Maryland Manufacturing Strategic Plan 1225712553575740 9

7/28/2019 Maryland Manufacturing Strategic Plan 1225712553575740 9

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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




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 itappears to have experienced a steady decline…

The traditional manufacturing workforce in 2003 was 5.9% compared to more than 9% in early1990s

Gross State Product (GSP) related to traditional manufacturing was 7.2% in 2001 compared toapproximately 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 tothe state

Food and beverage manufacturing Printing and related support activities Transportation equipment manufacturing Chemical Manufacturing Furniture and related product manufacturing




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 CraftManufacturing

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




Confidential6

February 23, 2006

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 d isrup t ive research competenc ies and

manufactur ing proc ess innov ation to enhance i ts abi l ity to

manage the global sup ply ch ain

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




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% to7.2% 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%

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

Time

%MD

US

Manufacturing as % of GSP

0%

5%

10%

15%

20%

25%

1 9 7 7

1 9 7 8

1 9 7 9

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

Time

% o

f G S

US

MD




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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:




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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** 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

E c o n

o m i c

A c t i v i t y




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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 mi l l ion consum er base within500 mile radius provides opportunities to beclose to wide range of customers

• Acc ess to the port of Balt imore, one of thebusiest ports in the US offers assembly

opportunities at the dock before exporting

• In tensity in R&D demonstrates commitment toinnovation and process improvement

• Vibrant econom y that has ample access toventure capital and the value generated by IPOs

• Highly educated workfo rce provides a skilledworkforce base

• Manufactur ing assistance programs focusedon enhancing manufacturing through taxincentives, sharing of technology and resources

Challenges

• Manufactur ing im age suffers an outdated

reputation and fails to communicate modernaspects of the manufacturing environment

• Signif icant drop in the manufactur ing

workforce does not bode well with themanufacturing businesses

• Gap in educat ion of the manufactur ing

workforce results in lacking in basic skills andhigher training costs

• In f rastructure issues such as traffic congestionand high cost of housing makes it difficult toattract employees

• Taxes and Gov ernment regulat ions lead to ahigh cost of doing business

• Low export dol lar per capita and lack of signif icant FDI indicates a lack of openness toglobalization and makes economies lesscompetitive




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 perceptions

Develop advocates for industry’s public perception

Assess Impact

Communicate Results

Focus on CompaniesEstablish meaningful relationships with manufacturer

Connect Appropriate Solutions

Focus on Business Competitiveness and growth (Supply Chain)

Assess Impact

Communicate Results

Focus on Service ProvidersIdentify 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

To emphasize the role of the emerging knowledge economy and

traditional manufacturing, one must address the manufacturing image




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 LLCConfidential

14February 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 encouragesadvanced 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 businessesd. 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:




15February 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 Statepersonnel 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 atMaryland’s Universities

9. Promote increased coordination at University and college technology

transfer offices

…Maryland should:




16February 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 laboratorytechnology 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 existingweaknesses, Maryland must focus its limited resources on strategically supporting

key manufacturers.

The fol lowing sect ion prov ides a model for ident ify ing th ese opp ortuni t ies and

optimizing use of the State’s resources.

… Maryland should:



© Copyright 2006 Archstone Consulting LLCConfidential17

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 growingmanufacturing 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




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 andpartners to the core companies

Related businesses provide a more indirectsupport to the core by enabling supportivecompanies or providing services to the corecompanies

Impacted businesses are affected by thecluster but do not directly relate to theactivities 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

Suppor t ing

Related

Impacted

Cl t id i d t t b i hi h i




February 23, 2006

Clusters provide economic advantages to business, which in

turn drive benefits to the state

Higher Employment

Retention of existing companies and jobsthrough high switching costs

Creation of new jobs in growing industries

Creation of new jobs through spillover andmultiplier effects

Higher Incom es 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 BenefitsBusiness Benefits

More Eff ic ient Access to Inputs:

Raw materials

Industry-specific suppliers

Skilled labor

More Eff ic ient Processing :

Fast diffusion of knowledge, innovations,

benchmarking, etc.Economies of scope and scale

Industry-specific services (e.g., legal,finance)

More Effic ient Access to End Markets:

Existing customers

New customers

H i kill d l b f i f th k f t f th




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 formaleducation drives the cluster and attracts newmembers

Specialized skills were vital to thedevelopment of the semiconductor in the

Silicon Valley

R&D Capability Availability and accessibility of research centersand expert individual researchers to providecutting-edge research and solve pressing problems

Specialized optics and imaging institutesand active professional associationsprovided channels for developing an opticsand imaging cluster in Rochester, NY

Proximity of

Suppliers

Proximity of suppliers assist in reduced inventorycarrying costs, innovation, and delivery time

Quick dissemination of information between cluster members and knowledge sharing reduces productdevelopment and R&D costs

Hosiery cluster in North Carolina alsoencompasses 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 toindustry and are integral to cluster’s success

The Industrial Technology Institute in Ann Arbor, MI was established to support themodernization 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 andwill attract new members

Entrepreneurial energy was one of the keyreasons for the success and expansion of

the Silicon Valley

Shared Vision and

Leadership

Increases competitiveness and profitability of itsmember firms

North Carolina, hosiery industrystrengthened the buying power againstmajor customers such as Wal-Mart bynegotiating collectively

Having a skilled labor force is one of the key factors for the

success of clusters






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

Potential Clusters with some core competency that might be developed, suchas 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 inassessing 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 potent ial , as these are most likely to promote manufacturing growth











The Operational Advantage TM Program has defined five major strategy




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

Reduce

Working

Capital

Increase

Operating

Earnings Improve

Return on

Assets

Profitability

Growth



Identifying and developing clusters requires a similar




February 23, 2006

Identifying and developing clusters requires a similar

systematic and disciplined approach

• Identify major companies in thearea

• Conduct survey

with selectcompanies

• Identify trendsacross major industries

• Develop selectioncriteria

- PromisingTechnology

-Economic Benefit

- Competitive Advantage

• Identify impact onstrategic technologymanufacturing sector

• Develop cluster strategy for eachof the clusters

• Prioritize clusters

• Identify gaps inthe clusters

• Allocateresources, fundsand efforts basedon prioritization

• Develop minimumrequirements toqualify for statesponsorship

• Conduct quantitativeand qualitativeevaluation

• Develop a committeeof government andprivate sector

• Take measuresto formalizecluster communications

• Organizecommittee for each cluster

ProfileManufacturing

Industry

ClassifyManufacturingIndustry into

Clusters

Develop a

Cluster SpecificStrategy

EstablishPolicy for State

SponsorshipFormalize

Cluster Communication

Recruit

Companies toFill Gaps in

Cluster

Develop anExecution

PlanDevelop

CommunicationPlan

• Carefully plan

and manageprocessesdesigned to

diversify aculture

• Develop detailedexecution plan

• Attributes of theexecution plan

-Project managementteam

- Project timelines

- Communication plans

- Legal documents

• Develop CommunicationPlan

- Improvemanufacturing image

-Facilitatemanufacturingeducation initiative

- Facilitate risk takingfor entrepreneurs

Maryland has ample data available to identify traditional and




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 early1990s

Despite a drop in the job growth and GSP, the manufacturing sector has



Research and analysis into the multiplier effect across the manufacturing sector inMaryland 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 earnin gs, indicating that it is larger than thedirect manufacturing measures indicates

Profile Manufacturing Industry


Industry


Clusters

Develop aCluster SpecificStrategy


Sponsorship

FormalizeCluster

Communication

RecruitCompanies to

Fill Gaps inCluster

Develop anExecution

Plan

DevelopCommunication

Plan


Industry


Clusters

Develop aCluster SpecificStrategy


Sponsorship

FormalizeCluster

Communication

RecruitCompanies to

Fill Gaps inCluster

Develop anExecution

Plan


Plan

Promising technology and economic benefits are key criteria




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

ManufacturingIndustry


Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan



Traditional manufacturing industries add value to other sectors in




February 23, 2006

Traditional manufacturing industries add value to other sectors in

areas such as product development, environment and transportationClassify Mfg Industry into Clusters

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Food and

Beverage

Manufacturing

Printing Aerospace and

Defense

Modern

Agriculture

Distribution and

Warehouse

Bio-Technology Environmental Friendly,Product Development

Product Development

Information Technology Print ManagementSoftware

Miniaturization, ProductDevelopment

Nanotechnology Genetic ModificationsPrinting Material

DevelopmentMiniaturization, Product

Development, R&DGenetic Modifications

Miniaturization RFID, ProductDevelopment

Miniaturization, ProductDevelopment

Bio-intensive GrowthRFID, ProductDevelopment

Transportation System Transportation SolutionDevelopment

Transportation SolutionDevelopment

Intelligent TransportationSystem Solutions

Development, ProductDevelopment

Transportation SolutionDevelopment

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

E m

e r g i n g M a n u f a c t u r i n g I n d u

s t r i e s

Cross cluster themes that support multiple industries will also enhance




February 23, 2006

Security Defense Miniaturization Environmental

Friendly

Next

Generation

Sensors for Process

Control

Protecting

IntellectualProperty

Transportation

ProductDevelopment

(CommercializingTechnology)

Traditional

Manufacturing

Industries

Food and BeverageManufacturing X X X

Printing X X X

Aerospace X X X X X X X

Modern Agriculture X X X X

Distribution andWarehouse X X

Strategictechnology

Manufacturing

Industries

Bio-Technology X X X X X

IT X X X X

Nanotechnology X X X X

Miniaturization

(actuators withcomputing technology),

RFID

X 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

Themes Industries

Classify Mfg Industry into Clusters

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Maryland should develop a strategy specific to each of the




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

Suppor t ing

Related

Impacted

Core

Suppor t ing

Related

Impacted

Requiredbusinesses/institutions

Marketing R&D

Education Incentives

Develop Cluster Specific Strategy

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

The state should then determine the policies that will best




February 23, 2006

The state should then determine the policies that will best

foster the targeted clusters…

Increase Cluster

Network ing and

Learning

Reestablish or recognize cluster associations and alliances

Facilitate external connections

Encourage inter-cluster communications

Eff iciently 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 Workforc e 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


ClassifyManufacturing

Industry intoClusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile




Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

...formalize cluster communication targeted and tailored for




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 mediaadvertising

Community out-reach

Develop Policy and Communications

Profile




Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile




Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

…recruit companies by approaching a broad set and then




February 23, 2006

…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 PotentialCompanies

PotentialCompanies

Cluster Company

Recruit Companies to Fill Gaps

Profile




Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile




Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

…develop a rigorous implementation plan to execute the




February 23, 2006

p g p p

strategy…

Activities

Project Milestones

Week1 2 3 4 5 6 7 8 9 10 11 …

Init iat ive Kick -Off

Tier 1 Plan

• Define project management team

• Finalize approach

• Craft communication plans

• Integrate cluster companies

• Draft legal documents

Tier 1 Plan




• Integrate cluster companies

• Draft legal documents

Tier 1 Plan




• Integrate cluster companies• Draft legal documents

Develop Execution and Communication Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

…and implement a comprehensive communication strategy that




February 23, 2006

p p gy

builds on success to create more and better clusters

PublicizeWins

ShareLearnings

Improve

Image

Attract MoreCompanies

DocumentSuccesses

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

Profile



Clusters

Develop a

Cluster Specific

Strategy


Sponsorship

FormalizeCluster

Communication

Recruit


Cluster

Develop anExecution

Plan


Plan

R d ti




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

Recommendations




Confidential

44February 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

Next Steps




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45February 23, 2006

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 andmarkets.





February 23, 2006

Current Situation

The manufacturing sector has steadily increased output as well




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48February 23, 2006

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



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

Proximity to the federal government, access to 92 million consumers,




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49February 23, 2006

Category MetricUS

RankMaryland Current Situation

CurrentManufacturing

Sector

Total Mfg Employment

Mfg Output/GSP

43

46

148K jobs in the manufacturing sector represents only 5.9% of Maryland’sworkforce

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 overalleducation, Maryland’s manufacturingworkforce lacks basic skills

16.5% workforce represented by unions

Taxes,

Government and

Policy

Budget Deficit/Stability

Taxes

AAABond

43

Despite having AAA Bond rating and a lowbudget deficit, environmental andgovernment regulations coupled with hightaxes were hurting the businesses

Proximity to the Federal Government is a bigplus

Infrastructure Rental Cost for two bedroomapartment

Travel Time to Work

Household with internet access

39

49

6

Second longest commute time andcomparatively high cost of living don’t favor

well with the businessesMaryland has access to 92 millionconsumers within 500 mile radius and one of the busiest ports in the US

58% of households have access to theinternet

a vibrant economy and fiscal stability entices businesses…



Leveraging manufacturing strengths and working on overcoming




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51February 23, 2006

major challenges will be the key to attracting companies

Strengths

• Proximity to the Federal Government providesopportunities to enhance lobbying efforts

• Access to 92 mi l l ion consum er base within500 mile radius provides opportunities to beclose to wide range of customer

• Acc ess to the port of Balt imore, one of thebusiest ports in the US offers assembly

opportunities at the dock before exporting

• In tensity in R&D demonstrates commitment toinnovation and process improvement

• Vibrant econom y that has ample access toventure capital and the value generated by IPOs

• Highly educated workfo rce provides a skilledworkforce base

• Manufactur ing assistance programs focusedon enhancing manufacturing through taxincentives, sharing of technology and resources

Challenges

• Manufactur ing im age suffers an outdatedreputation and fails to communicate modern

aspects of the manufacturing environment

• Signif icant drop in the manufactur ing

workforce does not bode well with themanufacturing businesses

• Gap in educat ion of the manufactur ing

workforce results in lacking in basic skills andhigher training costs

• In f rastructure issues such as traffic congestionand high cost of housing makes it difficult toattract employees

• Taxes and Gov ernment regulat ions lead to a

high cost of doing business

• Low export dol lar per capita and lack of signif icant FDI indicates a lack of openness toglobalization and makes economiesless competitive





Gain Consensus




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54 February 23, 2006

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.

Arizona, Connecticut and Minnesota have successfully




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A few of the states have successfully implemented cluster policy include

Ar izona – 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

Connect icut – 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

State 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.

implemented cluster-based policies

One of the key goals of cluster-based policies is to direct funds to




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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 childcare services, transportation improvements, and home ownership programs

Industry clusters make it easier and more effective for town planning commissions to targetpotential businesses seeking to locate in the area

Public policy makers should know when to pursue them and when




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to push them aside for cluster-based policies to be successful

Policy makers should avoid following pitfalls while developing cluster-based

policies:

Cluster-based po l ic ies are not the same as ind ustr ia l pol ic ies – cluster-based

policy initiatives must promote the competitive advantages of an interlinked groupof related industries

Cluster creat ion is best lef t to the m arket – policy makers should refrain fromthe temptation to create new clusters and leave cluster formation to the marketmechanism

Let research , no t pol i t ics , driv e the faci l i tat ion of clu sters – policy makersmust not bow to the pressures of political lobbyists pulling for certain industries,unless it is supported by specific research indicating tangible benefits

Cluster Pitfalls




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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

Having a skilled labor force is one of the key factors for the

f l t




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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 byformal education drives the cluster and attractsnew members

Specialized skills were vital to the

development of the semiconductor in theSilicon Valley

R&D Capability Availability and accessibility of research centersand expert individual researchers to providecutting-edge research and solve pressingproblems

Specialized optics and imaging institutes andactive professional associations providedchannels for developing an optics andimaging cluster in Rochester, N.Y.

Proximity of Suppliers Proximity of suppliers assist in reduced inventory

carrying costs, innovation, and delivery timeQuick dissemination of information betweencluster members and knowledge sharing reducesproduct development and R&D costs

Hosiery cluster in North Carolina also

encompasses yarn, needle, dyestuff andpackaging materials suppliers

Proximity assists the cluster in organizingevents for exchange of knowledge

Access to Specialized

Services

Specialized services provide functions tailored toindustry and are integral to cluster’s success

The Industrial Technology Institute in Ann Arbor, Mich., was established to support themodernization of the auto industry

Entrepreneurial Energy Small firms rely on research institutions,associations or other special services in order toremain competitive

Entrepreneurs highlight benefits of the cluster andwill attract new members

Entrepreneurial energy was one of the keyreasons for the success and expansion of theSilicon Valley

Shared Vision and

Leadership

Increases competitiveness and profitability of itsmember firms

North Carolina hosiery industry strengthenedthe buying power against major customerssuch as Wal-Mart by negotiating collectively

success of clusters

Focus communication plans to improve the image of manufacturing

i d t d f ilit t f t i d ti i iti ti



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

Documents

Maryland Manufacturing Strategic Plan 1225712553575740 9