Criteria
    • Promising Technology
    • Environmentally Friendly
    • Legal Requirements
    • Resources Requirements
    • Location and Area Requirements
    Quantitative Criteria
    • Economic Value to the State
    • Size of the industry
    • Growth Potential
    • Funding Requirements
    • Tax incentives
    • Impact on Other Industries
    • Tax Revenues
    • Institutionalizing an unbiased evaluation process for developing clusters depends on both qualitative and quantitative criteria
    Classify Mfg Industry into Clusters
  • 34. Cluster classification assists in focusing resource and fund allocations
    • Clusters can be classified into one of the six categories:
      • Competitive Those that have scale, such as Hollywood, Silicon Valley or Detroit
      • Strategic Small but vital to region’s interest
      • Emerging Those with high growth rates, such as bio-tech
      • Potential Those with core competencies that might be developed, such as environmental tech.
      • Mature Those with low or no employment growth
      • Stabilizing Those that add diversity to economy, such as tourism or business services
    • The table below classifies major Maryland’s industries into clusters based on jobs and GSP growth information
    Classify Mfg Industry into Clusters Harland Company, Custom Direct LLC, Moore Wallace BCS, Cadmus Mature Cluster Printing and Publishing Micros Corp., BP Solar, Mack Trucks, Black and Decker, GM Powertrain, National Jet Mature Cluster Industrial Machinery and Equipment Giant Food, Nafco, Dreyer’s, Marktek Biosciences Corporation, Faidley’s Seafood, Clipper City Brewing Company, Solo Cup, McCormick, BD Biosciences, Phillips Seafood, Breyers, Perdue Chicken Competitive Cluster Food and Beverage Products Millenium Inorganic Chemicals, WL Gore, FMC Corp., Alpharma, Proctor and Gamble Cosmetics, WR Grace, Qiagen, Unilever, Medimmune Competitive Cluster Chemicals and Allied Products Fabricators Steel and Manufacturing Corp., Industrial Knife Company, Stromberg Sheet Metal, Swales and Associates, Master-Halco, DynCorp, MaTech, Thermoform, East Alcoa Emerging Cluster Fabricated Metal Products Large variety of companies that use wood as an intermediate product during the manufacturing process and others that produce finished wood products. i.e. American Woodmark Strategic Cluster Lumber and Wood Products Krenik Manufacturing Company, Offray, Gore, MD Screen Printers, Inc. Strategic Cluster Textile Mill Products Fila, Clemco Strategic Cluster Leather and Leather Products Companies Within the Cluster Cluster Type Industry
  • 35. Traditional manufacturing industries add value to other sectors in areas such as product development, environment and transportation Classify Mfg Industry into Clusters Food and Beverage Manufacturing Printing Aerospace and Defense Modern Agriculture Distribution and Warehouse Bio-Technology Environmental Friendly, Product Development Product Development Information Technology Print Management Software Miniaturization, Product Development Nanotechnology Genetic Modifications Printing Material Development Miniaturization, Product Development, R&D Genetic Modifications Miniaturization RFID, Product Development Miniaturization, Product Development Bio-intensive Growth RFID, Product Development Transportation System Transportation Solution Development Transportation Solution Development Intelligent Transportation System Solutions Development, Product Development Transportation Solution Development Energy (hydrogen, fuel cell, alternative energy) Environmental Friendly Environmental Friendly Environmental Friendly Aerospace and Defense Next generation sensors for process control, Defense, Security Advanced Agriculture Genetic Modifications, Environmental Friendly Product Development, Genetic Modifications, Environmental Friendly Craft Manufacturing Industries Environmental Friendly Transportation Traditional Manufacturing Industries Emerging Manufacturing Industries
  • 36. Cross cluster themes that support multiple industries will also enhance Maryland’s strategic ability to focus critical manufacturing resources Cross Cluster Themes Industries Classify Mfg Industry into Clusters   X     X     X Craft Manufacturing X   X   X     X Advanced Agriculture X   X X     X X Aerospace         X     X Energy (hydrogen, fuel cell, alternative energy) X X X         X Transportation X   X     X   X Miniaturization (actuators with computing technology), RFID X   X     X   X Nanotechnology X   X     X   X IT X   X   X X   X Bio-Technology Strategic technology Manufacturing Industries   X           X Distribution and Warehouse X X     X     X Modern Agriculture X X X   X X X X Aerospace   X     X     X Printing   X     X     X Food and Beverage Manufacturing Traditional Manufacturing Industries Product Development (Commercializing Technology) Transportation Protecting Intellectual Property Next Generation Sensors for Process Control Environmental Friendly Miniaturization Defense Security
  • 37. Maryland should develop a strategy specific to each of the target clusters 3 Allocate Resources 1 Prioritize Clusters 2 Identify Gaps Qualitative Criteria Quantitative Criteria Tier 1 Tier 2 Tier 3 Prioritization Required businesses/institutions Develop Cluster Specific Strategy
  • 38. The state should then determine the policies that will best foster the targeted clusters… Increase Cluster Networking and Learning
      • Reestablish or recognize cluster associations and alliances
      • Facilitate external connections
      • Encourage inter-cluster communications
    Efficiently Organize And Deliver Services
      • Aggregate and publish information by cluster
      • Form cross-agency quick response teams
    State Policy Levers *,** Make Targeted Investments
      • Invest in cluster R&D
      • Establish cluster-specific technology centers or parks
      • Support cluster-based entrepreneurial activity
    Improve Workforce
      • Develop a more skilled and specialized labor force
      • Establish cluster skills centers
      • Qualify people for employment
    * From “A Governor’s Guide to Cluster-Based Economic Development” ** These recommendations should be planned and executed conjunction with the recommendations of the Pappas Commission Develop Policy and Communications
  • 39. ...formalize cluster communication targeted and tailored for specific constituencies… education business
      • Education initiatives
      • University outreach
      • Trade shows
      • Business journals
      • Newsletters
      • Trade associations
      • Mass media advertising
      • Community out-reach
    Develop Policy and Communications
  • 40. …recruit companies by approaching a broad set and then progressively narrowing the field until the best remain…       Negotiation Opportunity Development Initial Communication Opportunity Assessment Follow-up Communication Proposal Presentation Potential Companies Potential Companies Cluster Company Recruit Companies to Fill Gaps
  • 41. …develop a rigorous implementation plan to execute the strategy… Activities Project Milestones Initiative Kick-Off
    • Tier 1 Plan
      • Define project management team
      • Finalize approach
      • Craft communication plans
      • Integrate cluster companies
      • Draft legal documents
    • Tier 1 Plan
      • Define project management team
      • Finalize approach
      • Craft communication plans
      • Integrate cluster companies
      • Draft legal documents
    • Tier 1 Plan
      • Define project management team
      • Finalize approach
      • Craft communication plans
      • Integrate cluster companies
      • Draft legal documents
    Develop Execution and Communication Plan … Week 5 4 3 2 1 10 9 8 7 6 11
  • 42. …and implement a comprehensive communication strategy that builds on success to create more and better clusters      Publicize Wins Share Learnings Improve Image Attract More Companies Document Successes
  • 43. Recommendations Maryland should pursue multiple activities to promote manufacturing:
    • Follow a rigorous approach to identify, create, promote, develop, and maintain new and existing manufacturing clusters
    • Develop and promote a pro-manufacturing image for Maryland
    • More effectively market Maryland as a center of valuable R&D, and as a home to many leading technology companies
    • Purse policy measures to attract technology companies to Maryland
    • Support the operational improvement of existing tradition manufacturing capabilities within the state
    If Maryland follows the above recommendations it will be well positioned to thrive well into the future
  • 44.
    • Establish a permanent State Chief Manufacturing Officer
    • Increase utilization and effectiveness of Maryland Manufacturing and Business development Councils
    • Encourage entrepreneurial initiatives and technology transfer, especially for those Maryland companies who can leverage manufacturing and the global supply chain
    • Support the State’s targeted manufacturing clusters with capital and operating funds for best practices and operational excellence
    • Allow State higher education institutions greater leeway under State personnel and procurement rules for activities that are not directly supported by State General Funds
    • Increase state funding for academic research related to the broader view of the Extended Enterprise represented by manufacturing
    • Encourage Maryland research consortia to compete for large federal funding opportunities supporting the emphasis on Advanced Technology Manufacturing
    • Create alternative financing vehicles to create more laboratory space for applied research and commercialization opportunities at Maryland’s Universities
    • Promote increased coordination at University and college technology transfer, applied research, and advanced manufacturing offices
    To increase the manufacturing commercialization of R&D being created by the laboratories and universities within its borders, Maryland should: Recommendations
  • 45. Next Steps
    • Apply lessons learned from Maryland biotechnology and education (Career Clusters) efforts to other traditional and strategic technology clusters
    • Build a commission-based role to coordinate cluster activities across the state’s multiple constituencies (including business, academia, government, and advisory services)
    • Further develop cluster concentrations to determine ways to marshal resources and develop implementation plans for proposed manufacturing clusters
    • Pursue ways to consolidate/coordinate multiple constituencies interested in supporting manufacturing across the state
    • Use academia’s unique position to optimize competing government (federal and state) and business interests and gain consensus
    • Identify the most effective “levers” to pull in support of manufacturing clusters
    • Institutionalize the Maryland Manufacturing Strategy Process to build on the momentum generated by coordinating activities across business, government, academia, and industry advisors
      • Assess Progress
      • Continually Revaluate Initiatives and Clusters
    • Continue to emphasize those efforts to support the relationship between disruptive research, innovation, and manufacturing competencies that lead to new products, processes, customers and markets.
  • 46. Appendix
  • 47. Current Situation
  • 48. The manufacturing sector has steadily increased output as well as assisted other sectors in increasing earnings and job growth
    • Maryland’s manufacturing sector has experienced steady decline in the last decade
      • Workforce in 2003 was 5.9% compared to more than 9% in early 1990s
      • Gross State Product (GSP) was 7.2% in 2001 compared to approximately 10% in early 1990s
    • Despite a drop in the job growth and GSP, the manufacturing sector has
      • Steadily increased the total output since 1992
      • Created significant earnings and jobs in other sectors
    • Research and analysis into the multiplier effect across the manufacturing sector in Maryland revealed that the following industries provided the most economic value to the state
      • Food and beverage manufacturing
      • Printing and related support activities
      • Transportation equipment manufacturing
      • Chemical Manufacturing
      • Furniture and related product manufacturing
  • 49. Proximity to the federal government, access to 92 million consumers, a vibrant economy and fiscal stability entices businesses… Second longest commute time and comparatively high cost of living don’t favor well with the businesses Maryland has access to 92 million consumers within 500 mile radius and one of the busiest ports in the US 58% of households have access to the internet Despite having AAA Bond rating and a low budget deficit, environmental and government regulations coupled with high taxes were hurting the businesses Proximity to the Federal Government is a big plus Despite the highest ranking in overall education, Maryland’s manufacturing workforce lacks basic skills 16.5% workforce represented by unions 148K jobs in the manufacturing sector represents only 5.9% of Maryland’s workforce Manufacturing sector is suffering from a poor image among the students Maryland Current Situation Rental Cost for two bedroom apartment Travel Time to Work Household with internet access Budget Deficit/Stability Taxes Workforce Education Manufacturing Education Total Mfg Employment Mfg Output/GSP Metric 39 49 6 AAA Bond 43 1 32 43 46 US Rank Infrastructure Taxes, Government and Policy Quality of the Work Force Current Manufacturing Sector Category
  • 50. … despite a decline in manufacturing jobs, low export-dollar per capita, and high representation of labor union Maryland’s $926 export-dollar per capita is well below the US average of $1900 per capita Maryland ranks fairly high as a state to live in, despite high number of crimes and second worst homicide rate 4.6% of GSP spent on R&D compared to national average of 2.66% Maryland has a vibrant economy and is ranked high in both venture capital dollars and number of IPO Maryland Current Situation Exports Per Capita Foreign Direct Investment (FDI) Most Livable State R&D Intensity Venture Capital Initial Public Offering (IPO) Metric 44 26 14 4 5 7 US Rank Openness Quality of Life Technology Economic Dynamism Category
  • 51. Leveraging manufacturing strengths and working on overcoming major challenges will be the key to attracting companies Strengths
    • Proximity to the Federal Government provides opportunities to enhance lobbying efforts
    • Access to 92 million consumer base within 500 mile radius provides opportunities to be close to wide range of customer
    • Access to the port of Baltimore, one of the busiest ports in the US offers assembly opportunities at the dock before exporting
    • Intensity in R&D demonstrates commitment to innovation and process improvement
    • Vibrant economy that has ample access to venture capital and the value generated by IPOs
    • Highly educated workforce provides a skilled workforce base
    • Manufacturing assistance programs focused on enhancing manufacturing through tax incentives, sharing of technology and resources
    Challenges
    • Manufacturing image suffers an outdated reputation and fails to communicate modern aspects of the manufacturing environment
    • Significant drop in the manufacturing workforce does not bode well with the manufacturing businesses
    • Gap in education of the manufacturing workforce results in lacking in basic skills and higher training costs
    • Infrastructure issues such as traffic congestion and high cost of housing makes it difficult to attract employees
    • Taxes and Government regulations lead to a high cost of doing business
    • Low export dollar per capita and lack of significant FDI indicates a lack of openness to globalization and makes economies
    • less competitive
  • 52. State of Maryland Ranked in Selected Metrics
  • 53. Maryland Manufacturing
    • Manufacturing remains an important part of Maryland’s economy, accounting for 7.2% of the gross state product
    • The total output of the manufacturing sector grew steadily from 1992 to 2001
    • The multiplier effect magnifies the importance of manufacturing across the state
    Declining Manufacturing Base Government Industry Academia Industry Advisers Maryland Manufacturing Strategy Manufacturing Strategy Development
  • 54. Gain Consensus
    • Academia is uniquely positioned to optimize competing government (federal and state) and business interests and gain consensus.
    Business Interests Government Interests
    • Low taxes
    • Skilled employees
    • Low regulation
    • etc.
    • Tax revenue
    • Full employment
    • Environment
    • etc.
  • 55. Arizona, Connecticut and Minnesota have successfully implemented cluster-based policies
    • A few of the states have successfully implemented cluster policy include
      • Arizona – The Greater Tucson Economic Council has adopted cluster policies as “framework for the overall direction of the economic development activities and allocation of limited resources
      • Connecticut – The state has embarked on a cluster-based strategy built around the idea that nurturing the state’s key industries improves the competitiveness of businesses within these industries
      • Minnesota – The University of Minnesota, in association with state and local policy programs, are examining rural knowledge clusters as a model for innovative, dynamic rural economies
    • Maryland has successfully implemented cluster policy for secondary and post-secondary education
    • Additional examples of cluster policies implemented by other states are listed below
  • 56. One of the key goals of cluster-based policies is to direct funds to the most productive industry channels
    • Cluster-based economic development policies contain important “spillover” effects that extend their influence beyond the specific business that are targeted for support
    • Cluster-based policies reinforce two linkages that help to perpetuate a skilled and educated workforce
      • Providing residents with more jobs in growing industries
      • Forging a healthy collaboration between industry and educational institutions
    • Cluster policies improve the scope of community involvement in the corporate sector
      • Coordination efforts between communities and cluster leaders can lead to development of child care services, transportation improvements, and home ownership programs
      • Industry clusters make it easier and more effective for town planning commissions to target potential businesses seeking to locate in the area
  • 57. Public policy makers should know when to pursue them and when to push them aside for cluster-based policies to be successful
    • Policy makers should avoid following pitfalls while developing cluster-based policies:
      • Cluster-based policies are not the same as industrial policies – cluster-based policy initiatives must promote the competitive advantages of an interlinked group of related industries
      • Cluster creation is best left to the market – policy makers should refrain from the temptation to create new clusters and leave cluster formation to the market mechanism
      • Let research, not politics, drive the facilitation of clusters – policy makers must not bow to the pressures of political lobbyists pulling for certain industries, unless it is supported by specific research indicating tangible benefits
  • 58. Cluster Pitfalls
    • Cluster-based policies are not the same as industrial policies
    • Cluster creation is best left to markets
    • Let research, not politics, drive the facilitation of clusters
  • 59. Having a skilled labor force is one of the key factors for the success of clusters North Carolina hosiery industry strengthened the buying power against major customers such as Wal-Mart by negotiating collectively Increases competitiveness and profitability of its member firms Shared Vision and Leadership Entrepreneurial energy was one of the key reasons for the success and expansion of the Silicon Valley Small firms rely on research institutions, associations or other special services in order to remain competitive Entrepreneurs highlight benefits of the cluster and will attract new members Entrepreneurial Energy The Industrial Technology Institute in Ann Arbor, Mich., was established to support the modernization of the auto industry Hosiery cluster in North Carolina also encompasses yarn, needle, dyestuff and packaging materials suppliers Proximity assists the cluster in organizing events for exchange of knowledge Specialized optics and imaging institutes and active professional associations provided channels for developing an optics and imaging cluster in Rochester, N.Y. Specialized skills were vital to the development of the semiconductor in the Silicon Valley Example Specialized services provide functions tailored to industry and are integral to cluster’s success Proximity of suppliers assist in reduced inventory carrying costs, innovation, and delivery time Quick dissemination of information between cluster members and knowledge sharing reduces product development and R&D costs Availability and accessibility of research centers and expert individual researchers to provide cutting-edge research and solve pressing problems Most important determinant for a cluster’s success Knowledge of the industry supplemented by formal education drives the cluster and attracts new members Value to Clusters Access to Specialized Services Proximity of Suppliers R&D Capability Skilled Labor Force Success Factors
  • 60. Focus communication plans to improve the image of manufacturing industry and facilitate manufacturing education initiative
    • Educating the workforce and managers will be key to the success of the cluster strategy.
    Universities Trade Schools Primary Schools Management Workforce Coordination & Feedback Training & Education
    • Literacy
    • Basic PC Skills
    • Skilled Trades
    • Managerial Skills
    • Engineering Abilities
    Engineering Business