The State of Manufacturing in Minnesota

Minnesota manufacturers are a resilient, patient and innovative bunch. So, how are our state’s manufacturers faring in the recent economic downturn? Some are finding growth opportunities by looking at other stable or growing industries such as alternative energy or medical equipment. Other manufacturers are identifying growth opportunities in new markets in the United States and within Minnesota. And some are building and redesigning their products for use in new applications. But it’s their adoption of innovative strategies that makes them stand out from the crowd. 

We spoke with Jaime Nolan, executive director of the Minnesota Precision Manufacturing Association, to gain her insights on the state of Minnesota’s manufacturing segment and the outlook for this ever-changing industry.   

Q Minnesota Business:  Historically speaking, how does the current state of the manufacturing industry in Minnesota compare to recent years? 

Jaime Nolan: Overall, manufacturing is doing better than five or 10 years ago. The peak of the recession for our industry was the early 2000s. Sales now are about 15 percent to 20 percent higher than in 2006, and 40 percent to 50 percent higher than 2001. Material costs are much higher, but that’s because automation overall costs are down. 

We have fewer people and are doing more, and there is a lot less forecasting of demand by our customers, as everyone wants things with very little to no lead-time. Inventory is much smaller throughout the whole supply chain.

 According to the Department of Employment and Economic Development (DEED), manufacturing in Minnesota is responsible for 293,000 jobs among 8,620 companies in the state. This represents over $4.2 billion in wages, which is the equivalent of 13 percent of the total employment in this state. In addition, for every manufacturing job, there are another 1.7 jobs created.

Q MB: How vital is manufacturing to Minnesota’s economy?

JN: Manufacturing is vital to all economies. Manufacturing is one of the only industries that produces new wealth—most other industries (70 percent+ of this nation’s economy) simply pass money around; no new wealth is generated. Every single thing we use has to be manufactured somewhere. From cars to chairs, appliances, electronics, pencils, paper, snacks, food—you name it. 

Nothing can be created or produced without manufacturing being involved. Those countries that understand this will thrive. Those who put all their focus into professional service industries will create their own demise. How vital is manufacturing to Minnesota’s economy? If the state doesn’t make it a priority, we will never regain a strong economic position. 

Q MB: Are their certain segments of the manufacturing industry in Minnesota that are stronger than others? If so, which ones and why? 

JN: It varies. Right now medical, defense and aerospace seem to be busy. There may be other industries that are busy as well.

Q MB: How has the economic downturn affected our state’s manufacturing efforts? 

JN: As a whole, manufacturing came through the downturn quite well. Many companies invested in more automation. In large part, this is because of a lack of available skilled workers in the labor pool. As much as we hear about the state’s unemployment status, there are many unfilled jobs remaining in the manufacturing environment. 

The addition of automation to many companies has decreased the employment numbers at the Department of Employment and Economic Development (DEED) for our industry, but that is not representative of the revenue manufacturing brings into the state. The numbers are the same, if not higher, representing over 13 percent of our state’s economy.  

Q MB: What strides are Minnesota companies making in the manufacturing arena?

JN: There is lots of cutting-edge technology being developed by Minnesota companies.  We just learned of a University of Minnesota engineering group that developed a filter using nanotechnology to filter oil to make gasoline that will reduce the cost of petroleum products by 15 percent. Whoever grabs that and develops it will make a ton of money.

Q MB: What’s the outlook  for the industry?

JN: The biggest challenge we face is the cost of doing business in this country, much less in Minnesota. We could be much more competitive if it was most cost-effective to do business. However, companies are continuing to work very hard to keep manufacturing here in the U.S., and the adoption of new technologies and automation is helping to make manufacturing more competitive. 

Additionally, we are seeing a lot of work come back from overseas. Customers are finding that cheaper is not always better—many of our members have had to “fix” jobs that were originally sourced overseas, but were so poorly manufactured, the customer brought it back to the U.S. to repair and finalize. Since about mid-2010 I have seen a large uptick in business across our members, and I look forward to seeing this continue to grow. mb