Manufacturing Remains Strong in Iowa

October 13, 2017 | Manufacturing remains strong in Iowa

Manufacturing is critical to Iowa’s economy. So much so that former Iowa Gov. Terry Branstad earlier this year declared 2017 as the year of manufacturing in Iowa.

The industry is the single largest sector of the state’s economy and represents 18 percent of Iowa’s gross domestic product. Advanced manufacturing contributes $29 billion each year to Iowa’s economy. Iowa’s 6,000 manufacturers employ more than 213,000 people, according to the Iowa Economic Development Authority.

“We’re a manufacturing state. There’s no way around it, and that has been helpful in diversifying our economy from a state perspective,” said Debi Durham, director of IEDA.

State and economic development officials hope Branstad’s declaration to boost manufacturing and increase its contribution to $32 billion by 2022 will help it grow even more; spark innovation, research and new products; and bring attention to resources available to manufacturers to help them succeed, such as the Center for Industrial Research and Service (CIRAS) at Iowa State University.

CIRAS provides a variety of experts with the knowledge to help companies with many aspects of their business, from reducing manufacturing and inventory costs to improving the quality of products and the innovation process. The center works one-on-one with manufacturers and conducts broader educational programming.

Mike O’Donnell, the program director for CIRAS, said manufacturing companies across the state are growing and hiring workers.

“Well-run companies are excelling right now regardless of what sector they’re in,” he said.

Growth occurs for companies in many areas

HNI, with manufacturing facilities in Mount Pleasant and Muscatine, employs more than 4,000 Iowans through its production and sales. The company is the world’s largest manufacturer of hearth products and second-largest for office products.

“We like Iowa a lot,” said Stan Asken, chief executive officer of HNI. “It’s been our legacy. We like the work ethic. We like the culture that the state has. The state has a lot of positives. ... The state leadership legislative branch works hard to make sure Iowa is a good place to live and work, and that makes an attractive place to do business here.”

Advanced manufacturing in Iowa is growing in the area of medical devices, which is a relatively new niche and would allow for partnerships with research institutions, as well as the creation of renewable chemicals from bioproducts, which could replace petrochemicals or products that derive from petroleum.

Diamond Vogel Paint works nationally with manufacturers and provides specialty coatings for manufacturing companies; household paints and stains that are sold through service centers; automotive paints; farm repair products and coatings; and traffic coatings for road striping use.

Drew Vogel, chairman and chief executive officer, said the company’s business has been strong, particularly in powder coatings, which has led to a large $20 million expansion of the company’s powder coating facility located in Orange City.

The company has service centers in 13 states and eight manufacturing sites in five states. Four of those eight are in Iowa, where 70 percent to 80 percent of the company’s output is created.

The company also has seen growth from its customers in the construction business and general transportation, as well as recreational companies and other businesses that are creating new products and need to protect them with paint and coatings.

The company’s customers who produce agriculture equipment and products – about one-third of Diamond Vogel’s industrial coatings business – have seen a decline in business as commodity prices have declined and input costs have increased, Vogel said.

Company President Jeff Powell agreed and compared it to the supply and demand of the oil industry. Farmers are waiting for better times before they purchase new equipment.

“Manufacturing is strong with the ag sector being so ,” he said. “We see it coming back, but it’s not at its highest points.”

The future of manufacturing also looks strong in Iowa, both men said, but with the possibility of some challenges. Powell said there could be continued consolidations of companies with mergers and acquisitions. This is both a risk and an opportunity, depending on whether the parent company decides to continue using technology that utilizes Diamond Vogel products or eliminates it, he said.

Diamond Vogel, in its 91st year with four generations of the family working for the company, will continue to grow by meeting the needs of its customers and partnering with them on their coating needs. Much of this future growth in technology will come in the area of powder coatings, Powell said.

Officials seek ways to increase workforce

O’Donnell said the manufacturing industry will experience significant shifts in the next five to 10 years. Some of this will happen within the workforce.

Officials, through collaboration with businesses and service providers, also want to expand educational opportunities for prospective manuacturing employees to provide the skills needed for today’s manufacturing jobs and to fill the void where there are gaps in employees.

“People need to know that manufacturing is alive and it’s growing and will be around for a long time,” O’Donnell said.

More than 100 manufacturers will open their doors to students and the public this month (October) to celebrate manufacturing and show their plant floor, technologies and more.

Iowa has low unemployment, O’Donnell said, so there’s much discussion about how to create more workers with the necessary skills, how to pull people from other industries, and how to make workers more productive. There also will be a generational shift within the leadership structure of companies, as baby boomers retire and millennials move into leadership roles.

He said he doesn’t anticipate this meaning a change in leadership philosophy but rather an introduction to more technology in manufacturing with digital natives in charge.

“They’re going to be more open to implementing technologies, and I see them demanding this throughout their companies,” O’Donnell said. “Your first answer is not what is the right answer, but it’s why are we not doing digital. It’ll go from trying out new digital technologies to digitizing as a priority.”

School districts and colleges can help the industry by investing in robotics, artificial intelligence and other programs and courses that will create a base of well-skilled workers, Askren with HNI said. Kirk McCollough, president of Seneca Foundry Inc. in Webster City, said there is a demand for more entry-level product employees and end-skills trades workers. His family’s company makes cast moldings, exhaust manifolds and other casted parts and components. Most of its customers are in the United States, but it also has a relationship with some overseas companies.

Innovation, technology pave the way

The future of manufacturing looks bright in the state. The next couple of years will continue to bring more innovation and research and development of new products and ways to make manufacturers grow and compete on a national and global level. Shared services such as the 3-D printer at the Cedar Valley TechWorks Campus will likely expand in the future, so businesses can share the expense of cu ing-edge technology.

“Individual businesses can’t always afford the cost on their own, but together they could collectively invest in these types of cutting-edge technologies and offset the costs,” Durham said.

There will be more expansion in digital manufacturing – computer-based and network-based technologies that help manufacturers better design, service and engineer their products, O’Donnell said.

This will include more use of 3-D printing for metal and plastics, as well as virtual and augmented reality, where manufacturers could overlay a 3-D model in front of a piece of equipment on their shop floor and determine a design.

Three-dimensional printing of products will expand beyond the creation of prototypes and be used for low-end production of items, McCollough said. He also foresees less high-volume production of parts because product designs will change and be updated at a quicker pace.

“We won’t necessarily see the tens of thousands of parts,” he said. “The design cycle will go faster. The complexity of the design will increase.”

Leaders want business-friendly climate

About 95 percent of the advanced manufacturing products produced in Iowa are shipped outside of the United States, so the ability to export is vital to the state’s economy.

“It’s important we put agreements in place that allow us to fairly and competitively export Iowa products around the world,” Durham said.

O’Donnell, the CIRAS program director, said Iowa manufacturers can compete in the global market when they’re on equal footing with other businesses.

For the most part, Diamond Vogel’s customers are in the United States with some in other areas of North America. Any initiative that could return manufacturing jobs to the country from overseas would give the company more opportunities to increase its market share in the industrial coatings business, Powell said.

Since President Donald Trump took office, Powell said there has been a boost among customers in feeling more secure about business having the support of the administration.

Vogel agreed, and added that he’s in favor of increasing manufacturing opportunities within the United States and removing any hurdles that prevent U.S. companies from marketing their products internationally.

“If that happens, generally everyone wins,” he said. “Employment goes up, and the economy become stronger. If manufacturing grows and succeeds, there’s revenues for the government and to fund programs.”

McCollough said there have been some inquiries about products returning to the United States for production, but price-wise it’s still cheaper to produce them overseas, and companies located in the country, his included, charge more to produce them.

There are challenges for all companies regardless of which state they reside in, and businesses want to locate in a place where they can succeed, Askren said. That’s why it’s important for the state to have a strong education system, and a tax structure, regulations and incentives that are favorable toward businesses, he said.

“Sometimes we as a public lose track of the fact that we compete globally, and corporations have alternatives,” Askren said.

HNI has invested more than $150 million in the state in the past few years in facilities, equipment and technologies. 

“Iowa is a good place for us to do work, but we do take business elsewhere when it’s the most advantageous for cost,” Askren said, adding that the company’s plants in China and India serve customers in those regions.

If there are back trade regulations or policies, they need to be removed, said Askren, who favors free trade and thinks the best value proposition wins. But it’s more important to focus on making Iowa and U.S. companies better than knocking down the global competition, he said.

“Iowa needs to continue to develop and invest and work on this because the world is moving quickly,” Askren said. “The world is ruthlessly efficient. They will go where they can get the best deal. ... We as a state need to keep moving forward. As soon as we stop, everyone else will take us over.”