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February 23, 2006
Maryland Manufacturing in the Global Digital Economy
Maryland Advisory Commission on Manufacturing Competitiveness
January 2007
© Copyright 2006 Archstone Consulting LLC
Confidential2
February 23, 2006
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
© Copyright 2006 Archstone Consulting LLC
Confidential3
February 23, 2006
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
© Copyright 2006 Archstone Consulting LLC
Confidential4
February 23, 2006
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
February 23, 2006
Purpose
© Copyright 2006 Archstone Consulting LLC
Confidential6
February 23, 2006
Purpose
The State of Maryland:
Has proximity to major marketsUnparalleled access to state and national governments
A base of natural, technological, and transportation resourcesA 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
February 23, 2006
Overview: Manufacturing in Maryland
© Copyright 2006 Archstone Consulting LLC
Confidential8
February 23, 2006
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.
Manufacturing as % of Total Employment
0%2%4%6%8%
10%12%14%16%18%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Time
%
MD
US
Manufacturing as % of GSP
0%
5%
10%
15%
20%
25%
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Time%
of G
SP US
MD
© Copyright 2006 Archstone Consulting LLC
Confidential9
February 23, 2006
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
Traditional Growth Rate Advanced Technologies Growth Rate
Tobacco 1.21% Aerospace and Defense 8.47%
Chemical manufacturing 2.04% Transportation systems 8.94%
Printing and related support activities 2.92% Energy 11.57%
Transportation equipment manufacturing 7.58% Information Technology 12.59%
Food and Beverage 7.75% Bio-technology 19.46%
Furniture and related product manufacturing 11.32% Nanotechnology 25.00%
Miniaturization 34.00%
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:
© Copyright 2006 Archstone Consulting LLC
Confidential10
February 23, 2006
Advanced technology’s higher growth rates and stronger multiplier effects can significantly increase economic activity in Maryland
Traditional Benefits to MD* Jobs** GrowthTobacco $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
Eco
no
mic
A
ctiv
ity
Higher Growth Potential
© Copyright 2006 Archstone Consulting LLC
Confidential11
February 23, 2006
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
© Copyright 2006 Archstone Consulting LLC
Confidential12
February 23, 2006
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
Focus on Public PerceptionIdentify Key Audiences
Develop successful approaches for changing perceptionsDevelop advocates for industry’s public perception
Assess Impact Communicate Results
Focus on CompaniesEstablish meaningful relationships with manufacturer
Connect Appropriate SolutionsFocus on Business Competitiveness and growth (Supply Chain)
Assess ImpactCommunicate Results
Focus on Service ProvidersIdentify Key Service ProvidersCoordinate Among Providers
Align Various Programs of value to the IndustryMake it a customer friendly systemReduce costs through cooperation
Assess ImpactCommunicate Results
To emphasize the role of the emerging knowledge economy and traditional manufacturing, one must address the manufacturing image
© Copyright 2006 Archstone Consulting LLC
Confidential13
February 23, 2006
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:
1. Make Maryland more competitive in attracting and growing
technology companies
2. Increase the commercialization of research and development
(R&D) being created by the many government laboratories
and universities within Maryland’s borders
3. 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
© Copyright 2006 Archstone Consulting LLC
Confidential14
February 23, 2006
To make Maryland more competitive in attracting and growing technology companies…
1. Increase state pension funds investment in private equity
2. Raise investment by Maryland banks in Small Business Investment Companies
3. Restore and increase funding for investment financing programs
4. Encourage foundations in Maryland to invest in technology companies
5. Use State tax incentives to affirm that Maryland welcomes and encourages advanced technology investments
a. Promote investment in advanced technology equipment and construction materials
b. Align Maryland’s tax policy for capital gains on technology investments to be similar to Federal tax policy
c. Increase research and development credits for businesses
d. Provide investment tax credits for early stage investors
6. Survey CEOs on regulatory processes
7. Invest in the Business/Technology Case Management Program
…Maryland should:
© Copyright 2006 Archstone Consulting LLC
Confidential15
February 23, 2006
To increase the commercialization of R&D being created by the laboratories and universities within Maryland’s borders…
1. Establish a permanent State Chief Technology Officer
2. Increase utilization and effectiveness of Maryland Technology Councils
3. Encourage entrepreneurial initiatives and technology transfer
4. Support the State’s incubator network with capital and operating funds for best practices
5. Allow State higher education institutions greater leeway under State personnel and procurement rules for activities that are not directly supported by State General Funds
6. Increase state funding for academic research
7. Encourage Maryland research consortia to compete for large federal funding opportunities
8. Create alternative financing vehicles to create more laboratory space at Maryland’s Universities
9. Promote increased coordination at University and college technology transfer offices
…Maryland should:
© Copyright 2006 Archstone Consulting LLC
Confidential16
February 23, 2006
To more effectively market Maryland as a center of valuable R&D, and as a home to many leading technology companies…
1. Increase state pension funds investment in private equity
2. Leverage the Office of the Governor to encourage and sustain Maryland’s advanced technology enterprises
3. Develop a comprehensive marketing strategy to “brand” Maryland as a leading home for technology business and innovation
4. Create a central database of Maryland academic and federal laboratory technology resources
5. Pursue targeted international investment in Maryland
6. Create an Executive Job Corps
7. 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:
© Copyright 2006 Archstone Consulting LLC
Confidential17
February 23, 2006
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:
1. Make Maryland more competitive in attracting and growing
manufacturing companies that emphasize disruptive
innovation and research
2. Increase the emphasis that Maryland places on
manufacturers who provide creative advances in processes
3. 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”
February 23, 2006
Cluster Overview and Benefits
© Copyright 2006 Archstone Consulting LLC
Confidential19
February 23, 2006
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
© Copyright 2006 Archstone Consulting LLC
Confidential20
February 23, 2006
Clusters provide economic advantages to business, which in turn drive benefits to the state
Higher EmploymentRetention of existing companies and jobs
through high switching costsCreation of new jobs in growing industriesCreation of new jobs through spillover and
multiplier effects
Higher IncomesIncreased demand for laborHigher average skill level
Increased Tax RevenueHigher personal incomesHigher corporate incomesIncreased economic activity (sales tax,
gasoline tax, telecom tax, per capita tax, property tax, etc.)
State BenefitsBusiness Benefits
More Efficient Access to Inputs:Raw materialsIndustry-specific suppliersSkilled 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 customersNew customers
© Copyright 2006 Archstone Consulting LLC
Confidential21
February 23, 2006
Success Factors Value to Clusters Example
Skilled Labor Force Most important determinant for a cluster’s success
Knowledge of the industry supplemented by formal education drives the cluster and attracts new members
Specialized skills were vital to the development of the semiconductor in the Silicon Valley
R&D Capability Availability and accessibility of research centers and expert individual researchers to provide cutting-edge research and solve pressing problems
Specialized optics and imaging institutes and active professional associations provided channels for developing an optics and imaging cluster in Rochester, NY
Proximity of Suppliers
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
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
Access to Specialized Services
Specialized services provide functions tailored to industry and are integral to cluster’s success
The Industrial Technology Institute in Ann Arbor, MI was established to support the modernization of the auto industry
Entrepreneurial Energy
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 was one of the key reasons for the success and expansion of the Silicon Valley
Shared Vision and Leadership
Increases competitiveness and profitability of its member firms
North Carolina, hosiery industry strengthened the buying power against major customers such as Wal-Mart by negotiating collectively
Having a skilled labor force is one of the key factors for the success of clusters
February 23, 2006
Cluster Identification, Development and Support
© Copyright 2006 Archstone Consulting LLC
Confidential23
February 23, 2006
Clusters can be classified in six main groupings…
Competitive Clusters with scale, such as Hollywood, Silicon Valley, or Detroit
Strategic Clusters with high growth rates, such as biotech
Emerging Clusters which are small but vital to region’s interests
PotentialClusters with some core competency that might be developed, such as environmental technology
Mature Clusters with low or no employment growth
StabilizingClusters which add diversity to economy, such as tourism or business services
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
© Copyright 2006 Archstone Consulting LLC
Confidential24
February 23, 2006
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
© Copyright 2006 Archstone Consulting LLC
Confidential25
February 23, 2006
• 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 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
Maryland Strengths
These strengths will also help support the transition of Maryland’s existing manufacturing base to benefit from the global knowledge-based economy
© Copyright 2006 Archstone Consulting LLC
Confidential26
February 23, 2006
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
Va
lue
to
MD
Ec
on
om
y
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 ValueMedium
Investment Threshold
Value Threshold Chart
© Copyright 2006 Archstone Consulting LLC
Confidential27
February 23, 2006
With proper support, traditional clusters can transition to advanced technology clusters or high value clusters
Company Strategy
Operational Advantage™ Program
4Program Management 2Operational
Objectives
1Strategic Objectives
3Improvement Initiatives
Company Strategy
Operational Advantage™ Program
4Program Management 2Operational
Objectives
1Strategic Objectives
3Improvement Initiatives
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 descriptionsMetrics and goal
setting
The Operational AdvantageTM framework can be used to identify and execute operational process improvement initiatives based on their alignment with
corporate objectives
© Copyright 2006 Archstone Consulting LLC
Confidential28
February 23, 2006
The Operational AdvantageTM Program features a comprehensive, easy to use toolkit
© Copyright 2004 Archstone Consulting LLC
Confidential1
Guide for Choosing Improvement Initiatives
Improve Customer Service
Shareholder Value
Performance Expectations Strategic Objectives
Improve ProductQuality
Develop New
Products & Tech.
Reduce Cost
Enter New Markets
Profitability Growth
StrategicObjective
Participants identify the company strategy
1
© Copyright 2004 Archstone Consulting LLC
Confidential2
Reduce Cost
Operational Objective
Improve Sales, General &
Administrative Processes
Improve Engineering Processes
Improve Scheduling
& Production Control
Processes
Improve Sourcing
Processes
Improve Production Processes
Improve Dispatch &
Transportation Processes
Improve Field
Service Processes
Reduce Cost
Through High
Quality
Improve Inventory
Management Processes
Improve Maintenance Processes
Improve Accounts
Receivable Processes
Improve Asset
Management Processes
Improve Safety
Processes
BackReduce
Cost Operational AdvantageTM processes guide the selection of the highest priority Operational Objectives and Improvement Initiatives
2
© Copyright 2004 Archstone Consulting LLC
Confidential4
Process CostProcess TimeProcess Quality
Improve Engineering Processes
Improvement Initiatives
Improve Engineering Processes
Improve Accuracy of Engineering & Drawings
Reduce Cost of
Engineering Processes
Reduce Engineering Cycle Time
Improve Producibility of Designs
Back
Comprehensive diagnostics drive to the identification of the root causes of performance issues
3 All necessary analytical tools link directly from the diagnostics
4
© Copyright 2004 Archstone Consulting LLC
Confidential1
Process Design Tool
Allows the company to ensure that a project is on task, will be completed on time, and solve problems as they arise
Benefits
A team of people who have an understanding of all aspects of the business that will be effected
People, who have experience with Continuous Improvement and many of the tools and concepts
Cross-functional team members, to provide a variety of perspectives
Also known as, DMADV, it is an advanced process for continuous improvement.
5 step data driven process for designing processes
Eliminates unnecessary steps
Often focuses on new measurements
Utilizes many of the current tools
DMADV is an acronym for the phases:
1. Define (the business objective)
2. Measure (develop measurement criteria)
3. Analyze (the process design options)
4. Design (develop new process)
5. Verify (test new process)
In this document, each of these phases will be addressed on separate tabs.
Note: You may have to revisit a phase if you do not have enough information. An example of this would be while in the Analyze phase you are reviewing the data and you find that you do not have enough to isolate the root cause. In this case you would need to go back to the Measure phase to gather more data.
This tool differs from Process Improvement in that this tool is about designing, not making incremental improvements to an existing process
People to InvolveDescription
A process is not in existence at your company and one needs to be developed, or
The existing process has been optimized but still doesn't meet customer specification levels
Applicable Situations
Process DesignToolOpportunity
Implementation & Benefit Tracking
Process StepProcess which is not meeting
customer expectationsChallenge
© Copyright 2004 Archstone Consulting LLC
Confidential2
Define Phase
Deliverables
Project Charter
Project Plan
Organizational Change Plan
Risk Management Plan
Review presentation and Storyboard presentation
Steps
1. Develop the charter
2. Develop the project plans
3. Develop the organizational change plan
4. Identify the risks
5. Hold a review
Main Activities
Validate/Identify Business Opportunity
Validate/Develop Team Charter
Develop Team Guideline & Ground Rules
Questions
What are the strategic drivers for the project?
What is the problem or opportunity we are trying to address?
Why is process improvement (DMAIC) not adequate?
What is the scope of the project?
What is the project timeline and completion date?
What team resources are needed?
What are the major risks associated with the project? When and how will we address those risks?
How can we make sure the organization embraces and supports the changes resulting from the design?
ToolsProject Charter tool Pareto Chart toolBarrier Analysis tool Project Plan toolWBS tool Statistical Process Control toolCustomer Focus tool
Tips
At the top level, the goals will be the organization's strategicobjectives, such as higher return on investment or market share
At the operations level, the goal might be to increase the throughput of the engineering department
At the project level, goal might be to redesign the project management process
Definition: Define the goals of the design activity. What is being designed? Why? Note: make sure that the goals are consistent with customer requirements and business strategy
Objective: To identify and/or validate the process design opportunity, develop the business process, define critical customer requirements, and prepare to be an effective project team.
Processes, diagnostics and tools are simple to understand and use and contain numerous examples so employees with little familiarity can successfully participate
© Copyright 2006 Archstone Consulting LLC
Confidential29
February 23, 2006
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
ReduceWorkingCapital
IncreaseOperatingEarnings
ImproveReturn on
Assets
Profitability
Growth
© Copyright 2006 Archstone Consulting LLC
Confidential30
February 23, 2006
Each Strategic Objective is further decomposed into Operational Objectives that focus on a company’s specific transitional needs
Profitability Growth
Op
era
tio
na
l O
bje
cti
ve
Str
ate
gic
Ob
jec
tiv
e
Reduce Cost/Low-CostProvider
Improve Prod.Quality/
High QualityProvider
Improve Cust.Service/
High ServiceProvider
ImproveSG&A
ImproveEngineeringProcesses
ImproveInventory
ManagementProcesses
ImproveSourcing
Processes
ImproveProductionProcesses
ImproveScheduling
& ProductionControl
Processes
ImproveMaintenanceProcesses
ImproveAccounts
Receivable
ImproveAsset
ManagementProcesses
ImproveSafety
ImproveQuality of
Engineering
ImproveQuality ofProduction
ImproveQuality
Processes
ImproveOn-TimeDelivery
ImproveCustomerService
Processes
Develop NewProducts &Technology
Enter NewMarkets
ImproveMfg.
Flexibility
ImproveProduct/
TechnologyDevelopment
& Launch
ImproveSales
PipelineProcesses
ImproveMarketing
Capabilities
ImproveField ServiceProcesses
Reduce Costthrough
High Quality
ImproveDispatch &Transport.Processes
© Copyright 2006 Archstone Consulting LLC
Confidential31
February 23, 2006
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
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
• 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
© Copyright 2006 Archstone Consulting LLC
Confidential32
February 23, 2006
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
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
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
© Copyright 2006 Archstone Consulting LLC
Confidential33
February 23, 2006
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
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
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
© Copyright 2006 Archstone Consulting LLC
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February 23, 2006
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
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
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
Industry Cluster Type Companies Within the Cluster
Leather and Leather Products Strategic Cluster Fila, Clemco
Textile Mill Products Strategic Cluster Krenik Manufacturing Company, Offray, Gore, MD Screen Printers, Inc.
Lumber and Wood Products Strategic ClusterLarge 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
Fabricated Metal Products Emerging ClusterFabricators Steel and Manufacturing Corp., Industrial Knife Company, Stromberg Sheet Metal, Swales and Associates, Master-Halco, DynCorp, MaTech, Thermoform, East Alcoa
Chemicals and Allied Products Competitive ClusterMillenium Inorganic Chemicals, WL Gore, FMC Corp., Alpharma, Proctor and Gamble Cosmetics, WR Grace, Qiagen, Unilever, Medimmune
Food and Beverage Products Competitive ClusterGiant Food, Nafco, Dreyer’s, Marktek Biosciences Corporation, Faidley’s Seafood, Clipper City Brewing Company, Solo Cup, McCormick, BD Biosciences, Phillips Seafood, Breyers, Perdue Chicken
Industrial Machinery and Equipment Mature Cluster Micros Corp., BP Solar, Mack Trucks, Black and Decker, GM Powertrain, National Jet
Printing and Publishing Mature Cluster Harland Company, Custom Direct LLC, Moore Wallace BCS, Cadmus
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February 23, 2006
Traditional manufacturing industries add value to other sectors in areas such as product development, environment and transportation
Classify Mfg Industry into Clusters
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
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
Food and
Beverage
Manufacturing
PrintingAerospace 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 ModificationsPrinting Material
DevelopmentMiniaturization, Product
Development, R&DGenetic Modifications
Miniaturization RFID, Product Development
Miniaturization, Product Development
Bio-intensive GrowthRFID, 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 DefenseNext generation sensors
for process control, Defense, Security
Advanced Agriculture Genetic Modifications, Environmental Friendly
Product Development, Genetic Modifications, Environmental Friendly
Craft Manufacturing
IndustriesEnvironmental Friendly Transportation
Traditional Manufacturing Industries
Em
erg
ing
Man
ufa
ctu
rin
g In
du
stri
es
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Security Defense MiniaturizationEnvironmental
Friendly
Next Generation Sensors for
Process Control
Protecting Intellectual Property
Transportation
Product Development
(Commercializing Technology)
Traditional Manufacturing
Industries
Food and Beverage Manufacturing X X X
Printing X X X
Aerospace X X X X X X X
Modern Agriculture X X X X
Distribution and Warehouse X X
Strategic technology
Manufacturing Industries
Bio-Technology X X X X X
IT X X X X
Nanotechnology X X X X
Miniaturization (actuators with computing
technology), RFIDX X X X
Transportation X X X X
Energy (hydrogen, fuel cell, alternative energy) X X
Aerospace X X X X X
Advanced Agriculture X X X X
Craft Manufacturing X X X
Cross cluster themes that support multiple industries will also enhance Maryland’s strategic ability to focus critical manufacturing resources
Cross Cluster ThemesIndustries
Classify Mfg Industry into Clusters
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
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
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February 23, 2006
Maryland should develop a strategy specific to each of the target clusters
3 Allocate Resources1 Prioritize Clusters 2 Identify Gaps
Qualitative Criteria
Quantitative Criteria
Tier 1
Tier 2
Tier 3
Prioritization
Core
Supporting
Related
Impacted
Core
Supporting
Related
Impacted
Required businesses/institutions
Develop Cluster Specific Strategy
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
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
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February 23, 2006
The state should then determine the policies that will best foster the targeted clusters…
Increase Cluster Networking and
Learning
Increase Cluster Networking and
Learning
Reestablish or recognize cluster associations and alliances Facilitate external connections Encourage inter-cluster communications
Efficiently OrganizeAnd Deliver
Services
Efficiently OrganizeAnd Deliver
Services
Aggregate and publish information by cluster Form cross-agency quick response teams
State Policy Levers*,**
Make Targeted Investments
Make Targeted Investments
Invest in cluster R&D Establish cluster-specific technology centers or parks Support cluster-based entrepreneurial activity
Improve WorkforceImprove 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
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
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
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February 23, 2006
...formalize cluster communication targeted and tailored for specific constituencies…
educationbusiness
Education initiatives University outreach
Trade shows Business journals Newsletters Trade associations
Mass media advertising
Community out-reach
Develop Policy and Communications
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
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
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…recruit companies by approaching a broad set and then progressively narrowing the field until the best remain…
Negotiation
OpportunityDevelopment Initial
Communication OpportunityAssessment Follow-up
CommunicationProposal
PresentationPotentialCompanies
PotentialCompanies
ClusterCompany
Recruit Companies to Fill Gaps
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
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
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February 23, 2006
…develop a rigorous implementation plan to execute the strategy…
Activities
Project Milestones
Week
1 2 3 4 5 6 7 8 9 10 11 …
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
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
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
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February 23, 2006
…and implement a comprehensive communication strategy that builds on success to create more and better clusters
PublicizeWins
ShareLearnings
ImproveImage
Attract MoreCompanies
DocumentSuccesses
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
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
© Copyright 2006 Archstone Consulting LLC
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February 23, 2006
Recommendations
Maryland should pursue multiple activities to promote manufacturing:
1. Follow a rigorous approach to identify, create, promote, develop, and maintain new and existing manufacturing clusters
2. Develop and promote a pro-manufacturing image for Maryland
3. More effectively market Maryland as a center of valuable R&D, and as a home to many leading technology companies
4. Purse policy measures to attract technology companies to Maryland
5. 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
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February 23, 2006
1. Establish a permanent State Chief Manufacturing Officer
2. Increase utilization and effectiveness of Maryland Manufacturing and Business development Councils
3. Encourage entrepreneurial initiatives and technology transfer, especially for those Maryland companies who can leverage manufacturing and the global supply chain
4. Support the State’s targeted manufacturing clusters with capital and operating funds for best practices and operational excellence
5. Allow State higher education institutions greater leeway under State personnel and procurement rules for activities that are not directly supported by State General Funds
6. Increase state funding for academic research related to the broader view of the Extended Enterprise represented by manufacturing
7. Encourage Maryland research consortia to compete for large federal funding opportunities supporting the emphasis on Advanced Technology Manufacturing
8. Create alternative financing vehicles to create more laboratory space for applied research and commercialization opportunities at Maryland’s Universities
9. 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
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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.
February 23, 2006
Appendix
February 23, 2006
Current Situation
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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
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Category MetricUS
RankMaryland Current Situation
Current Manufacturing Sector
Total Mfg Employment
Mfg Output/GSP
43
46
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
Quality of the Work Force
Workforce Education
Manufacturing Education
1
32
Despite the highest ranking in overall education, Maryland’s manufacturing workforce lacks basic skills
16.5% workforce represented by unions
Taxes, Government and Policy
Budget Deficit/Stability
Taxes
AAA Bond
43
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
Infrastructure Rental Cost for two bedroom apartment
Travel Time to Work
Household with internet access
39
49
6
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
Proximity to the federal government, access to 92 million consumers, a vibrant economy and fiscal stability entices businesses…
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Category MetricUS
RankMaryland Current Situation
Economic Dynamism Venture Capital
Initial Public Offering (IPO)
5
7
Maryland has a vibrant economy and is ranked high in both venture capital dollars and number of IPO
Technology R&D Intensity 4 4.6% of GSP spent on R&D compared to national average of 2.66%
Quality of Life Most Livable State 14 Maryland ranks fairly high as a state to live in, despite high number of crimes and second worst homicide rate
Openness Exports Per Capita
Foreign Direct Investment (FDI)
44
26
Maryland’s $926 export-dollar per capita is well below the US average of $1900 per capita
…despite a decline in manufacturing jobs, low export-dollar per capita, and high representation of labor union
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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
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Category Metric MD % of Total RANKUS Avg or
Total% of Total
Total Mfg Employment (in 000s) 148 5.9% 43 14,525 11.18%# of Mfg Companies 4,519 1.2% 13 386,863 N/AMfg Output/GSP 7.2% N/A 46 14% N/A
Unemployment Rate 4.0% N/A 10 5.6% N/AAvg Annual Mfg Wage $48,568 N/A 5 $44,097 N/A% of Labor Force Represented by Unions 16.5% N/A 38 14.3% N/AWork Force Education 60.9 N/A 1 49.2 N/AEducation Level of Manufacturing Force 0.95 N/A 32 1 N/AInformation Technology Jobs 2.40% 5 1.70%Managerial, Professional and Tech Jobs 33.30% 2 29.10%
State Corporate Taxes 7.0% N/A 25 6.72%Budget Deficit as % of GSP 1.9% N/A 21 2.10%Average benefit per First Payment, for Unemployed $2,879 N/A 30 $2,830 N/AState Bond Rating AAA N/A N/A
Electricity cost, Avg. revenue/KWH $0.039 N/A 9 $0.053 N/AHouseholds with Computers % 64.1% N/A 8 N/AHouseholds with Internet Access % 57.8% N/A 6 N/ATravel Time to Work 30 min. N/A 49 22 min. N/ARental Cost 2 Bedroom Apartment (Land Cost) $865 N/A 39 $720 N/A
Venture Capital Per Capita 1,226$ N/A 5 N/AEmployer Firm Births p/ 100,000 Inhabitants 377 N/A 10 N/AEmployer Firm Terminations p/100,000 Inhabitants 383.4 N/A 16 N/AInitial Public Offerings 6.5% N/A 7 5.0% N/A
R&D Intensity 4.6% 4 2.7%Numbet of Patents 467 1.7% 19 27,017 Science and Engineering per 100,000 Inhabitants 237.7 2.3% 14 206Scientists and Engineers as % of Labor Force 12.6% N/A 6 8.6 N/AOnline Manufacturers 81.7% N/A 39 84.5% N/A
Reported Crime per 100,000 habitants 4,747 2.4% 40 3,900 % Change in Crime Index -3.4% N/A 23 -330.0% N/AMurders per 100,000 Habitants 9.4 4.1% 49 4.6 N/A% of People w/o Health Insurance 12.0% N/A 23 14.7% N/AMost Livable State 28.7% N/A 14 N/A N/A
Exports per Capita 926 0.97% 44 1,900 FDI 4.1% 26 4.7%
Economic Dynamism
Technology
Quality of life
Openness
Work Force
Current Manufacturing Sector
Taxes, Government and Policy
Infrastructure
State of Maryland Ranked in Selected Metrics
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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
BaseGovernment Industry
Academia
IndustryAdvisers
Maryland Manufacturing
Strategy
ManufacturingStrategy
Development
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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.
Core
Supporting
Related
Impacted
Core
Supporting
Related
Impacted
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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 belowState Organization Description of Activities
Kentucky Center for Urban and Regional Studies at UNC, Chapel Hill
Used a sophisticated benchmarking technique to identify clusters in Kentucky.
Maine Maine Science and Technology Foundation Commissioned a report to promote economic development through the application of science and technology. The report outlined eight clusters that exist in the New England area.
New York Empire State Development Identified 12 industry clusters in the state to help guide development strategies.
North Dakota Greater North Dakota Association The association's New Economy Initiative uses a cluster approach to build relationships between businesses in each cluster area.
Oregon Oregon Department of Community and Economic Development
Developed cluster groups with firms and associations in key productive industries between 1990 and 1996.
Wisconsin Wisconsin Department of Commerce The Department of Commerce has made the cluster approach a focus of its economic development strategy.
Arizona, Connecticut and Minnesota have successfully implemented cluster-based policies
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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
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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
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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
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Success Factors Value to Clusters Example
Skilled Labor Force Most important determinant for a cluster’s success
Knowledge of the industry supplemented by formal education drives the cluster and attracts new members
Specialized skills were vital to the development of the semiconductor in the Silicon Valley
R&D Capability Availability and accessibility of research centers and expert individual researchers to provide cutting-edge research and solve pressing problems
Specialized optics and imaging institutes and active professional associations provided channels for developing an optics and imaging cluster in Rochester, N.Y.
Proximity of Suppliers 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
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
Access to Specialized Services
Specialized services provide functions tailored to industry and are integral to cluster’s success
The Industrial Technology Institute in Ann Arbor, Mich., was established to support the modernization of the auto industry
Entrepreneurial Energy 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 was one of the key reasons for the success and expansion of the Silicon Valley
Shared Vision and Leadership
Increases competitiveness and profitability of its member firms
North Carolina hosiery industry strengthened the buying power against major customers such as Wal-Mart by negotiating collectively
Having a skilled labor force is one of the key factors for the success of clusters
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Focus communication plans to improve the image of manufacturing industry and facilitate manufacturing education initiative
Universities
Trade Schools
Primary Schools
Management Workforce
Coordination & Feedback
Training & Education
• Literacy• Basic PC Skills• Skilled Trades
• Managerial Skills• Engineering Abilities
Educating the workforce and managers will be key to the success of the cluster strategy.
Engineering Business