Utah manufacturers say that both orders and jobs disappeared in the recent economic crunch. Only one of them seems to be coming back right now.
"Economic recovery without job growth" describes Utah's immediate manufacturing prospects, as companies embrace the lean, efficient models they created to cope with the recession.
"When things started slowing down in the economy, it gave us the opportunity to look internally and get some difficult-to-reach objectives in our manufacturing," said Randy Hales, president and CEO of Orem-based Mity-Lite Inc. "Orders were slowing, so we focused on continuous improvement and making sure we are as efficient as we can be."
That's been the pattern for local manufacturers, said Tom Bingham, president of the Utah Manufacturers Association, making companies stronger and more competitive. It is also "part of the reason we're not seeing people who have lost their job coming right back."
Becoming lean means companies are taking all the waste and barriers they can find out of their processes. And they're finding "they can do the same thing with fewer people and a lot of that is going on," Bingham said. So as product demand comes back, many are not rehiring "and that's a concern we have for job growth. A number of those companies will not bring back everyone they laid off; jobs are not going to be there. It's recovery without job growth and it's fairly common, particularly among manufacturers."
Manufacturing's payroll in Utah is about $5.7 billion, according to David Sorensen, executive director of Manufacturing Extension for Utah, at Utah Valley University, but it's a smaller part of the state's gross domestic product than it used to be. The average size of the companies is 26 employees. The feds count as large manufacturers only those companies that have 5,000 or more workers; only 34 of Utah's 3,900 manufacturers have 500 employees.
But small manufacturers are essential for large manufacturers to survive, said Sorensen, and 80 to 90 percent of the products consumed by large manufacturers are made by small manufacturers like the many in Utah.
The fundamentals of manufacturing have been changing. Thirty years ago, said Sorensen, manufacturers brought in raw materials, built the products and sent them out to be sold. If something didn't sell, it was modified or discounted to get rid of it. Now, "there's not as much inventory and they're shipping more rapidly, not making investments they can avoid. They are trading standing inventory for services. I think a lot more companies are looking seriously at their cost."
His example is a company based in Lindon, Coverstar, which makes automated pool safety covers. He said it changed its layout and increased its output significantly. Not more people, not a new facility," just more efficient ways to do things, he said. "That same output with far less resources" makes a huge difference to the bottom line.
Some Utah manufacturers have done quite well in the recession, including companies that make medical devices and those that make parts used by the aerospace industry, which has been "relatively untouched" — a strong counterpoint to cabinetmakers and others who crashed along with the housing market. Some companies, like La-Z-Boy, have pulled out of the Beehive State. Companies that primarily supplied products for California's housing market have been especially hard-hit, Bingham said.
Still, "we have not seen in the more than 850 companies we represent more than a handful that said they were closing their door." A large percentage, though, planned to "pull back and hunker down." Only about one-fourth were, like medical device makers, doing well.
And not all the news has been bad. Some companies migrated north from California's dire economy to set up shop in Iron and Washington counties, which helped offset some of the devastation for companies that had been dependent on a California market. They moved to Utah, he said, where costs are lower and there are fewer regulatory hurdles to jump.
Among Utah's other pluses is the fact that the state's workers' compensation and unemployment trust funds are solvent, Bingham said. Many states cannot say that.
The Governor's Office of Economic Development says many manufacturing companies have shown interest in Utah.
"We have cluster initiatives" to help businesses capitalize on Utah's competitive advantages, said Derek Miller, GOED managing director. You can see results in the field of medical devices or companies that make composites. The latter, said Miller, will likely bring in one or two new companies, drawn by the state's "crossroads of the West" aspect ?— the cost to ship from the East is too much and the West is where the country's population growth is, he said.
One result of the newfound efficiency for the Mity-Lite plant, said Hales, is that the Orem site not only competed against the company's Asian facility to produce new products, but beat it out and kept the jobs in Utah. It's a powerful advantage when you don't tie up resources in inventory, which you have to do if you're shipping products from overseas. A domestic manufacturing plant can actually build to order almost entirely. And that's what it's doing now, with about 90 percent of the product made-to-order and then shipped, often the same day, Hales said. Now all of Mity-Lite's offshore manufacturing is for customers outside of North and South America.
Mity-Lite has also been renegotiating supply contracts and teaming with new suppliers. For instance, it now buys steel from sometime-competitor Lifetime Products in Clearfield, which has a steel roller mill.
"We increased their business, lowered our costs and improved our services," Hales said.