Maryland Manufacturing in the Global Digital Economy

1
Maryland Manufacturing in the Global Digital
Economy

• Maryland Advisory Commission on Manufacturing
  Competitiveness

January 2007
2
Table of Contents

• Executive Summary
• Purpose and Overview Manufacturing in Maryland
• Advanced Technology Manufacturing
• Cluster Overview and Benefits
• Cluster Identification, Development, and Support
• Recommendations and Next Steps
• Appendix
• Current Situation of Marylands Manufacturing
• Competitive Advantages
• Challenges
• Cluster Background
• Cluster Classification
• Cluster Policies and Pitfalls

3
Executive Summary

• Maryland manufacturing contributes significantly
  to the development of the knowledge economy in
  the global digital arena
• Marylands manufacturing sector is being
  transformed throughout the state and although it
  appears to have experienced a steady decline
• The traditional manufacturing workforce in 2003
  was 5.9 compared to more than 9 in early 1990s
• Gross State Product (GSP) related to traditional
  manufacturing was 7.2 in 2001 compared to
  approximately 10 in early 1990s
• And despite a drop in the job growth and GSP,
  the manufacturing sector has actually
• Steadily increased the total output since 1992
• Created significant earnings and jobs in other
  sectors
• And provided a strong foundation for managing the
  global supply chain
• In addition, traditional metrics and
  classification schema do not fully capture the
  full breadth of manufacturing and related
  capabilities in the state and across the globe
• Research and analysis into the multiplier effect
  across the manufacturing sector in Maryland
  revealed that the following industries have
  traditionally provided the most economic value to
  the state
• Food and beverage manufacturing
• Printing and related support activities
• Transportation equipment manufacturing
• Chemical Manufacturing
• Furniture and related product manufacturing

4
Executive Summary (Continued)

• To foster manufacturing growth, Maryland should
  continue to support targeted traditional
  manufacturing clusters
• Traditional Food and Beverage Manufacturing,
  Printing, Aerospace and Defense, Modern
  Agriculture, and Distribution and Warehousing
• More importantly though, Maryland should
  emphasize a manufacturing transition that
  supports the knowledge economy and the
  commercialization of Marylands core research
  competencies
• Strategic technology Bio-technology, Information
  Technology, Nanotechnology, Miniaturization,
  Transportation Systems, Energy, Aerospace
  Defense, Advanced Agriculture, and Craft
  Manufacturing
• The focus should be on growing those
  manufacturing capabilities that leverage
  Marylands unique position in the realm of
  disruptive research competencies and process
  innovation
• Maryland should follow a rigorous approach to
  promote the creation, development, and
  maintenance of clustersespecially those that
  leverage the global supply chain for Maryland
  manufacturing

5
Purpose
6
Purpose
The State of Maryland Has proximity to major
markets Unparalleled access to state and national
governments A base of natural, technological, and
transportation resources A strong history of
innovative manufacturing This suggests
manufacturing should have a favorable future in
Maryland by leveraging its disruptive research
competencies and manufacturing process innovation
to enhance its ability to manage the global
supply chain
The purpose of this report is to provide a
critical understanding of where and how the state
should focus its key resources
7
Overview Manufacturing in Maryland
8
Manufacturing in Maryland has reached a critical
inflection point
The strong role manufacturing has traditionally
played in Marylands economy has been declining
since the early 1990s

• Its contribution to the states Gross State
  Product (GSP) declined from 10 to 7.2 in 2001
• Employment dropped from 9.3 of Marylands
  workers to 5.9 in 2003

Though this decline appears to paint a dire
picture, it is largely due to faster growth in
other sectors, process automation, and increased
productivity Marylands manufacturing output
and growth rate have actually been expanding.
9
Though Marylands manufacturers have seen steady
growth, not all types of manufacturers have
grown at the same rate
Manufacturing can be broken into the following
groups

• Traditional manufacturing is well established and
  has served Maryland well in the past, but has
  limited growth potential and does not capture new
  industries nor leverage many of Marylands
  strengths
• Advanced technology manufacturing involves more
  risk but offers more growth potential as it
  supports and aligns with industry throughout the
  global knowledge-based economy

(Source Stern School of Business, NYU, January
2005)
In addition to offering strong rates of growth,
research shows advanced technology manufacturing
provides an additional benefit to the State
economy through strong multiplier effects
10
Advanced technologys higher growth rates and
stronger multiplier effects can significantly
increase economic activity in Maryland
The States existing base of traditional
manufacturers is relatively established and slow
growing
Example Multiplier Effects
Traditional Benefits to MD Jobs Growth
Tobacco 1.92 2.0 Low Food and Beverage
1.92 2.0 Medium Printing 1.94
1.1 Low
Higher Growth Potential
Economic Activity
Emerging Industries
Advanced Tech. Benefits to MD Jobs Growth
Traditional Industries
Transportation Systems 2.01 2.13 Medium I
nformation Technology 2.06 1.42 High Biote
chnology 1.96 N/A High
Time
Supporting the development of higher-growth
industries will allow Maryland to increase its
economic base without disturbing traditional
manufacturing businesses
Benefits to MD each 1 activity in the
industry generates X amount of activity in other
industries. Jobs based on the direct-effect
multiplier of employment, each job added in that
industry adds an additional number of jobs in the
area.
11
While Maryland has much to offer high-growth
advanced technology manufacturers, challenges
remain to be addressed
Strengths
Challenges

• Proximity to the Federal Government provides
  opportunities to enhance lobbying efforts
• Access to 92 million consumer base within 500
  mile radius provides opportunities to be close to
  wide range of customers
• Access to the port of Baltimore, one of the
  busiest ports in the US offers assembly
  opportunities at the dock before exporting
• Intensity in RD demonstrates commitment to
  innovation and process improvement
• Vibrant economy that has ample access to venture
  capital and the value generated by IPOs
• Highly educated workforce provides a skilled
  workforce base
• Manufacturing assistance programs focused on
  enhancing manufacturing through tax incentives,
  sharing of technology and resources

• Manufacturing image suffers an outdated
  reputation and fails to communicate modern
  aspects of the manufacturing environment
• Significant drop in the manufacturing workforce
  does not bode well with the manufacturing
  businesses
• Gap in education of the manufacturing workforce
  results in lacking in basic skills and higher
  training costs
• Infrastructure issues such as traffic congestion
  and high cost of housing makes it difficult to
  attract employees
• Taxes and Government regulations lead to a high
  cost of doing business
• Low export dollar per capita and lack of
  significant FDI indicates a lack of openness to
  globalization and makes economies less
  competitive

12
To emphasize the role of the emerging knowledge
economy and traditional manufacturing, one must
address the manufacturing image

• By addressing the evolution of traditional
  manufacturing into world class competencies and
  emphasizing the emerging knowledge economy,
  Maryland can improve manufacturings image
• Messaging should be directed at customers,
  service providers, and the perception of the
  general public
• The approach will necessitate aligning and
  connecting customers to resources, as well as
  sharing results throughout the manufacturing
  industry and with the public

Focus on Companies Establish meaningful
relationships with manufacturer Connect
Appropriate Solutions Focus on Business
Competitiveness and growth (Supply Chain) Assess
Impact Communicate Results
Focus on Public Perception Identify Key
Audiences Develop successful approaches for
changing perceptions Develop advocates for
industrys public perception Assess Impact
Communicate Results
Focus on Service Providers Identify Key Service
Providers Coordinate Among Providers Align
Various Programs of value to the Industry Make it
a customer friendly system Reduce costs through
cooperation Assess Impact Communicate Results
13
The Pappas Commission Report has identified
near-term actions Maryland should take to support
the growth of advanced technology
The reports recommendations are intended to

• Make Maryland more competitive in attracting and
  growing technology companies
• Increase the commercialization of research and
  development (RD) being created by the many
  government laboratories and universities within
  Marylands borders
• More effectively market Maryland as a center of
  valuable RD and as a home to many leading
  technology companies

The following pages provide specific
recommendations to enhance Marylands ability to
attract high-growth manufacturers
14
To make Maryland more competitive in attracting
and growing technology companies
Maryland should

• Increase state pension funds investment in
  private equity
• Raise investment by Maryland banks in Small
  Business Investment Companies
• Restore and increase funding for investment
  financing programs
• Encourage foundations in Maryland to invest in
  technology companies
• Use State tax incentives to affirm that Maryland
  welcomes and encourages advanced technology
  investments
• Promote investment in advanced technology
  equipment and construction materials
• Align Marylands tax policy for capital gains on
  technology investments to be similar to Federal
  tax policy
• Increase research and development credits for
  businesses
• Provide investment tax credits for early stage
  investors
• Survey CEOs on regulatory processes
• Invest in the Business/Technology Case Management
  Program

15
To increase the commercialization of RD being
created by the laboratories and universities
within Marylands borders
Maryland should

• Establish a permanent State Chief Technology
  Officer
• Increase utilization and effectiveness of
  Maryland Technology Councils
• Encourage entrepreneurial initiatives and
  technology transfer
• Support the States incubator network with
  capital and operating funds for best practices
• Allow State higher education institutions greater
  leeway under State personnel and procurement
  rules for activities that are not directly
  supported by State General Funds
• Increase state funding for academic research
• Encourage Maryland research consortia to compete
  for large federal funding opportunities
• Create alternative financing vehicles to create
  more laboratory space at Marylands Universities
• Promote increased coordination at University and
  college technology transfer offices

16
To more effectively market Maryland as a center
of valuable RD, and as a home to many leading
technology companies
Maryland should

• Increase state pension funds investment in
  private equity
• Leverage the Office of the Governor to encourage
  and sustain Marylands advanced technology
  enterprises
• Develop a comprehensive marketing strategy to
  brand Maryland as a leading home for technology
  business and innovation
• Create a central database of Maryland academic
  and federal laboratory technology resources
• Pursue targeted international investment in
  Maryland
• Create an Executive Job Corps
• Create a Governors Science Advisory Board

To effectively capitalize on its manufacturing
strengths and overcome existing weaknesses,
Maryland must focus its limited resources on
strategically supporting key manufacturers. The
following section provides a model for
identifying these opportunities and optimizing
use of the States resources.
17
To this end, Maryland should marshal its
manufacturing resources from around the state and
across the globe to reinforce this transformation
The approach outlined herein is intended to

• Make Maryland more competitive in attracting and
  growing manufacturing companies that emphasize
  disruptive innovation and research
• Increase the emphasis that Maryland places on
  manufacturers who provide creative advances in
  processes
• Encourage manufacturers who aggressively engage
  customers beyond the current customer set,
  particularly in terms of leveraging the global
  supply chain

The following pages provide specific
recommendations to enhance Marylands ability to
attract high-growth manufacturers in the new IT
Innovation and Transformation
18
Cluster Overview and Benefits
19
Promoting industry clusters is an effective means
for a state to foster economic growth
Clusters are geographically related networks of
businesses that promote efficiency with varying
degrees of interdependency
A Cluster and its Levels of Interdependency

• Core companies form the basis for the cluster and
  the impetus for the value from the cluster
• Supporting companies and institutions (e.g.,
  universities) provide crucial support to the core
  and may include customers, suppliers and partners
  to the core companies
• Related businesses provide a more indirect
  support to the core by enabling supportive
  companies or providing services to the core
  companies
• Impacted businesses are affected by the cluster
  but do not directly relate to the activities of
  the cluster, such as restaurants or real estate
  support

20
Clusters provide economic advantages to business,
which in turn drive benefits to the state
State Benefits
Business Benefits

• Higher Employment
• Retention of existing companies and jobs through
  high switching costs
• Creation of new jobs in growing industries
• Creation of new jobs through spillover and
  multiplier effects
• Higher Incomes
• Increased demand for labor
• Higher average skill level
• Increased Tax Revenue
• Higher personal incomes
• Higher corporate incomes
• Increased economic activity (sales tax, gasoline
  tax, telecom tax, per capita tax, property tax,
  etc.)

• More Efficient Access to Inputs
• Raw materials
• Industry-specific suppliers
• Skilled labor
• More Efficient Processing
• Fast diffusion of knowledge, innovations,
  benchmarking, etc.
• Economies of scope and scale
• Industry-specific services (e.g., legal, finance)
• More Efficient Access to End Markets
• Existing customers
• New customers

21

Having a skilled labor force is one of the key
factors for the success of clusters
22
Cluster Identification, Development and Support
23
Clusters can be classified in six main groupings
While there is no set criteria by which to
classify clusters, there is value in assessing
them to determine which have the potential to add
the most value to the state economy
Using the taxonomy discussed above, emerging
clusters should receive first attention followed
by strategic and potential, as these are most
likely to promote manufacturing growth
24
Maryland should focus on developing strategic
clusters which are well-positioned for strong
growth

• Manufacturing can be broken-down in into two main
  groups
• Traditional Including mature, competitive and
  stabilizing clusters
• Advanced Technology Including emerging, strategic
  and potential clusters

• Traditional manufacturing is well established and
  has served Maryland well in the past, but needs
  to find way to grow and remain profitable

• Advanced technology manufacturing has risk but
  much more growth potential because it supports
  new technology and industry throughout the global
  knowledge-based economy

Traditional Manufacturing
Advanced Technology Manufacturing

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

• Bio-technology
• Information Technology
• Nanotechnology
• Miniaturization
• Transportation systems
• Energy
• Aerospace and Defense
• Advance Agriculture
• Craft Manufacturing

If Maryland can establish itself as a leader in
advanced technology manufacturing, it will be
well-positioned for future prosperity
25
Maryland has multiple characteristics that make
it attractive to strategic technology
manufacturing
Maryland Strengths

• Highly educated workforce provides a skilled
  source of labor
• Intensity in RD demonstrates commitment to
  innovation and process improvement
• Vibrant economy that has ample access to venture
  capital and the value generated by IPOs
• Proximity to the Federal Government provides
  opportunities to enhance lobbying efforts
• Access to 92 million consumer base within 500
  mile radius provides opportunities to be close to
  wide range of customer
• Access to the port of Baltimore, one of the
  busiest ports in the US offers assembly
  opportunities at the dock before exporting
• Manufacturing assistance programs focused on
  enhancing manufacturing through tax incentives,
  sharing of technology and resources

• Industries such as Bio-technology, Information
  Technology and Aerospace Defense require a
  highly educated workface
• A strength in RD is also critical in emerging
  industries such as Nanotechnology and
  Miniaturization
• Venture capital is critical to developing new
  technologies, products and industries

These strengths will also help support the
transition of Marylands existing manufacturing
base to benefit from the global knowledge-based
economy
26
Maryland should not solely focus on advanced
technology to the detriment of the traditional
manufacturing base

• Both traditional and advanced manufacturing
  clusters can be cataloged and characterized
• One valuable analysis tool assesses traditional
  and advanced manufacturing based on importance to
  Maryland and potential industry growth

Value Threshold Chart
High
High Value
Medium

• Clusters beyond the Investment Threshold are
  prioritized for support and development
• Clusters near or below the Investment Threshold
  can be developed to transition to higher value

Value to MD Economy
Low Value
Medium
Low
Low
High
Growth Potential
Investment Threshold
Advanced
Traditional
27
With proper support, traditional clusters can
transition to advanced technology clusters or
high value clusters
The Operational AdvantageTM framework can be used
to identify and execute operational process
improvement initiatives based on their alignment
with corporate objectives

• Driven by company strategy and goals
• Structured root cause analysis turns problems
  into projects
• Knowledge is captured into the program
• Complete set of training materials
• Comprehensive project definition and planning
  process
• Chooses tools based on the problem to be solved

• Embedded project management requirements
• Results sustained through ongoing iterative
  program
• Project status monitoring and reporting
• Incentive compensation program
• Job descriptions
• Metrics and goal setting

28
The Operational AdvantageTM Program features a
comprehensive, easy to use toolkit
Processes, diagnostics and tools are simple to
understand and use and contain numerous examples
so employees with little familiarity can
successfully participate
29
The Operational Advantage TM Program has defined
five major strategy-level improvement objectives
focused on profitability and growth
Improve Quality
Profitability
Strategic Objectives are tied to critical
business metrics, providing the initial links in
the accountability chain
Growth
Improve Customer Service
Reduce Costs
Increase Gross Margin
Increase Operating Earnings
Develop New Products Services
Grow Revenue
Reduce Working Capital
Improve Return on Assets
Enter New Markets
30
Each Strategic Objective is further decomposed
into Operational Objectives that focus on a
companys specific transitional needs
Profitability
Growth
Reduce Cost/ Low-Cost Provider
Improve Prod. Quality/ High Quality Provider
Improve Cust. Service/ High Service Provider
Develop New Products Technology
Enter New Markets
Strategic Objective
Improve SGA
Improve Engineering Processes
Improve Sourcing Processes
Improve Production Processes
Improve Scheduling Production Control Processes
Improve Quality of Engineering
Improve On-Time Delivery
Improve Mfg. Flexibility
Improve Marketing Capabilities
Improve Inventory Management Processes
Improve Accounts Receivable
Improve Quality of Production
Improve Customer Service Processes
Improve Product/ Technology Development Launch
Improve Sales Pipeline Processes
Improve Field Service Processes
Reduce Cost through High Quality
Improve Dispatch Transport. Processes
Operational Objective
Improve Maintenance Processes
Improve Asset Management Processes
Improve Safety
Improve Quality Processes
31
Identifying and developing clusters requires a
similar systematic and disciplined approach

• Develop selection criteria
• Promising Technology
• Economic Benefit
• Competitive Advantage
• Identify impact on strategic technology
  manufacturing sector

• Develop minimum requirements to qualify for state
  sponsorship
• Conduct quantitative and qualitative evaluation
• Develop a committee of government and private
  sector

• Develop detailed execution plan
• Attributes of the execution plan
• Project management team
• Project timelines
• Communication plans
• Legal documents

• Identify major companies in the area
• Conduct survey with select companies
• Identify trends across major industries

• Develop cluster strategy for each of the clusters
• Prioritize clusters
• Identify gaps in the clusters
• Allocate resources, funds and efforts based on
  prioritization

• Take measures to formalize cluster communications
• Organize committee for each cluster

• Carefully plan and manage processes designed to
  diversify a culture

• Develop Communication Plan
• Improve manufacturing image
• Facilitate manufacturing education initiative
• Facilitate risk taking for entrepreneurs

32
Maryland has ample data available to identify
traditional and emerging advanced technology
manufacturing clusters
Profile Manufacturing Industry

• Marylands manufacturing sector has experienced
  steady decline
• Workforce in 2003 was 5.9 compared to more than
  9 in early 1990s
• Gross State Product (GSP) was 7.2 in 2001
  compared to approximately 10 in early 1990s
• Despite a drop in the job growth and GSP, the
  manufacturing sector has
• Steadily increased the total output since 1992
• Created significant earnings and jobs in other
  sectors
• Research and analysis into the multiplier effect
  across the manufacturing sector in Maryland
  revealed that the following industries provided
  the most economic value to the state
• Food, beverage and tobacco manufacturing
• Printing and related support activities
• Transportation equipment manufacturing
• Chemical Manufacturing
• Furniture and related product manufacturing
• However, advanced technology manufacturing offers
  significant opportunity for Maryland to invest in
  the future

The multiplier effect accounts for the total
impact of the manufacturing sector on Marylands
output, employment and earnings, indicating that
it is larger than the direct manufacturing
measures indicates
33
Promising technology and economic benefits are
key criteria for developing clusters
Classify Mfg Industry into Clusters

• Institutionalizing an unbiased evaluation process
  for developing clusters depends on both
  qualitative and quantitative criteria

Qualitative Criteria
Quantitative Criteria

• Promising Technology
• Environmentally Friendly
• Legal Requirements
• Resources Requirements
• Location and Area Requirements

• Economic Value to the State
• Size of the industry
• Growth Potential
• Funding Requirements
• Tax incentives
• Impact on Other Industries
• Tax Revenues

34
Cluster classification assists in focusing
resource and fund allocations
Classify Mfg Industry into Clusters

• Clusters can be classified into one of the six
  categories
• Competitive Those that have scale, such as
  Hollywood, Silicon Valley
  or Detroit
• Strategic Small but vital to regions interest
• Emerging Those with high growth rates, such as
  bio-tech
• Potential Those with core competencies that
  might be developed, such as environmental tech.
• Mature Those with low or no employment growth
• Stabilizing Those that add diversity to economy,
  such as tourism or business services
• The table below classifies major Marylands
  industries into clusters based on jobs and GSP
  growth information

35
Traditional manufacturing industries add value to
other sectors in areas such as product
development, environment and transportation
Classify Mfg Industry into Clusters
Traditional Manufacturing Industries
Food and
Aerospace and
Modern
Distribution and
Printing
Beverage
Defense
Agriculture
Warehouse
Manufacturing
Environmental Friendly,
Bio-Technology
Product Development
Product Development
Print Management
Miniaturization, Product
Information Technology
Software
Development
Printing Material
Miniaturization, Product
Nanotechnology
Genetic Modifications
Genetic Modifications
Development
Development, RD
RFID, Product
Miniaturization, Product
RFID, Product
Miniaturization
Bio-intensive Growth
Development
Development
Development
Intelligent Transportation
Transportation Solution
Transportation Solution
System Solutions
Transportation Solution
Emerging Manufacturing Industries
Transportation System
Development
Development
Development, Product
Development
Development
Energy (hydrogen, fuel
Environmental Friendly
Environmental Friendly
Environmental Friendly
cell, alternative energy)
Next generation sensors
Aerospace and Defense
for process control,
Defense, Security
Product Development,
Genetic Modifications,
Advanced Agriculture
Genetic Modifications,
Environmental Friendly
Environmental Friendly
Craft Manufacturing
Environmental Friendly
Transportation
Industries
36
Cross cluster themes that support multiple
industries will also enhance Marylands strategic
ability to focus critical manufacturing resources
Classify Mfg Industry into Clusters
Cross Cluster Themes
Industries
37
Maryland should develop a strategy specific to
each of the target clusters
Develop Cluster Specific Strategy
3
1
2
Allocate Resources
Prioritize Clusters
Identify Gaps
Qualitative Criteria
Quantitative Criteria
Prioritization
Required businesses/institutions
Tier 1
Tier 2
Tier 3
38
The state should then determine the policies that
will best foster the targeted clusters
Develop Policy and Communications
State Policy Levers,
Efficiently Organize And Deliver Services

• Aggregate and publish information by cluster
• Form cross-agency quick response teams

Make Targeted Investments

• Invest in cluster RD
• Establish cluster-specific technology centers or
  parks
• Support cluster-based entrepreneurial activity

Increase Cluster Networking and Learning

• Reestablish or recognize cluster associations and
  alliances
• Facilitate external connections
• Encourage inter-cluster communications

Improve Workforce

• Develop a more skilled and specialized labor
  force
• Establish cluster skills centers
• Qualify people for employment

From A Governors Guide to Cluster-Based
Economic Development These recommendations
should be planned and executed conjunction with
the recommendations of the Pappas Commission
39
...formalize cluster communication targeted and
tailored for specific constituencies
Develop Policy and Communications
education
business

• Education initiatives
• University outreach

• Trade shows
• Business journals
• Newsletters
• Trade associations

• Mass media advertising
• Community out-reach

40
recruit companies by approaching a broad set and
then progressively narrowing the field until the
best remain
Recruit Companies to Fill Gaps
?
?
?
?
?
?
Opportunity Development
Initial Communication
Opportunity Assessment
Follow-up Communication
Proposal Presentation
Potential Companies
Negotiation
Cluster Company
Potential Companies
41
develop a rigorous implementation plan to
execute the strategy
Develop Execution and Communication Plan
Activities
Initiative Kick-Off

• Tier 1 Plan
• Define project management team
• Finalize approach
• Craft communication plans
• Integrate cluster companies
• Draft legal documents

• Tier 1 Plan
• Define project management team
• Finalize approach
• Craft communication plans
• Integrate cluster companies
• Draft legal documents

• Tier 1 Plan
• Define project management team
• Finalize approach
• Craft communication plans
• Integrate cluster companies
• Draft legal documents

Project Milestones
42
and implement a comprehensive communication
strategy that builds on success to create more
and better clusters
?
?
?
?
?
Attract More Companies
Improve Image
Share Learnings
Publicize Wins
Document Successes
43
Recommendations
Maryland should pursue multiple activities to
promote manufacturing

• Follow a rigorous approach to identify, create,
  promote, develop, and maintain new and existing
  manufacturing clusters
• Develop and promote a pro-manufacturing image for
  Maryland
• More effectively market Maryland as a center of
  valuable RD, and as a home to many leading
  technology companies
• Purse policy measures to attract technology
  companies to Maryland
• Support the operational improvement of existing
  tradition manufacturing capabilities within the
  state

If Maryland follows the above recommendations it
will be well positioned to thrive well into the
future
44
Recommendations
To increase the manufacturing commercialization
of RD being created by the laboratories and
universities within its borders, Maryland should

• Establish a permanent State Chief Manufacturing
  Officer
• Increase utilization and effectiveness of
  Maryland Manufacturing and Business development
  Councils
• Encourage entrepreneurial initiatives and
  technology transfer, especially for those
  Maryland companies who can leverage manufacturing
  and the global supply chain
• Support the States targeted manufacturing
  clusters with capital and operating funds for
  best practices and operational excellence
• Allow State higher education institutions greater
  leeway under State personnel and procurement
  rules for activities that are not directly
  supported by State General Funds
• Increase state funding for academic research
  related to the broader view of the Extended
  Enterprise represented by manufacturing
• Encourage Maryland research consortia to compete
  for large federal funding opportunities
  supporting the emphasis on Advanced Technology
  Manufacturing
• Create alternative financing vehicles to create
  more laboratory space for applied research and
  commercialization opportunities at Marylands
  Universities
• Promote increased coordination at University and
  college technology transfer, applied research,
  and advanced manufacturing offices

45
Next Steps

• Apply lessons learned from Maryland biotechnology
  and education (Career Clusters) efforts to other
  traditional and strategic technology clusters
• Build a commission-based role to coordinate
  cluster activities across the states multiple
  constituencies (including business, academia,
  government, and advisory services)
• Further develop cluster concentrations to
  determine ways to marshal resources and develop
  implementation plans for proposed manufacturing
  clusters
• Pursue ways to consolidate/coordinate multiple
  constituencies interested in supporting
  manufacturing across the state
• Use academias unique position to optimize
  competing government (federal and state) and
  business interests and gain consensus
• Identify the most effective levers to pull in
  support of manufacturing clusters
• Institutionalize the Maryland Manufacturing
  Strategy Process to build on the momentum
  generated by coordinating activities across
  business, government, academia, and industry
  advisors
• Assess Progress
• Continually Revaluate Initiatives and Clusters
• Continue to emphasize those efforts to support
  the relationship between disruptive research,
  innovation, and manufacturing competencies that
  lead to new products, processes, customers and
  markets.

46
Appendix
47
Current Situation
48
The manufacturing sector has steadily increased
output as well as assisted other sectors in
increasing earnings and job growth

• Marylands manufacturing sector has experienced
  steady decline in the last decade
• Workforce in 2003 was 5.9 compared to more than
  9 in early 1990s
• Gross State Product (GSP) was 7.2 in 2001
  compared to approximately 10 in early 1990s
• Despite a drop in the job growth and GSP, the
  manufacturing sector has
• Steadily increased the total output since 1992
• Created significant earnings and jobs in other
  sectors
• Research and analysis into the multiplier effect
  across the manufacturing sector in Maryland
  revealed that the following industries provided
  the most economic value to the state
• Food and beverage manufacturing
• Printing and related support activities
• Transportation equipment manufacturing
• Chemical Manufacturing
• Furniture and related product manufacturing

49

Proximity to the federal government, access to 92
million consumers, a vibrant economy and fiscal
stability entices businesses
50

despite a decline in manufacturing jobs, low
export-dollar per capita, and high representation
of labor union
51
Leveraging manufacturing strengths and working on
overcoming major challenges will be the key to
attracting companies
Strengths
Challenges

• Proximity to the Federal Government provides
  opportunities to enhance lobbying efforts
• Access to 92 million consumer base within 500
  mile radius provides opportunities to be close to
  wide range of customer
• Access to the port of Baltimore, one of the
  busiest ports in the US offers assembly
  opportunities at the dock before exporting
• Intensity in RD demonstrates commitment to
  innovation and process improvement
• Vibrant economy that has ample access to venture
  capital and the value generated by IPOs
• Highly educated workforce provides a skilled
  workforce base
• Manufacturing assistance programs focused on
  enhancing manufacturing through tax incentives,
  sharing of technology and resources

• Manufacturing image suffers an outdated
  reputation and fails to communicate modern
  aspects of the manufacturing environment
• Significant drop in the manufacturing workforce
  does not bode well with the manufacturing
  businesses
• Gap in education of the manufacturing workforce
  results in lacking in basic skills and higher
  training costs
• Infrastructure issues such as traffic congestion
  and high cost of housing makes it difficult to
  attract employees
• Taxes and Government regulations lead to a high
  cost of doing business
• Low export dollar per capita and lack of
  significant FDI indicates a lack of openness to
  globalization and makes economies
• less competitive

52
State of Maryland Ranked in Selected Metrics
53
Maryland Manufacturing

• Manufacturing remains an important part of
  Marylands economy, accounting for 7.2 of the
  gross state product
• The total output of the manufacturing sector grew
  steadily from 1992 to 2001
• The multiplier effect magnifies the importance of
  manufacturing across the state

Industry Advisers
Manufacturing Strategy Development
Declining Manufacturing Base
Maryland Manufacturing Strategy
Government
Industry
Academia
54
Gain Consensus

• Academia is uniquely positioned to optimize
  competing government (federal and state) and
  business interests and gain consensus.

Business Interests
Government Interests

• Low taxes
• Skilled employees
• Low regulation
• etc.

• Tax revenue
• Full employment
• Environment
• etc.

55
Arizona, Connecticut and Minnesota have
successfully implemented cluster-based policies

• A few of the states have successfully
  implemented cluster policy include
• Arizona The Greater Tucson Economic Council has
  adopted cluster policies as framework for the
  overall direction of the economic development
  activities and allocation of limited resources
• Connecticut The state has embarked on a
  cluster-based strategy built around the idea that
  nurturing the states key industries improves the
  competitiveness of businesses within these
  industries
• Minnesota The University of Minnesota, in
  association with state and local policy programs,
  are examining rural knowledge clusters as a model
  for innovative, dynamic rural economies
• Maryland has successfully implemented cluster
  policy for secondary and post-secondary education
  
• Additional examples of cluster policies
  implemented by other states are listed below

56
One of the key goals of cluster-based policies is
to direct funds to the most productive industry
channels

• Cluster-based economic development policies
  contain important spillover effects that extend
  their influence beyond the specific business that
  are targeted for support
• Cluster-based policies reinforce two linkages
  that help to perpetuate a skilled and educated
  workforce
• Providing residents with more jobs in growing
  industries
• Forging a healthy collaboration between industry
  and educational institutions
• Cluster policies improve the scope of community
  involvement in the corporate sector
• Coordination efforts between communities and
  cluster leaders can lead to development of child
  care services, transportation improvements, and
  home ownership programs
• Industry clusters make it easier and more
  effective for town planning commissions to target
  potential businesses seeking to locate in the area

57
Public policy makers should know when to pursue
them and when to push them aside for
cluster-based policies to be successful

• Policy makers should avoid following pitfalls
  while developing cluster-based policies
• Cluster-based policies are not the same as
  industrial policies cluster-based policy
  initiatives must promote the competitive
  advantages of an interlinked group of related
  industries
• Cluster creation is best left to the market
  policy makers should refrain from the temptation
  to create new clusters and leave cluster
  formation to the market mechanism
• Let research, not politics, drive the
  facilitation of clusters policy makers must not
  bow to the pressures of political lobbyists
  pulling for certain industries, unless it is
  supported by specific research indicating
  tangible benefits

58
Cluster Pitfalls

• Cluster-based policies are not the same as
  industrial policies
• Cluster creation is best left to markets
• Let research, not politics, drive the
  facilitation of clusters

59

Having a skilled labor force is one of the key
factors for the success of clusters
60
Focus communication plans to improve the image of
manufacturing industry and facilitate
manufacturing education initiative

• Educating the workforce and managers will be key
  to the success of the cluster strategy.

Coordination Feedback
Universities
Trade Schools
Engineering
Business
Primary Schools
Training Education
Management
Workforce

• Literacy
• Basic PC Skills
• Skilled Trades

• Managerial Skills
• Engineering Abilities