Enterprise Minnesota Magazine - Winter 2017

MINNCOR offers prison offenders an opportunity to learn manufacturing skills while also producing high-quality products

Helping Manufacturing Enterprises Grow Profitably WINTER 2017

Special Report

Too much work, too few hands Southeast Minnesota manufacturers struggle to keep up with demand

Enterprise Minnesota 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413

PRODUCTIVE TIME

Fifty-four percent of manufacturers say they have a formal strategic plan to achieve profitable growth.

Is your company one of them?

Call us today at 612-373-2900 or reach us at enterpriseminnesota.org for a free 90 minute consultation with one of our strategy experts.

We can help you grow profitably!

Scan here to learn more about how we can help your business.

2100 Summer St. NE, Suite 150 • Minneapolis, MN 55413

WINTER 2017

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TOO MUCH WORK, TOO FEW HANDS

Southeast Minnesota manufacturers struggle to keep up with demand

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Q&A WITH AMY KLOBUCHAR THE REBIRTH OF APPRENTICESHIPS?

PRODUCTIVE TIME

Senators Amy Klobuchar and Susan Collins want to revitalize apprenticeships to help solve the skills gap in manufacturing

MINNCOR offers prison offenders an opportunity to learn manufacturing skills while also producing high-quality products

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2 Bracing for Prosperity Successful manufacturers will be proactive in their thinking

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Training the Trainer

Simple … and Strategic

Alexandria-based Aagard prepares for staffing challenges by investing in its supervisors

Owatonna’s Modern Metal Products takes a deeper dive in organizing its diverse customer base

32 When the Numbers Prove You’re Right A local think tank’s research confirms the lifelong value of a career in manufacturing

Visit the Enterprise Minnesota website for more details on what’s covered in the magazine at www.enterpriseminnesota.org.

Subscribe to The Weekly Report and Enterprise Minnesota® magazine today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit www.enterpriseminnesota.org/subscribe.

WINTER 2017 ENTERPRISE MINNESOTA /

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bob kill

Bracing for Prosperity Successful manufacturers will be proactive in their thinking

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s we prepare for the 10th anniversary edition of our State of Manufacturing® survey, I still marvel at our first set of focus groups a decade ago, when we asked manufacturers to assess how the first aftershocks of the Great American Recession forced their forecasts to slide off the bottom of their spreadsheets.

I was impressed by the number of executives who calmly described how they would exploit the downturn to retool their operations, retrain their people and reexamine their products.

Today’s manufacturers face a more nuanced challenge: How to thrive in prosperity in a way that maximizes strategic longterm profitability without generating vulnerabilities that might jeopardize them during economic blips.

Think about it. Today’s manufacturers today enjoy a marketplace of improving productivity, stable inflation and still-low interest rates. Even conservative predictions place GDP at a manageable 2.6 percent.

Energy costs are down, we’re coping with health care and most federal regulators are lifting their collective boots from the throats of their clientele. And domestic markets are continually juiced by the fading attraction to the increasingly false economies of outsourcing contracts to China and India.

Overall, it’s a pretty good time to be a manufacturer. (Now, none of this constitutes a bankable Bob Kill Manufacturing Index that guarantees the health of the economy. We all remember the devastating takeaway of 2008-9 was that nobody saw it coming. Therefore, if the economy tanks anytime soon, I’ll deny that I wrote this. Why should I be different?)

So, how are the savvy manufacturers handling the current environment? I make a point every week to visit a handful of 2

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manufacturers in their facilities all across Minnesota, and I’m struck by three persistent traits of successful manufacturers.

Think of them as the evolution of Lean and continuous improvement.

They think strategically. We’re seeing a shrinking number of successful manufacturers (of any size) who run their operations out of a shirt pocket through a combination of instinct, past success and blind luck. Future markets will not forgive the LTs who haven’t analyzed what they’re producing, why they’re producing it and how it differs from their competition.

They are managing their way around the skills gap. Instead of wringing their hands or blaming their local school districts for producing an insufficient number of job candidates, shrewd manufacturers are 1) keeping the employees they have by training them to accept new and better challenges, and 2) plotting technologies that will enable their existing workforce to accomplish ever more and to use fewer resources.

They recognize ISO as Lean 2.0. There will always be a market for new and innovative management tools. We see more and more companies embrace the awesome managerial strengths of ISO 9001:2015 to bring efficiency and greater productivity to their operations.

We intend to probe these kinds of forward-looking management attitudes and techniques as we plot out the themes and out the questions within our 10th anniversary State of Manufacturing survey in the coming year.

Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably

Publisher Lynn K. Shelton

Custom Publishing By

Contributing Photographers Chuck Miller, Winona Daily News Chris Morse Chelsea Sobtzak Writers Jo Colvin William Morris

Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org 612-455-4225

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HR SOLUTIONS

Training the Trainer Alexandria-based Aagard prepares for staffing challenges by investing in its supervisors

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any manufacturers statewide who struggle to attract and retain the number of employees they need to grow profitably are identifying that their managers provide the capability of getting that accomplished.

Aagard Group LLC, an Alexandriabased company that designs, engineers, and manufactures automated packaging machinery, is addressing that need by providing skills not only to its frontline, but to those who lead that line.

“Labor is the No. 1 constraint to growth today,” says Rick Kvasager, a business development advisor at Enterprise Minnesota. “Many manufacturers are turning away business because they can’t hire enough people to take on anything additional.” Aagard, he says, has been “engaged in developing its workforce, focusing on first-level supervisors and leaders.”

Kvasager said a recent State of Manufacturing® survey revealed that attracting and retaining a qualified workforce experienced the largest jump—from 26 to 34 percent—when manufacturers were asked to name the biggest challenge that might negatively impact future growth.

“Successful companies like Aagard are investing in their people,” Kvasager added. “The objective is to help supervisors develop a well-trained work force and provide proper training to help people do their jobs effectively.”

Aagard, which manufactures cartoners, sleevers, case packers, retort unloading and loading, tray packers, and palletizers/ unitizers, recently began instituting Training Within Industry (TWI), with training provided by Enterprise Minnesota.

“We are growing at such a rapid rate. We knew we needed to provide them some resources to enhance their toolboxes to deal with the issues that came up.

This was a great way to do it.”

—Sharlo Meyer, Human Resources Manager, Aagard Group

TWI uses a hands-on approach to teach essential skills for supervisors, team leaders, and anyone who directs the work of others. The program originated in the 1940s, as American industry sought to train unskilled workers entering the war production workforce as skilled laborers went off to war. It provides frontline personnel with skills to establish a culture for change, improve methods, and facilitate standard work.

Manufacturing manager David Lamb brought TWI to Aagard, based on successes he had experienced at a previous employer.

“People got a lot out of it and were able to implement the practices,” Lamb recalled. “The goal for Aagard is to train our workforce in leadership, and [TWI] is a

very practical, common-sense approach.”

TWI trains leaders using four components: job relations, job instruction, job methods, and job safety. With all on board at the progressive manufacturing company, Aagard was eager to participate, and has currently completed the job relations portion of the program.

From its inception in 1997 in a small facility in Carlos, MN, Aagard sold its first combination packaging system. The company steadily grew, and in 2005 broke ground at its current location in Alexandria.

A 31,000-square-foot addition was added a year later, increasing the square footage to 75,000. At that time, Aagard boasted a work force of 75 employees. In 2014 the company bought an additional 87,000-square-foot facility and in 2016

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added another 60 employees. Aagard currently has 180 employees and has a projected revenue of $37 million in 2017.

“We have a lot of new people in supervision and leadership roles, and we are growing at such a rapid rate,” explained Sharlo Meyer, human resources manager at Aagard. “We knew we needed to provide them some resources to enhance their toolboxes to deal with the issues that came up. This was a great way to do it.”

Thirty of Aagard’s leaders and supervisors recently completed the job relations portion of the program, which consisted of three four-hour sessions, led

by Abbey Hellickson, a business growth consultant for Enterprise Minnesota.

“Aagard is a valuable organization,” Hellickson said. “The concept of job relations aligns with their values on how to effectively handle employees with a strong value set and provide a place for them in the organization.”

According to Hellickson, a group of no more than 12 leaders participates in each four-hour session. First, the group discusses the goals of the leaders within

“Successful companies like Aagard are investing in their people. The objective is to help supervisors develop a well-trained work force and provide proper training to help people do their jobs effectively.”

—Rick Kvasager, a business development advisor at Enterprise Minnesota

the organization, and how they want their leaders and coworkers to act.

“Then we go into the concept of how communication impacts leadership, and the need to have strong communication skills,” Hellickson explained.

The training then continues with emphasis placed on implementing the job relations method, a four-step process that a leader can utilize when a problem arises with an employee.

“It teaches the leader to first of all

pause and make sure they have a full understanding of the situation. They discover how to get the facts,” she continued.

Attendees in the confidential sessions at Aagard were asked to discuss a problem that they had personally experienced on the job.

Each incident, as well as the events leading up to it and how it was managed, was discussed as a group.

Input was then gathered from all attending on how the situation could have been handled with the most positive outcome.

“We teach them how to go about putting the situation together. It allows them to brainstorm the actions they could take based off the facts they discover and the situation that is happening,” Hellickson said of the job relations training method.

Following up on those actions, providing credit and accolades, maximizing employees’ abilities, and teaching leaders how to prevent future problems from arising are also part of the discussion.

Leaders also learned the importance of open lines of communication with employees and providing feedback regarding their performances and potential improvements that could be made.

But of all the positive changes implemented with job relations training,

Manufacturing manager David Lamb brought TWI to Aagard based on successes he had experienced at a previous employer.

establishing a common language companywide was perhaps the most important.

“Aagard’s goal is to strengthen their leadership values and align them with their value-based organization,” Hellickson concluded. “They want to provide a language for their leaders and this does that. All their leaders are familiar with the four-step method, so they have a common language that they can use.”

That common language will continue to be encouraged and embedded in the leadership culture at Aagard. The company plans to begin implementation of the next two components of the TWI program—job instruction and job methods—over the next few months.

“We are so excited to bring the next session in,” said Meyer of the job instruction phase, which begins this month.

The goal of this phase is to train the trainer. Trainers, supervisors, and those involved with customer service will be trained to consistently provide on-the-job training to both employees and customers.

“Job instruction is not necessarily a leadership program,” Lamb explained. “A WINTER 2017 ENTERPRISE MINNESOTA /

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lot of folks will go through it who are not supervisors. It’s focused on how you go about training people.”

Job instruction creates a consistent, proven method for retention and is more focused on training people to develop new skills, including tracking and identifying the need for continued instruction. This phase will comprise three sessions and will involve several more employees.

This will be followed by the next phase of TWI, job methods, which ensures that employees use consistent methods to complete tasks

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TWI trains leaders using four components: job relations, job instruction, job methods, and job safety.

With all on board at the progressive manufacturing company, Aagard was eager to participate, and has currently completed the job relations portion of the program. by emphasizing standardized job documentation and work processes.

The aim is to produce greater quantities of products in less time by streamlining the process. It eliminates wasteful tasks, and combines and rearranges necessary tasks.

Aagard expects to complete TWI by next July. And although its leaders have completed only the first step, its positive impact has already been noted.

“It has opened many of our supervisors’ eyes that you don’t have to do this alone,” Meyer says. “There are people out there to talk through a situation and there are professional ways to handle things.”

Employees approach situations with greater confidence, she adds. And they are “intentional about building relationships with staff.”

RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Visit rsmus.com /aboutus for more information regarding RSM US LLP and RSM International.

—Jo Colvin 6

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MED DEVICE

Concept Through Approval Nortech uses its Devicix acquisition to bolster its growing med device business

PHOTOGRAPH BY CHELSEA SOBTZAK

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n 2015, Nortech Systems acquired Eden Prairiebased Devicix to give more comprehensive capabilities to its rapidly growing medical device business.

Devicix was founded in 2004 as a company that could guide other companies as they build medical devices all the way from design assistance through final government approvals. By the time of the acquisition, the company’s 25 employees had developed a strong reputation of innovation in medical product design and engineering.

“The addition of Devicix will enhance and broaden Nortech’s capabilities for complete design and manufacturing and service, particularly for regulated medical devices,” Nortech said at the time of the acquisition.

Nortech is one of Minnesota’s great entrepreneurial successes.

Nortech built its own reputation—with world-class electronics manufacturing services—from early-stage product development and engineering through production and fulfillment. Starting with a single facility in northern Minnesota in 1990, it has grown through steady growth and strategic acquisitions to a company with $100 million-plus in revenues.

Curt Steichen, senior vice president and chief marketing and sales officer at Devicix, has been with Nortech for 14 years. He says the Devicix acquisition was part of an overall strategy for the company to find more “upfront involvement” with customers who were looking for engineering and manufacturing.

Devicix brought a wide range of customers, particularly at the early stages

Curt Steichen is senior vice president and chief marketing and sales officer at Devicix.

of development. “A lot of them are virtual companies that we help bring together and turn into commercialization and to manufacturing,” Steichen says. “That’s a value to the small, early stage company.”

Nortech and Devicix help engineers with extensive experience in clinical applications understand what larger customers need.

“It was really a full suite of engineering services and knowledge of what it takes to develop and design a medical product— that was the key asset that we added to Nortech’s portfolio.”

The combined companies still use the Devicix name as the brand device trade name for medical product development services, but they’ve also blended in Nortech as the parent company to convey the size and strength behind Devicix.

“We’re marketing the parent company more and more as we utilize Devicix to leverage Nortech getting into the space,” he says.

It has worked. During 2016, Nortech’s medical sales skyrocketed 30 percent.

The Nortech and Devicix alliance has established particularly strong expertise with complex medical devices, Steichen says, citing work the company has done to RF generators that are providing heat or steam as the energy source to do ablations (surgical removal of body tissues).

The company also helped a customer manufacture an injector system to treat aneurysms. “What we’re doing is mixing two parts polymer materials very precisely that are then injected into the coronary vessels. It’s a great example of our software in electrical to manage very precise controls,” Steichen says.

“We’re vital in bringing together the ecosystem of connecting the customer with the engineering and the technical and the manufacturing, as well as working with the regulatory departments, the test labs and other kinds of things our customers need to have success in the marketplace.

“That’s really what we’re about. We do a lot of different things and part of our expertise is the overall knowledge of what it takes to develop a product. We thrive on helping our customers succeed and we do that by providing vital connections.”

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Owatonna-based Modern Metal Products is a 92-year-old family-operated sheet metal fabrication company that focuses primarily on enclosure work—metal boxes.

From its 52,000-foot facility, the company’s 52 employees service customers that need 25 or 50 enclosures a year, or maybe 25 to 30 thousand enclosures a year.

PROFILE

Simple … and Strategic Owatonna’s Modern Metal Products takes a deeper dive in organizing its diverse customer base

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hawn Pfieffer attributes much of his company’s almost century-long success to keeping things really simple.

“We take care of our customers,” he says.

“And we don’t do things that aren’t in our wheelhouse.”

Pfieffer is operations manager at Owatonna-based Modern Metal Products, a 92-year-old family-operated sheet metal fabrication company that focuses primarily on enclosure work—metal boxes. From its 52,000-foot facility, the company’s 52 employees service customers that need 25 or 50 enclosures a year, or maybe 25 to 30 thousand enclosures a year. Their customers range from start-up entrepreneurs to Fortune 100 companies, some of whom have been with Modern Metal Products for more than 60 years.

“People find us,” he says of Modern Metal’s ability to attract new customers.

Potential customers enter “enclosure,” “toolbox,” “box,” “manufacturers,” “fuel box,” into a search engine “and we’re com-

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ing up.”

“Some customers call us and say, ‘Hey, I’ve got this widget, and I need a container to put it into, but I don’t know anything about it.’ And we help them through the process. We ask the right questions, make a quick rendering and email it out to them,” Pfieffer says. “What’s fun about that is you get that excitement on the other end of the phone the next day. They are like, ‘Wow! That’s exactly ... Can we make it a little bit bigger? Can we make it a little bit more rectangular? Can I add my name on it? Can I have it painted blue or purple or yellow, whatever?’”

Business with large multinational corporations is “very, very meaningful to us, but truly the lifeblood of the company is always finding time to be with the entrepreneurs.” For every 10 entrepreneurs he deals with, “probably eight come and go but there’s that 20 percent that take off.”

Taking care of those disparate customers requires different strategies.

He particularly enjoys the moments when entrepreneurs realize that what they’re doing is fundamental to their branding. “We’re helping them brand their new thing,” Pfieffer says. “Because we’re building boxes, we’re helping our customer with that first impression. You only get one chance to make that first impression.”

“We’re not a very sexy industry,” Pfieffer admits. “We have a hard time trying to tell our story to a recent college graduate or someone maybe a little bit younger.” But he says, “every widget needs an enclosure.”

Pfieffer just celebrated his 28th year at the company, in which he has “been everything from a materials manager to a process engineer to a full-time production employee.” He also worked at the company as a part-time production employee while attending Owatonna High School and while getting an engineering degree at Mankato State University.

“There was never a doubt that I was

going to return to the company,” in part because he could work with his father, who is one of the owners.

But his attraction was also “our people, our product line, and our customers.”

“A great number of the people that now report in to me, I at one time reported in to them.”

It is shown in the tenure of employees, whose tenure ranges from the high teens to the 30s. One gentleman retired this summer after 48 years with the company.

Modern Metal Products was founded in 1925 to manufacture ventilator systems for buildings, especially for barns.

The company then created a brisk business making the back-step metal enclosures that enabled America’s neighbor-

“We’re not a very sexy industry,” Pfieffer admits.

“We have a hard time trying to tell our story to a recent college graduate or someone maybe a little bit younger.”

But he says, “every widget needs an enclosure.”

G ra n ite E q u ity . co m

—Shawn Pfieffer

hood milkmen to exchange empty milk bottles for fresh new ones. During World War II, the company built metal boxes and enclosures for the U.S. military, from ammunition boxes to different containers for support vehicles. Although a very small part of their business, Modern Metal continues to supply the military.

“We are building the boxes that go in that transport vehicle to support spare parts, extra batteries, and different components so that drones can fly at all times at any location,” Pfieffer says.

Modern Metal Products then evolved into fire extinguisher cabinets. IBM became a client, as did Northwestern Bell and Honeywell, which remains the company’s largest customer, primarily in its fire and life safety division. Right now, its largest volume business is the manufacturer of cabinets for automated external defibrillators (AEDs). “We’re doing just about 2,000 cabinets a week for those.”

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New Board Members Two top female executives will bring diverse experiences to Enterprise Minnesota’s board of directors

New board member, Laura Ekholm

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wo prominent female executives related to Minnesota’s manufacturing community have joined the board of directors at Enterprise Minnesota: Julie Whitney, a vice president of business banking in the St. Cloud office of Bremer Bank and Laura Ekholm, owner of L&M Radiator in Hibbing.

Whitney replaces Jeanne Crain, who is now president of Bremer. “Big shoes? No doubt,” Whitney says. “Where Jeanne’s focus is broader, mine is a little narrower. I am in a position where I can focus on manufacturing.” As a commercial banker, Whitney works with manufacturers in a wide range of banking needs, from real estate financing and equipment financing, to international trade, foreign exchange, fraud prevention, and other financial services.

Whitney came to Bremer with a deep background in manufacturing. Her father is a machinist, and she worked as a machinist during her college years. Her father-in-law owned a machine shop. “It was a natural gravitation for me,” she says. “I’m fascinated by those who make all of the things that we use in everyday life.”

She is an adamant supporter of Enterprise Minnesota, which, she says, helps manu-

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facturers operate cost effectively, so that we can compete with international forces, and so that we can attract talent.

“Regardless of your size, you’ve got an expert at your disposal for a reasonable cost to help you be as sophisticated as you can possibly be. And you wouldn’t have those resources internally otherwise.”

Bremer Bank is a part of the St. Paulbased Bremer Financial Corporation, a privately held, $11 billion regional financial services company. Prior to joining Bremer, Whitney served as finance manager for Marco Technologies in St. Cloud and as vice president and commercial relationship manager for U.S. Bank in St. Cloud. She holds a Bachelor of Science degree in accounting from St. Cloud State University.

Ekholm brings to the board the expertise of an executive who has had to ride the dramatic sales cycles of the mining economy that L&M Radiator contends with—which have enabled (or forced) it to try a wide variety of employee leadership development strategies.

Almost fantastic surges in sales growth in the mid-2000s forced Hibbing-based L&M Radiator to make speedy and drastic personnel moves to keep up with the demand from

oil and gas companies for its prestigious Mesabi® line of industrial radiators.

Over a three-year period, the company quadrupled in size, growing from $50 million in sales to about $200 million.

It opened two more plants, one in Independence, Iowa (2005) and another in Yankton, S.D. (2007). L&M moved its existing plant in El Paso, Texas to a larger facility in Las Cruces, N.M., and also eventually expanded its plants in Iowa and South Dakota. In 2011, L&M opened a plant in Chile.

It also increased its workforce by some 400 percent.“We pretty much immediately expanded to three shifts in all four of our U.S. plants,” company owner Laura Ekholm told a recent meeting of business executives. “We needed first-line supervisors like right now.”

But now, almost as quickly as the fickle worldwide energy market had once pressed L&M’s facilities to the limits of their production capabilities, that same marketplace has contracted dramatically, lowering L&M’s sales to about $70 million.

Now, the mining economy is back.

As a consequence, L&M, Ekholm admits, has become “very agile.”

“We’re not the kind of company that’s going to grow five percent or 10 percent a year steady. We’re up and down 30 or 40 or 50 percent sometimes in a particular period,” she says. “Hopefully that experience in our case is something that can help other people in the manufacturing community.”

She joined the Enterprise Minnesota board in part because she admires how the organization can provide suggestions and guidance to small manufacturers about all the things that get thrown at them in the marketplace. “Everybody learns from listening to what other people have done.

Enterprise Minnesota has some really good folks that come in and look at your operation and offer suggestions,” she says.

The other reason? “[Enterprise Minnesota’s President and CEO] Bob [Kill] kept twisting my arm!”

NEW EMPLOYEES

Greater Depth Schottmuller and Kimball help add deep experience to Enterprise Minnesota’s business development professionals

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nterprise Minnesota has appointed Rob Kimball and Jim Schottmuller as business development professionals.

Schottmuller, who studied political science at Bethel University, previously worked at Enterprise Minnesota, where he was relationship manager in the marketing department. There, he established sponsorship relationships for the organization’s meetings, conferences, magazine, website, and the State of Manufacturing® project.

“We’re more than happy that Jim is returning to our organization,” said Bob

Rob Kimball

Kill, president and CEO of Enterprise Minnesota. “He is a natural networker whose knowledge of our programming meshes perfectly with his personal experience as a manufacturer. It will make him a well-informed listener for our clients.”

Since leaving his first stint at Enterprise Minnesota, Schottmuller spent two years each at Boberg Arms in White Bear Lake, and Coonan, Inc., in Blaine, both gun manufacturers.

Schottmuller began his career in commercial real estate and property management. For three years he was vice president and chief operating officer at the Alliance for a Healthier Minnesota, a Minneapolis-based organization that

helped organizations understand the business model of worksite wellness and establish policies and programs that worked from their perspectives.

Kimball spent the bulk of his career—24 years—as president and CEO of Kimball Systems, a manufacturers’ representative. He sold capital equipment to the medical device, heat-treat, semi-conductor, data storage, and electronics manufacturing industries.

Products sold included: Screen Printers, Dicing Machines, Surface Grinders, Diamond Abrasive Blades & Wheels, Surfactants and Lubricants, Pick & Place, Vision Inspection, Tape & Reel, Heat Processing Ovens & Furnaces, Heat Treating Furnaces, Custom Automation & Special Machines, Particle Sizing & Measuring Instruments, Lapping Machines and abrasives.

His experience also includes stints as a sales manager at Aspect Automation in St. Paul, as a business development manager at WSI Industries in Monticello, and as a contract market analyst for Eaton, where he identified three additional markets that increased the potential market opportunity for a new CNG liquid piston compressor from $248 to $972 million.

Kimball received a Master of Business Administration (M.B.A.) from the University of St. Thomas and a Bachelor of Mechanical Engineering (B.M.E.) from the University of Minnesota. In addition, he has earned a mini-master’s in project management and real estate development from St. Thomas. He has also achieved a Six Sigma Green Belt.

Strategic real estate solutions for Minnesota manufacturers

Chris Rohrer chris.rohrer@am.jll.com +1 612 217 5120 Zach Anderson zach.anderson@am.jll.com +1 612 217 5141

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VISIONARIES

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#stcloudgreater

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ometime later this year Winonabased Midwest Metal Products, Inc. will become the first commercially operating foundry in America that is run completely by solar power.

CEO and owner Joe Plunger says his decision was based partly on being a good corporate citizen and partly on identifying a way to save on his $30,000 monthly energy bill for his melt-based foundry. “We consume a lot of energy,” he said.

Plunger was one of four manufacturing executives who made presentations at Enterprise Minnesota’s business event called “Your Business Strategy: On Purpose or by Accident” at Great River Energy in Maple Grove.

Plunger says that being environmentally conscious is part of the sustaining (but underappreciated) legacy of America’s foundries, that have a “long historic path of being recyclers and

good environmental citizens.”

“When you think about it, foundries are kind of the ultimate recycler, to begin with,” he says. “We take scrap steel and we turn it into nice, beautiful, durable goods that all of you need.”

Plunger’s involvement began when developers related to 2013 Minnesota’s solar initiative recruited Midwest Metal Products to take part in the program.

These developers would create regional “solar gardens” for which businesses can subscribe for their energy.

He ultimately signed up with Geronimo Energy, a “green” energy supplier based in Edina.

Issues around the project generated a hurdle for a company as big as Midwest Metal Products to overcome.

State regulations would not allow huge acreages of solar panels, so the company had to sign up for relationships with several “gardens.” In addition, no

Chuck Miller, Winona Daily News

Joe Plunger, president and CEO of Midwest Metal Products, recently described his innovations to Representative Gene Pelowski (left) and Senator Jeremy Miller (right).

single subscriber could consume more than 40 percent of the energy from a single garden, so Plunger signed up for four.

Plunger says that for the next 25 years, he will save one penny below the prevailing rate for every kilowatt he consumes. For someone paying $30,000 per month for energy, that will mean a savings of about $25,000 per year.

Plunger is also innovating environmental pathways to reclaiming the sand used in forms. He has teamed with Milt Mathis, a retired 3M engineer. Plunger, a metallurgist by

Plunger says that being environmentally conscious is part of the sustaining (but underappreciated) legacy of America’s foundries, that have a “long historic path of being recyclers and good environmental citizens.” training, had seen proof of a concept project regarding Mathis’ technology to recover gold from gold mine tailings.

“When I saw this, I said, ‘Hey, I know there’s something there,’” he says.

Foundry sand retains a resin of phenolic urethane material, he says, calling it a volatile material.

“So when you put molten iron or molten steel against it, it creates some combustion products and gasses off,” he adds, explaining that once the sand is used, and you break it back down to granular, it retains that resin.

The process weakens the sand, he says, making it subject to creating more gas, “which ultimately could be a problem for defects in castings.”

His thermal reclamation project removes that resin from the sand, leaving an “almost virgin material to reintroduce into the process, which then has the ability to develop better properties for the user.”

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Enterprise Minnesota leaves downtown Minneapolis for easier accessibility Enterprise Minnesota has moved its headquarters from downtown to northeast Minneapolis, 2100 Summer Street NE, Suite 150. The building is just a half mile south of 35W’s Stinson Boulevard exit.

The move, which includes ample free parking, was intended to give the company’s customers, employees, and consultants easier access to the facility, as opposed to the increasingly congested Minneapolis streets, according to Bob Kill, Enterprise Minnesota’s president and CEO.

Important Milestone Owatonna’s Advanced Coil Technology achieves ISO certification

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Enterprise Minnesota’s President and CEO Bob Kill (left) led a delegation of professionals and elected officials to help Owatonna-based Advanced Coil Technology (ACT) commemorate its ISO 9001:2015 designation. Also shown are Devon Barnes, general manager at ACT (center), and Sarah Richards, president of ACT. Their offices are at Jones Metal, a Mankato-based manufacturer that co-owns ACT. Richards is also president of Jones Metal.

Dunwoody Expands The innovative Minneapolis school unveils its next ‘groundbreaking’ project

The Learning Commons will house a library, technology for research and additional digital library access, classrooms and multi-use spaces for faculty and student collaboration.

The new Welcome Center, capable of accommodating events of up to 200 attendees, will provide students with space to collaborate and work on multi-disciplinary projects, and it will house the college’s Admissions department.

T

he Dunwoody College of Technology in Minneapolis recently announced it will break ground on a $10 million renovation that will transform a World War I-era gymnasium into what it calls a 24,000-square-foot, state-of-the-art Learning Commons and a Welcome Center for students and families.

At an event announcing the project, President Rich Wagner told attendees it represents much more than a physical upgrade: “It’s about continuing to create the kind of collaborative, immersive learning spaces Dunwoody has become known for as well as staying ahead of what’s needed to fully prepare our students, from all walks of life and all parts of the state, for success in the 21st-century workplace. There’s a critical skills gap in Minnesota and around the country; this renovation is the next step in our efforts to meet employers’ needs this year, this decade and well beyond.”

Wagner says the new construction is in part required by the growth of students in Dunwoody’s new School of Engineering.

He announced that Mortenson Construc-

tion will serve as the overall contractor.

The Learning Commons will house a library, technology for research and additional digital library access, classrooms and multi-use spaces for faculty and student collaboration. The new Welcome Center, capable of accommodating events of up to 200 attendees, will provide students with space to collaborate and work on multi-disciplinary projects, and it will house the college’s Admissions department.

“I frequently watch in awe at the way Dunwoody quietly extends and improves its culture of creativity and excellence among Minnesota’s tech educators,” says Lynn Shelton, vice president of marketing at Enterprise Minnesota. “At a time when many—if not most—small and mediumsized manufacturers struggle to identify where they will find their next generation of leaders, this remarkable institution quietly adapts and improves how it tries to meet that demand.”

Dunwoody President Rich Wagner

She added that a cross-section of Dunwoody students annually comprises an engaging focus group as part of Enterprise Minnesota’s annual State of Manufacturing® project.

“This is always one of the most enjoyable and illuminating components of the poll,” she said. “Just as our survey unveils what Minnesota’s manufacturers are thinking about the challenges and opportunities in the current environment, this focus group relates how the future generation of leaders has begun formulating their worldview about manufacturing, how it fits into their lives and their futures.”

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OUTSIDE THE BOX

Millwright as Artist Lovegreen helps creates the artistic centerpiece for the new Nicollet Mall

E

agan-based Lovegreen Industrial Services veered from its traditional product lane this year when it won a bid to create a signature piece of art for the new Nicollet Mall renovation project unveiled November 15.

Lovegreen is a 69-year-old familyrun millwright business that specializes in equipment installation, moving and repair, and in-house fabrication of customfabricated metal products.

Project manager Mark Winehandle explains that Lovegreen won the bid 18 months ago over eight other companies to create the stainless armature that now sits in front of the IDS Tower.

The mock up was completed about a year ago and the footings poured in January.

“This is unique for us—to take our small fab shop in Eagan and do something that’s very public and very open and much bigger than we had been before,” he says.

“The excitement of this project is that we stepped outside of our normal fabrication skills.”

“We had to spend a lot of time as a team,” Winehandle says, adding that welders had to attain additional

certifications and the company had to upgrade some internal machining capabilities. “It was really fun, here.

Everybody rallied around something different.”

The public aspect of the project also inspired Lovegreen’s 100-plus employees, “because 99 percent of the things that our fabricators and skilled employees do are in the back factory, that nobody ever sees, understands, or appreciates,” Winehandle says. “It was an opportunity for us to rally internally and get a couple people excited to see something they’ve worked on be in the public eye, on TV, and to be celebrated as part of the Super Bowl.”

Winehandle says other contractors have already approached Lovegreen with the potential of upcoming work. “Now that they’ve seen this and that the designers are thrilled, they’re asking, ‘Hey, if we design another one of these things can we put you in the package as a vendor?’”

“It has opened up our own eyes internally as to what we’re capable of and what new avenues we can chase,” Winehandle says. “There will be visibility among other customers—people who recognize our capabilities.”

Four Questions Chris Schwartzbauer, President and CEO, EXB Solutions

H

How did you end up at EXB? Everybody at West Point gets an engineering degree of some shape or form, at least that was the case while I was there. I was an artillery officer, which meant that I was directing fire. I was directing the close air support, directing artillery, directing kind of all the indirect assets on the battlefield, so that was essentially most of my job while I was in Germany and in the desert. Artillery is a very technical field. It’s computational firing data, there’s a lot of technical communications around it, and I had a kind of technical aptitude. So, I guess I have always been technically oriented.

I started my civilian career working on highly technical pathological services, testing for different types of cancer—all that with very esoteric approaches and kind of new approaches—and genetics disorders. I left that and got into cybersecurity where I held a number of executive management roles. Back then it was called information security. I was consulting on a project for EXB, when the owners of EXB said, “We’d like you to come on and run this company.” So, that’s how I got here.

Why the growth?

A lot of things. We focused on trying to figure out what we’re good at.

When I took over, the company had a fairly large customer concentration and not enough of the “right kind” of customers. We did some good aerospace software engineering and essentially tried to replicate the model across the country. About two years ago, we expanded our basic core competency to medical device software engineering. We do safety critical software engineering, so if the software that we work on fails, there’s usually the loss of mission and lives are in potential danger. So we took the skills we learned in aerospace engineering and broke into medical device engineering, which had similar requirements.

Both regulated industries, they’re both

INNOVATIONS

safety critical, and we found that a lot of our engineers could easily migrate back and forth between aerospace and medical devices. There’s a reasonable amount of migration back and forth in an area like Minnesota, which has a high concentration of med device companies, and used to have a lot of aerospace companies like Lockheed Martin and Honeywell and United Technologies. As those have waned, a lot of those skilled workers have moved into similar types of fields in the med device industry, and we’ve capitalized on that talent pool.

You have delved into the American space program. Is that a big part of your strategic plan?

It came with the customer. We were performing well on similar work and it was a natural evolution. To continue our growth, now we’re doing a lot of work with satellite communications, which is also really space, and there’s been a concerted effort to do

Engineering is hard, especially finding young people who want to work in software engineering. more work directly with NASA. Space technologies, if I could use the term broadly, is a focus and is a big part of our business. The work that we’ve done on the Orion mission is exciting and interesting to us. It’s important, it’s great, it’s fun, we love working on it, we want to continue working on it.

Given that growth, how would you describe your challenge of dealing with the skills gap, of finding and keeping qualified employees?

We definitely have a challenge in finding talent. Engineering is hard, especially finding young people who want to work in software engineering.

The schools aren’t producing them. I don’t know if that’s because they don’t

EXB Solutions, Inc. (EXB) is an engineering services company focused on systems engineering and testing for safety and mission-critical software and systems.

Since Chris Schwartzbauer took the reins of the company in 2012, EXB’s revenues have grown from $4 million with 30 employees to more than $15 million with more than 100 employees.

Schwartzbauer, a graduate of West Point who was awarded a Bronze Star for his service as an Army officer in the Gulf War, was born and raised in Edina. He was recruited to be a goalie on the West Point hockey team.

want to or whether students don’t want to go there. We put an office in Bemidji a number of years ago with the intent to grow that office from a source of labor there. Bemidji State University had pretty solid engineering, physics, comp sci and other programs where we could get and cultivate new, fresh talent. Unfortunately, Bemidji State eliminated a number of programs that would have been relevant to our needs, and so it’s been tough.

WINTER 2017 ENTERPRISE MINNESOTA /

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Q&A with Amy Klobuchar

THE REBIRTH OF APPRENTICESHIPS? Senators Amy Klobuchar and Susan Collins want to revitalize apprenticeships to help solve the skills gap in manufacturing

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U.S.

Senators Amy Klobuchar (DMN) and Susan Collins (RME) this spring introduced the American Apprenticeship Act, legislation to provide funding for tuition assistance programs for participants in apprenticeship and pre-apprenticeship programs. Advocates say apprenticeships create a cost-effective workforce development tool by providing workers an opportunity to stay in the labor market, earn a living wage, and pursue a nationally-recognized credential. Apprenticeships provide employers, they say, with reduced turnover, improved safety, and a competitive edge in the global marketplace. Though evidence indicates that the apprenticeship model is a highly effective training model, it is not widely used by American workers or employers. In order

to expand and support Registered Apprenticeships, the American Apprenticeship Act would provide funding to states for the creation or expansion of tuition assistance programs that benefit participants in preapprenticeship and Registered Apprenticeship programs.

“We have businesses that need workers and workers that need jobs, but oftentimes, their skills just aren’t matching up. In Minnesota, more than 70 percent of our manufacturers said it was difficult for them to find workers with the right skills and experience,” Senator Klobuchar said when introducing the legislation. “Our bipartisan bill would create and strengthen tuition programs for those who participate in pre-apprenticeship and apprenticeship programs to help more of our workers bridge

that skills gap. By investing in the development of skills needed for 21st-century jobs, our legislation will make American businesses and workers more competitive in the global economy.”

“Many Maine business owners have told me that they have jobs available but have difficulty finding qualified and trained workers to fill these vacant positions.

Apprenticeships help address this issue by aligning employees’ skills with employers’ needs and preparing individuals for a successful future in their chosen field,” Senator Collins said. “Our legislation will improve the accessibility and affordability of apprenticeships, allowing more Americans to take advantage of these programs to gain in-demand skills and obtain well-paying jobs.”

Klobuchar’s staff held public events across northern Minnesota as part of her “Minnesota Workforce Tour” to discuss local initiatives helping bridge the skills gap and highlight Klobuchar-backed legislative actions to strengthen Minnesota’s workforce.

The American Apprenticeship Act would: • Authorize the Department of Labor to award competitive grants to states that have developed effective strategies to diversify, market, and scale Registered Apprenticeship and pre-apprenticeship programs.

• Authorize states to utilize grant funds to assist participants in pre-apprenticeship and Registered Apprenticeship programs in obtaining industry-relevant classroom instruction.

• Require the Department of Labor to analyze the use of apprenticeships for in-demand occupations.

• Recognize that states play a pivotal role in elevating and expanding Registered Apprenticeships and pre-apprenticeships as workforce solutions.

Klobuchar has long supported efforts to help workers succeed in an increasingly specialized workforce while making the country’s economy more competitive.

Klobuchar helped pass the Workforce Innovation and Opportunity Act in June 2014, which included her bipartisan provision to help match the skills of workers with the needs of local employers. The

provision established competitive grants for partnerships that help provide workers with the skills needed to fill vacancies in up-and-coming industries. She also led bipartisan legislation with Senator John Hoeven (R-ND), the Innovate America Act, which would fund 100 new Science, Technology, Engineering, and Mathematics (STEM)-focused high schools and help ensure workers have the skills they need for today’s competitive global economy. *

*

*

What is the background on this particular legislation and this particular partnership?

Not everyone wants to go to a four-year college. And we need to respect that. My sister didn’t at first—she didn’t graduate from high school. She got her GED, got a job at a plant in Iowa, went to community college, and eventually got a four-year degree. After all that, she got the best score on the accounting exam that year. And she’s been an accountant ever since. There isn’t one path to success, there are many. And we need to make sure that everyone has a clear path to a good job.

One solution is for our country to invest

manufacturers will have open by 2025, two million will go unfilled for the lack of unqualified applicants. Do you sense that Congress understands the urgency of this issue?

Senator Collins and I certainly do, as do many of our colleagues. In the Minnesota 2017 State of Manufacturing® report, 68 percent of respondents said it was difficult for them to find workers with the right skills and experience this year. That’s up from 40 percent in 2010. Several of my colleagues on both sides of the aisle are working to close the skills gap and provide employers with the workforce they need to thrive.

For example, I cosponsored the Leveraging and Energizing America’s Apprenticeship Programs (LEAP) Act, bipartisan legislation introduced by Senators Cory Booker (D-NJ) and Tim Scott (R-SC) to bridge the skills gap and address youth unemployment by providing a tax credit to employers to help increase the number of Registered Apprenticeships in the U.S. I also cosponsored the bipartisan Apprenticeship and Jobs Training Act of 2017, which would create a tax incentive for businesses to embrace apprenticeship programs, accelerate the adoption of the apprenticeship

Developing a skilled and competent workforce is critical to our nation’s long term economic success and competitiveness. in apprenticeship programs. Developing a skilled and competent workforce is critical to our nation’s long term economic success and competitiveness. That’s why I introduced the American Apprenticeship Act with Senator Susan Collins. Our legislation provides funding to states for the creation or expansion of tuition assistance programs that benefit participants in pre-apprenticeship and Registered Apprenticeship programs, and authorizes the Department of Labor to award competitive grants to states that have developed successful strategies to diversify, market, and scale these programs.

Senator Collins and I both work hard to bolster efforts that help workers obtain the resources and training necessary to compete in the 21st-century global economy.

The American Apprenticeship Act is evidence of how we can work together across the aisle to get things done.

We’ve all heard about the projection by the National Association of Manufacturers that of the 3.5 million jobs that

model, and boost training and education available to workers.

Bob Kill, the president and CEO of Enterprise Minnesota, has said that it stands to reason that the manufacturers that grow and prosper during this time will be in states whose companies, educators and policy-makers have collaborated to solve the skills gap and fill those jobs.

Do you think states understand the competitive advantage of early involvement in programs like yours? Do they understand that it is small and mediumsized companies that are most affected by the skills gap?

Minnesota understands the need to focus on a competitive agenda to move our economy forward. In Minnesota, we have a strong apprenticeship program with over 11,000 registered apprentices. The Minnesota Pipeline Project is providing tuition assistance to workers in advanced manufacturing, agriculture, information WINTER 2017 ENTERPRISE MINNESOTA /

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technology, and healthcare to get industry related classroom instruction. My American Apprenticeship Act would bolster state programs like this, helping workers get the skill they need for well-paying, in-demand occupations and providing employers with a well-trained workforce.

Why are apprenticeships less prevalent in the United States than they are in Europe?

Many students and parents get the message that a four-year institution is the only path to success, but we need to promote diverse pathways to career success by increasing access to community college, strengthening partnerships between community colleges and employers in the local community, and supporting and expanding pre-apprenticeship and Registered Apprenticeship programs.

A great example is the work being done at Dunwoody College with their partnership with Buhler Inc. Students interested in Customer Service Engineering can sign up for a three-year dual training program that provides on-the-job training and related technical instruction through Dunwoody.

Apprentices get paid full time and receive benefits while participating in the program.

Another example is the program devel-

Nationally-recognized credentials are important so employers across that industry can recognize the value of the training. oped at Alexandria Technical & Community College. As is too often the case, local manufacturers were having difficulty finding qualified employees. So the companies worked with the school to develop a new program that provides rigorous training and customized education to fill the needs of local businesses.

And another great program is the one I visited in November at Riverland Community College in Austin. The school has partnered with Hormel on their Foods Maintenance Trainee Program to get more qualified applicants. Hormel pays for students’ two years of electrical or mechanical classes and pays them as employees while the students complete on-the-job training.

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Where is the practical stumbling block to the success of apprenticeships? Is it that many parents, teachers, and guidance counselors don’t understand the kind of well-paying careers that exist in manufacturing? Or, is it that post-secondary schools assume that apprenticeships present competition?

In many cases, parents and high school students don’t know about quality alternatives to traditional four-year schools. It is critical that we boost awareness about the well-paying and in-demand career pathways that apprenticeship programs can offer.

My staff and I have toured the state meeting with educators and employers—we continue to hear the importance of reaching students early to ensure they are aware of these opportunities. It is also important that parents understand that the path to a successful career today is much different than it once was and that a career in manufacturing, for example, is now a career focused on innovation and new technology.

How do apprenticeships differ from the traditional tech school path?

Apprenticeships provide on-the-job training and relevant academic instruction, giving workers the opportunity to stay in the labor market and earn a living wage while pursuing a nationally-recognized credential.

Apprentices typically acquire little to no student debt in the course of their training, and usually retain employment with the company that trained them upon completion of their program.

What is a pre-apprenticeship?

Pre-apprenticeship programs are designed to prepare participants to meet the basic qualifications needed to enter and succeed in Registered Apprenticeship programs.

These programs have documented partnerships with at least one Registered Apprenticeship program sponsor. Together, they help build awareness of career opportunities and give participants the basic training they need for long-term success in apprenticeship programs.

One great example is the program at Summit Academy, which I visited last month. They are doing excellent work in Minneapolis to help people with less resources get access to certifications, learn key professional skills, and get connected to living-wage jobs in the community.

What is the distinction between a “registered” apprentice versus informal

Minnesota Senator Amy Klobuchar is a principal author of The American Apprenticeship Act.

in-house training?

Upon completion of a program, registered apprentices earn a nationally-recognized credential from the U.S. Department of Labor that can be taken to other jobs or that the apprentice can build on with additional training or education.

How important is the resulting “credential”?

Nationally-recognized credentials are important so employers across that industry can recognize the value of the training and the apprentice can continue to build his or her education, skills, and experience.

How rigorous are the requirements for federal funding? For example, do they require a balance of classroom and hands-on experience?

Our legislation gives states the flexibility to design, support, and expand apprenticeship programs that target high-growth industries in their local areas. We want states and local program sponsors to work

together to craft relevant programs aimed at training individuals to meet the needs of the state workforce and close any skills gaps. Programs will need to meet performance measures and reporting requirements.

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Is there a targeted age or demographic of your apprenticeship proposal?

To retain our competitive edge and keep our economy strong, our legislation requires that state entities applying for competitive grants outline how they will increase opportunities for pre-apprenticeship and Registered Apprenticeship programs among youth, minorities, individuals with disabilities, veterans, and any other individuals with barriers to employment.

This “learn and earn” model of apprenticeships in the U.S. has typically been under the purview of unions. Is that true?

Registered Apprenticeship programs have been implemented across all industries, and are sponsored by both union and non-union entities such as employers, community colleges and universities, industry associations, and the military.

Are there “white collar” applications to your proposed legislation?

The American Apprenticeship Act would give states the flexibility to design programs that target high-growth industries in their local areas. For example, Minnesota’s Pipeline Project is providing tuition assistance for workers in advanced manufacturing, agriculture, information technology, and healthcare to get industry-relevant classroom instruction.

What is the success rate of companies and employees who participate in apprenticeships?

More than 90 percent of registered apprentices retain employment after their program ends. For employers, apprenticeships provide a well-trained workforce, reduce turnover, and improve safety outcomes, giving American businesses an edge in the global marketplace. For employees, apprenticeships provide an opportunity to obtain hands-on career training, relevant classroom instruction, and a nationally-recognized credential while working toward a successful career with a competitive salary and, often, no student debt.

Helping Manufacturing Enterprises Grow Profitably Inside Enterprise Minnesota® magazine you will find in-depth information and unmatched insights into the latest innovations, business successes, and ingenious company leaders among Minnesota’s manufacturing community. The magazine reaches over 42,000 readers, including CEOs and additional key decision-makers.

Chip Tangen Relationship Manager 651-226-6842 Chip.Tangen@enterpriseminnesota.org www.enterpriseminnesota.org

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TOO MUCH WORK, TOO FEW HANDS

Southeast Minnesota manufacturers struggle to keep up with demand

E

ight years ago, one could drive east from Interstate 35 and find a region in crisis: businesses shuttered, layoffs left and right, and communities reliant on manufacturing reeling from the impact of the Great Recession.

That’s not what you’ll find in 2017, though.

From Winona and Houston counties on the Mississippi River to Rice County and the southern Metro exurbs, business is booming in southeast Minnesota, but success comes with its own perils for the region’s many manufacturers. From the smallest towns to the big cities, companies are straining to keep up with growth, hampered by worker shortages, insurance premiums and more—some challenges familiar to companies all over the state, and others unique to the southeast region. Despite this, many manufacturers say they’re finding new ways to forge ahead in spite of those

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headwinds.

It’s a good time, they say, to do business in southeast Minnesota … if you can find the workers to make it happen.

1.1 jobseeker per vacancy

Steve Cremer never foresaw himself opening a daycare center.

As the third-generation CEO of Harmony Enterprises, a company of about 75 employees building garbage compactors and balers, his normal work responsibilities would have nothing to do with the care and tending of small children. And yet in 2016, that’s just what he did, opening the Childcare Development Center in an underutilized building right across the parking lot from headquarters.

By William Morris

This is the first in an ongoing series about the regional competitive circumstances faced by Minnesota’s manufacturers.

Although the benefits of Minnesota’s manufacturers to the state as a whole are without question, experts acknowledge that it is a mistake to think that the challenges and opportunities confronted by manufacturers in Minnesota are all the same. This first article examines the challenges faced by manufacturers in southeast Minnesota.

“We just saw there’s such a demand for it, and we had a building someone put up right next to us,” Cremer said.

Opening an early childhood center, which caters both to employees (at a discounted rate) and the broader Harmony commu-

WINTER 2017 ENTERPRISE MINNESOTA /

23

nity, makes a great headline, but it also makes good business sense, Cremer said.

If he can’t attract skilled workers to live in or commute to a small town in Fillmore County, or if his current workers can’t find affordable care for their children while they work, those workers will move on, and he can’t grow his business.

“We focus more on, how do you retain the people that you have, rather than have the constant turnover as you try to replace people,” Cremer said.

What Harmony Enterprises has done is only one of the many ways southeast Minnesota manufacturers are adapting to deal with the tightest labor market in more than

As the recession ended, Minnesota’s manufacturing output has spiked sharply, from $32.9 billion in 2009 to $48.21 billion in 2015, the most recent year available.

Manufacturing is particularly concentrated in the southeast region, which boasts 652 manufacturing companies employing 18 percent of private sector employment, compared to 13 percent for the state as a whole. a decade. Mark Schultz, a regional analyst for the Minnesota Department of Employment and Economic Development (DEED), said that in the 11 counties that comprise the southeast region, employers since 2015 have seen only 1.1 jobseeker per vacancy, the lowest ratio in years.

“The issue comes with who’s to say that 1.1 person has the skills, training or experience needed to fill that opening?” Schultz asked. “If they need a mechanical engineer, who’s to say that 1.1 person has the skills and credentials to fill that opening?”

And that’s a problem, because there’s no shortage of work for companies to be doing.

Minnesota’s total manufacturing output was 24

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Ben Wiltsie, president and CEO, GeoTek, Inc., Stewartville, says, “There are other places around the world this could be done, but from a mission standpoint, we are dedicated to a Minnesota workforce, and we see that as an advantage.”

essentially flat from 2005 to 2010, according to figures from the National Association of Manufacturers, but as the recession ended it has spiked sharply, from $32.9 billion in 2009 to $48.21 billion in 2015, the most recent year available. Manufacturing is particularly concentrated in the southeast region, which boasts 652 manufacturing companies employing 18 percent of private sector employment, compared to 13 percent for the state as a whole.

So across the region, companies are straining to meet the voracious demand for their wide variety of products, which means finding the workforce needed to do it.

“Our biggest problem has been keeping up with that growth, especially from a labor standpoint,” said Ben Wiltsie, president and

CEO of fiberglass and composites manufacturer GeoTek, Inc. “That’s probably not an uncommon thread, but finding and retaining talent has been our biggest challenge.”

A cacophony of companies

Struggling to find workers is not, of course, an experience unique to southeast Minnesota. Manufacturers (and employers in other sectors) all over the state have had similar difficulties and been confronted by similar demographic trends. But the southeast region, which skews older, whiter and less educated than the state as a whole, has a few wrinkles of its own when it comes to finding the right hands for the job.

For starters, Mayo Clinic, the largest employer in the largest city in southeast

Minnesota, is hiring rapidly as it launches its multi-billion-dollar Destination Medical Center program, making it that much harder for other businesses in and around Rochester to attract applicants.

Craig Porter is CEO and owner of PlastiCert, Inc. in Lewiston, a small town located between Rochester and Winona.

It’s difficult, he said, to convince people to move or commute to Lewiston from the nearby cities when opportunities are so plentiful where people already are.

“With the increase in business everywhere, especially in Rochester with the Mayo Clinic facilities as well as Winona with its manufacturing sector, people don’t have to go far to find work,” he said. “I can draw from the immediate area, but that’s about it.”

Being in the neighborhood of a boom town has its upsides, though. Wiltsie, whose company is based in Stewartville, said he’s benefited from the influx of new people to the region brought by Mayo, many of whom bring spouses and other relatives in need of their own jobs.

“There probably is some overlap, but we see it mostly as a benefit,” he said.

“We actually employ a number of people that were brought to the area by a growing medical presence from Mayo. More often than not, as the region grows, they bring in talent from outside the region, and we’ve been able to benefit from that.”

Winona, to the east, has its own unique workforce opportunities and challenges.

Winona State University proudly advertises

offering the only undergraduate degree in the country in composite materials engineering, and the area is rife with plastic and composite manufacturers, from small specialty shops to big players such as Fastenal, attracted by that unique resource.

That many manufacturers, though, puts a premium on skilled workers of all sorts, not just those with engineering degrees.

“We are really a densely populated manufacturing area,” said Joe Plunger, CEO and owner of Winona custom fabricator Midwest Metal Products. “Certainly a local challenge for us is to gain employees in that noise, in that cacophony of companies that are looking for help.”

Small towns located between Rochester and Winona feel the pull in both directions.

“Fastenal’s headquarters are in Winona, and they almost underwrite the machine shop education down there and suck up almost all the graduates,” said Porter. “It’s just hard to find that kind of bodies.”

Even for those companies not located directly in the feeder zones for the larger cities of Rochester, Winona, Austin and Owatonna, there are struggles common across all the region’s small towns. Patrick Murphy, president of Automotion Services in Lake City, said even a top-notch package of pay and benefits can be a hard sell to convince people to move to a small town 20 miles or more from Red Wing or Rochester.

“The problem I have is getting people to move here, and there isn’t anything anyone can do about that ... I’ve had people

commute here from north Minneapolis or Fridley for a few years before moving here permanently,” he said. “We’ve got the whole gamut, but attracting people to our neck of the woods is the challenge. Once they start, we don’t have a problem.”

Other manufacturing leaders in rural areas echoed those concerns, but Mike Jensen, president of metal fabricator Gauthier Industries in Rochester, said the grass isn’t necessarily greener on the urban side of the fence.

“The unemployment rate in Rochester is under 2.5 percent. That’s a real issue for us,” he said. “We have to distinguish ourselves as a very good place to work, a

Companies and organizations all over southeast Minnesota are working to address the region’s workforce needs, but with statewide unemployment hitting a 17-year low of 3.3 percent in October, there simply may not be enough viable candidates to go around. So, efforts are focusing more and more on catching and molding the next generation of worker. place employees want to stay and move up and have opportunities going forward so we can retain them.”

Get them while they’re young

Companies and organizations all over southeast Minnesota are working to address the region’s workforce needs, but with statewide unemployment hitting a 17-year low of 3.3 percent in October, there simply may not be enough viable candidates to go around. So, efforts are focusing more and more on catching and molding the next generation of worker.

“I think many businesses are beginning to focus more on their relationships with high schools, because we haven’t done enough WINTER 2017 ENTERPRISE MINNESOTA /

25

in recent years to address the needs of those students that are not necessarily bound for a four-year college, let alone a two-year college, and one of those needs is to be connected with a local employer,” said Tim Penny, president of the Southern Minnesota Initiative Foundation in Owatonna.

One promising approach is being piloted by the Winona Area Chamber of Commerce. Chamber President Della Schmidt said her organization is working with the Minnesota Chamber of Commerce on several initiatives, the most ambitious of which is called REACH. Currently a two-year pilot capped at 30 students per year, REACH has three main components: two years of dual-credit coursework for juniors and seniors in fields such as blueprint reading, CAD and, even-

can see the students changing before our eyes.”

Programs like REACH are helping on the local level, but will be hard-pressed to make a significant dent in the region’s overall workforce shortages. Some companies are betting on their workplace environment, hosting student tours and racking up best-workplace awards as they combat a persistent stigma against manufacturing and attract a broader range of interested applicants.

“Finding people that want to work in manufacturing, it doesn’t sound sexy always, and I think people sometimes think of it as a last-resort job,” said Dan Tuohy of Tuohy Furniture in Chatfield. “College isn’t for everybody, we have good-paying jobs, good benefits, a very clean and safe workplace … but finding people that are willing to come in and work at starting pay in the mid-20s, and going up to people making twice that?

That’s just tough.”

Many companies, unable to wait for enough applicants to fill their vacancies, are instead finding ways to do with fewer workers. Tuohy Furniture, which employs about 140 in office and manufacturing positions, recently spent $3 million on new automation equipment and processes, and that’s Steve Cremer, CEO, Harmony Enterprises, opened an on-site not the only firm turning to early childhood center, which caters both to employees (at a disautomation as a pathway to counted rate) and the broader Harmony community. He admits it continued growth. makes a great headline, but it also makes good business sense.

“I can have one person or two people operate it and tually, electronics; soft-skills instruction, get as much done as four people doing it a and regular, intensive small-group immerdifferent way,” Tuohy said. sions in local manufacturers.

One way to attract more and better ap“By the end of their junior year of high plicants, of course, is better pay, but at least school, each of these students should have according to DEED, not every company is the opportunity to work in a hands-on mantaking that approach. In fact, Schultz said, ner in five or six different manufacturing the most recent data show that median businesses,” Schmidt said. hourly pay for manufacturing vacancies in The REACH model is not for the faint of southeast Minnesota is trending downward, heart, with high demands on both organizers from $13.47 in the fourth quarter of 2016 to and participating companies, but Schmidt $11.71 in quarter two of 2017. (The state as said early results are promising, especially a whole saw median starting pay rise from for the “at-risk” students enrolled in the $13.27 to $14.00 over the same period.) program—and the manufacturers are giving “Cost of living in the region, for a typical positive feedback, too. family, two parents, one full-time and one “It has already exceeded our expectapart-time with one child, is actually $15.52, tions,” she said. “Midterm grades have so those vacancies aren’t cutting it,” Schultz already indicated that all of our REACH said. “In general, what the story is saying students have seen increases in their GPA, is the median wage offer for the vacancies increases in their overall attendance … We aren’t really hitting the spot when it comes 26

/ ENTERPRISE MINNESOTA WINTER 2017

to the wage needed for a typical family.”

Manufacturing leaders said they’re surprised to hear those figures, as many have been raising wages to attract and retain workers, but several suggested the median wage might reflect companies forced to hire less and less qualified workers for lack of better applicants.

“For every ten you hire, you get one good one, it seems like,” said Todd Klees, CEO of EZ Fabricating, Inc. in Chatfield. “It’s tight right now.”

Challenges beyond the workforce

Every executive interviewed for this article listed worker shortages as their top concern, or at least tied for the top spot. That doesn’t mean everything else is smooth sailing in southeast Minnesota, though.

One particular challenge for companies near the state border is to compete with the sometimes widely divergent laws and regulations on the other side of the line.

Plunger, in Winona, said he has many workers commute from Wisconsin, which can create financial headaches for worker and employer alike.

“The fact that we don’t have reciprocity with Wisconsin on income tax—we used to, but we don’t anymore—can have some impact on whether people want to live in Wisconsin and work in Minnesota, because it can cost them more in that situation,” he said.

The cost of health insurance is another woe familiar to manufacturers across the state, but it’s particularly acute in southeast Minnesota. In 10 of the 11 counties, a 40-year-old in a benchmark plan will pay $595 a month in 2018 (Rice County residents luck out, with a benchmark plan premium of $472). That’s higher than any other region of the state, in some cases by quite a lot: in the Metro area, benchmark plans cost as little as $327. Rising insurance costs have forced some employers to cut back on benefits or end them entirely.

“In the past two years, we’ve been able to hire people from other manufacturers that no longer provide health insurance, and we continue to do that at an affordable price for our employees, because we think that’s important, but it reaches a point where it’s no longer affordable for us,” said Cremer at Harmony Enterprises.

Several business leaders pointed to one consequence of the fast-growing market: companies are less inclined to keep inventory on hand, which means additional challenges for planning and coordination.

“Our customers are saying, ‘I’m not

going to sit on 20 of these parts. When I need five, I’m going to order five, and I need them right away,’” Klees said.

“Our suppliers don’t want to sit on inventory either. We had a saw break down on us. It takes eight to 12 weeks to get a repair part in.”

Even capital can be hard to come by for some manufacturers, not because banks are reluctant to lend, but because the banks are already at capacity lending.

“There’s definitely a lot of banks and financial institutions that want to be able to do that for us,” said Jensen at Gauthier Industries. “They’re all very busy right now.”

But no matter the topic, the conversation always seems to work its way back

The cost of health insurance is particularly acute in southeast Minnesota. In 10 of the 11 counties, a 40-yearold in a benchmark plan will pay $595 a month in 2018, higher than any other region of the state, in some cases by quite a lot. to workforce, and many companies say that, for all their headaches in finding and retaining workers, the workforce they do have is second to none.

“There are other places around the world this could be done, but from a mission standpoint, we are dedicated to a Minnesota workforce, and we see that as an advantage,” Ben Wiltsie at GeoTek said.

And every business leader asked if they would consider uprooting for greener pastures said that for the foreseeable future, southeast Minnesota is where they plan to stay.

“There’s good transportation here, a good road system … and living in a small community is great, we have great school systems. So, really the only problem we have that I see is attracting people to live here,” said Automation Services’ Murphy. “Other than that, it’s a great place to live, a great place to own a business.”

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Second Chances

White Bear Lake city engineer Mark Burch stands in front of 160 new boat slips on the city’s newly renovated signature lakefront. The slips were manufactured

by MINNCOR, a company operated by Minnesota’s Department of Corrections.

PRODUCTIVE TIME MINNCOR offers prison offenders an opportunity to learn manufacturing skills while also producing high-quality products

L

ast fall, officials of the City of White Bear Lake were looking to replace a weather-worn collection of boat slips along the most publicfacing side of its historic lakefront.

The City had recently completed a public/private renovation of that gateway by skillfully integrating traditional sites like Tally’s Dockside boat launch and the

28

/ ENTERPRISE MINNESOTA WINTER 2017

locally-iconic VFW club with a new sevenstory apartment/retail complex, along with restaurants and other commercial amenities, and even indoor parking.

The final upgrade was to replace a 160slip dock system that badly displayed the effects of almost three decades of lake-related weather.

“It was junk,” says city engineer Mark

Burch. “People were complaining all the time. It was falling apart. We couldn’t keep it together.”

Burch’s search for a contractor to make those repairs led him to MINNCOR, a state enterprise located some 15 miles west of White Bear Lake in Stillwater—which also happened to be the Minnesota Correctional Facility, home to some 1,600 offenders.

MINNCOR is a $48.8 million manufacturer that competes directly with many private sector enterprises. It is well known to state agencies for its contemporary, cohesive, self-sufficient business operations, featuring 18 diverse product lines. As a government entity, MINNCOR offers state and other government agencies an option for purchasing products through an easier and more efficient process.

Burch was well aware of MINNCOR’s capabilities. The diverse capabilities include fabrication, assembly, painting, stamping, sewing and welding. The organization also has a woodworking operation that produces custom cabinets. Another division offers full-service commercial printing. It is also well known by government customers for its high-quality commercial office and dormitory furniture.

MINNCOR works with more than 60 subcontract partners from Minnesota’s public and private sectors. Some of the most successful companies in the state take advantage of its expanded and diverse production facilities, cost saving mechanisms, flexible production schedules, and reliable, consistent workforce.

Burch said White Bear Lake had already purchased heavy boat landings from MINNCOR and was impressed by the high level of quality. He wondered whether they had the capacity to take on a $500K project, with a fairly tight turnaround. The City wanted the dock system finished and installed by spring, as soon as the lake ice melted.

And since MINNCOR is a branch of state government, White Bear Lake was able to grant a sole source contract.

Burch was immediately impressed by the MINNCOR operation. He described his first meetings with inmate designers as “helpful” in brainstorming and “very good” at producing AutoCAD designs. He lauded their work.“It’s pretty ingenious design,” he said.

“It was just like working with our engineering guys here at White Bear Lake, just standing behind them on the screens. We were looking at different components of that dock system and they’d bring them up,

they’d blow them up, they’d rotate them, and they’d explode them so we could look at different components.”

In late winter of 2016, MINNCOR finished and delivered the components to Ramsey County Beach, across the lake from their ultimate destination. When the ice had cleared, city workers floated the docks across the water and easily pinned together the dock sections and installed the ramps.

by preparing inmates for life after prison.

Minnesota’s program began by producing twine and soon expanded into manufacturing farm machinery.

Minnesota’s Department of Corrections (DOC) founded MINNCOR Industries in 1994 to consolidate and centralize its individual facility programs into a single statewide enterprise and to simultaneously require that the consolidated operation be financially self-sustaining. This was no

Joe Bjelland, CFO; David Milton, CEO; Brenda Chandler, vice president, sales and marketing; and Jeff Lonsky, vice president, operations.

“It was just a huge success. All of our marina customers just raved about it all summer long,” Burch recalls. “If there was any surprise, it was how smoothly it ran. It was unbelievable. I was really impressed, and I still am.”

David Milton, MINNCOR’s CEO, said the scale of the project was new, but not its complexity. “There is a tremendous amount of talent in our engineering department in Stillwater. Since we are able to design and test everything in the modeling in software, by the time we get to production, we are pretty much locked in terms of delivering what we expected.” *** Minnesota’s prison industries were established in the 1870s in response to a federal mandate that required state-run prisons operations to help reduce recidivism

small mandate, according to Milton, who says the existing program consisted of an array of competing fiefdoms whose natural inefficiencies all contributed to a whopping $6 million financial operating shortfall.

With the help of a business plan by the University of Minnesota, MINNCOR booked its first profit in 2003. Many observers think the current MINNCOR represents a model structure of a government agency that works with the results and efficiencies of a private sector operation. Today’s MINNCOR receives no state subsidies, taxpayer dollars, or grants. At the same time, it provides a diversity of high-quality products and services to various markets and industries. MINNCOR is located in six facilities throughout the state, utilizing approximately 1,300 offenders as its main workforce.

By partnering with MINNCOR, companies have benefited from a flexible/skilled WINTER 2017 ENTERPRISE MINNESOTA /

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workforce, broad capabilities, quality products and services, timely delivery, and competitive pricing. MINNCOR provides these subcontract services to Minnesota businesses to open new opportunities for them by broadening their capabilities and augmenting their workforce capabilities and physical space as needed. MINNCOR views this service as a key asset to Minnesota industries that choose to utilize its resources.

Milton runs the program, but he reports directly to a DOC executive and an advisory committee of government officials that oversee MINNCOR’s capital spending, business plan, and marketing efforts.

Incarcerated individuals have to earn the right to receive a MINNCOR assignment.

Applicants must interview for specific job postings, which require a high school degree or GED. Participants receive quarterly evaluations and regular coaching.

Participants are frequently paired with Department of Corrections vocational training in order to give them nationally recognized trade certifications for welding

and cabinetry “Working for MINNCOR while incarcerated provides offenders the opportunity to learn work skills,” says Brenda Chandler, vice president. “For most of us, employment plays a big part of our lives and a

Many observers think the current MINNCOR represents a model structure of a government agency that works with the results and efficiencies of a private sector operation. large percentage of our waking hours. The value of learning employment and various vocational skills can be very beneficial to releasing offenders.”

Participants start out earning 50 cents an hour, maxing out at $2, which makes

Minnesota one of the top five states across the nation in terms of offender compensation. Officials emphasize that as inmates, they also receive room and board, medical coverage, counseling and education.

Correctional industry programs across the nation provide real-world job skills training and experience that often help offenders connect with private industry partners and potential employers after their release. For many offenders, the experience of working for MINNCOR while incarcerated enables them to successfully re-enter society, obtain employment and contribute as tax-paying citizens.

MINNCOR offers its participants a chance to “work for them so that when they’re released, they can be successful.”

MINNCOR has deployed its “profits” in part to fund two programs. One is the Bridge program, a 90-day program that enables qualified offenders to participate in a work release program before their work release date. Participants live in area halfway houses and a large warehouse in the back of MINNCOR’s Roseville headquarters. The first 60 days are devoted to

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teaching soft skills for the job. The next 30 are devoted to joining the workforce.

Participants learn various job skills, including how to conduct computer searches.

“Computer illiteracy’s a big part of it because it’s intimidating for some to sit at a desk,” Milton says. “They might have been using the internet on their phone, but to sit at a desktop is different, and we help them overcome that.” The Bridge program helps them set up email accounts so they can correspond with prospective employers. Milton calls this 90 days “the transformation.” Last year 90 percent graduated from this program with at least one livable wage job offer.

Says Chandler: “The idea is to ease their transition back into society. If they don’t have a job, they’re going to be far

By partnering with MINNCOR, companies have benefited from a flexible/skilled workforce, broad capabilities, quality products and services, timely delivery, and competitive pricing. more likely to re-offend. Some of them have been in for a long time. So you can imagine where you go from not making any decisions whatsoever, what you’re going to eat, what time you’re going to eat. But then to all of a sudden you get out and you have all these decisions to make. If we can help with that employment piece, and assist those participants in getting used to re-entering society in a more gradual way, I think they’re going to be far more apt to be successful. Ideally they finish work with us on a Friday and have a job opportunity lined up and ready to go to on the following Monday.”

The other program, EMPLOY, works with the soon to be/recently released on resume preparation, mock interviews, resources and job search support. In 2017, MINNCOR served almost 1,000 participants. Approximately 71 percent of the 200 program participants that were released in 2017 reported employment, and those remaining, that have yet to complete their sentence, are receiving training/coaching.

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Final Word

When the Numbers Prove You’re Right A local think tank’s research confirms the lifelong value of a career in manufacturing

F

rustrated manufacturers in Minnesota have long chafed at the reality that their ability to offer satisfying, wellpaid careers is still mostly unrecognized by an informal (and mis-informed) cartel of parents, counselors and teachers who think that seeking anything less than a four-year college degree would constitute as settling for second best.

How about settling for more money?

Center of the American Experiment, a Minneapolis-based think tank, released a study this fall entitled, “No Four-Year Degree Required: A Look at a Selection of In-Demand Careers in Minnesota” that demonstrates how lifetime earnings of students who follow a two-year degree path can actually exceed their four-year counterparts—by as much as 61 percent.

I’m hopeful that this study will be widely circulated to the whole array of people who refuse to acknowledge the well-paying, secure and challenging careers that are available in modern manufacturing facilities The Center recruited Dr. Amanda Griffith, a labor economist at Wake Forest University.

She selected a cross-section of occupations that do not require a four-year degree and estimated the long-term financial rewards for an 18-year-old Minnesotan looking to the future, while also factoring in the costs of post-secondary education.

Manufacturers have used job fairs, plant tours and classroom visits to showcase their clean high-tech facilities and dispel the stubborn myths that manufacturing jobs are 32

/ ENTERPRISE MINNESOTA WINTER 2017

Lynn Shelton is vice president of marketing at Enterprise Minnesota.

tedious, in dirty facilities, with go-nowhere opportunities for compensation. This study puts that notion to rest using hard data.

None of Griffith’s study—or anything we’ve ever written here—disparages the value of a solid four-year college degree.

Hardly. But she makes a valuable point that only 22 percent of jobs in Minnesota require a four-year degree, while the education establishment pushes more than half of high school graduates in that direction.

Griffith computed the cost of education and median hourly wages in each field for workers in the Twin Cities and statewide, using data from the State. Then she calculated a median lifetime earnings profile for each occupation that could be directly compared to the median lifetime earnings of Minnesotans with four-year college degrees.

The surprising results reveal that

numerous occupations that do not require a college degree pay more than the $25.30 per hour median wage earned by fouryear college graduates in Minnesota. For example, Griffith found the estimated median lifetime earnings for CNC machinists beat college graduates by 11 percent.

Griffith’s study examined opportunities for young people who are considering their career choices. I’m told the Center’s next report, scheduled for next spring, will examine how the effects of the ongoing skills gap threaten Minnesota’s entire economy.

This, too, should add to the data from the National Association of Manufacturers that of the 3.5 million jobs that manufacturers will require by 2025, two million will go unfilled for the lack of qualified applicants.

It stands to reason that the manufacturers that grow and prosper during that time will reside in states whose companies, educators and policy-makers have already collaborated to solve the skills gap and fill those jobs.

And it’s of particular interest to Greater Minnesota. When most Minnesotans—or Americans—think about manufacturing, they think about 3M or Medtronic, but it is the small manufacturers that are most challenged by the skills gap. We can’t overestimate the essential role these companies play in America’s manufacturing supply chain. It will be interesting to see what the Center’s research will uncover.

I’m hopeful that this study will be widely circulated to the whole array of people who refuse to acknowledge the well-paying, secure and challenging careers that are available in modern manufacturing facilities.

This includes teachers, guidance counselors and parents. It should also include anyone who cares about the economic vitality of their communities. But none of these people are likely to stumble upon it on their own.

I encourage manufacturers to download it (www.americanexperiment.org) and share widely.

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