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Business Observer Friday, Aug. 3, 2018 4 months ago

Cool Made: Florida manufacturers overcome obstacles

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Companies that manufacture stuff in Florida have some core challenges to solve. Top of the list: labor shortage. 
by: Mark Gordon Managing Editor

On both a national level and within Florida, manufacturing is on the rise — in multiple metrics.

Nationally, for example, the average industry annual sales growth per company and average net profit margins per company are on five-year high marks, according to data firm Sageworks. On sales, the average growth is 10% in fiscal 2018, up from 4.2% in 2017, Raleigh, N.C.-based Sageworks reports. The average net profit margin is 5.6% — the first time since 2014 it surpassed 5%.

In Florida, meanwhile, there are 20,000 manufacturing businesses that account for nearly 5% of the state’s GDP, according to 2017 Florida Department of Economic Opportunity data. The industry is mostly a small business game, with 80% of the manufacturers in the state having 20 or fewer employees.

Compared to other industries in the state, say professional business services or health care, manufacturing is low in total employees. But with an annual average wage of $57,884, the industry is No. 3 statewide in salaries per industry, according to the DEO.

Another look at the industry, from a Federal Reserve Bank of St. Louis Economic Research blog post, is more nuanced. “Is manufacturing up or down?” asks the post. “As economists like to say, it depends.”

To the good, manufacturing output is up steadily since the big recession-induced drop in 2010. Not yet 2007 output, data shows, but close. “This production is accomplished, however, with fewer and fewer employees,” the post states, given “increasing productivity per employee” through innovation.

In short: Manufacturers are making more stuff and using fewer people to do it. But if manufacturers had more people, they would be able to make more stuff. A trio of area manufacturing officials recently addressed that conundrum and other issues the sector grapples with. Edited excerpts:

• How have changes in technology, such as robotics, impacted manufacturers?

Neil Kagan, executive director of the Southwest Regional Manufacturers Association in Fort Myers, says he’d like to see companies in the region adapt to technology with a keener sense of urgency. “More companies need to keep up,” Kagan says. “If you can make 100 of something much easier, that gives you more opportunities to sell more things and do more business.”

Mark Wemple. American Torch Tip is a third-generation manufacturer now based in southern Manatee County. Clients include auto manufacturers and others connected to auto parts. Jack Walters is the president of the company.

Sarasota Manatee Manufacturers Association Executive Director Peter Strawsays automation is a good way to compensate for a workforce shortage. "Automation in robotics reduces the need for as many people on the floor," says Straw, "but it increases the demand for people who are more highly skilled and therefore more highly compensated."

• How has the tight labor market impacted manufacturers? What are some creative hiring solutions companies have undertaken?

Roy Sweatman, president of Southern Manufacturing Technologies in Tampa and a Bay Area Manufacturers Association board member, says the lack of talent in the region “has been horrible.” Adds Sweatman, whose 110-employee company did $14 million in sales last year, mostly in aerospace parts: “We’ve had to turn away a lot of potential work because we don’t have the people here to do it.”

A lack of workers is a regionwide issue. Kagan says he mentioned a local company’s need for two computer-numeric controlled machinist at a recent meeting and he was met with chuckles. “One board member said, ‘Good luck with that,’” Kagan recalls. 

Nearly every community on the west coast of the state has myriad programs, from high school to community colleges and trade schools, say the officials. Apprenticeships also help. One challenge in drumming up interest and participation, says Sweatman, is apathy. “We have to fight the perception that people think manufacturing is all done in China,” says Sweatman.

Straw says its key for manufacturers seeking employees is to ask, "What are we going to offer people to get their attention?"

"We are now finding ourselves competing with Walmart and other companies for entry-level employees," says Straw. "Salary attracts people ... but long term what people look at is job satisfaction and the chance for advancement. That’s where manufacturing has a leg up over some of the other sectors." 

• Will the Trump administration’s trade war and tariffs have a positive or negative impact on manufacturers in the region?

Sweatman says the negative fallout has already begun. His company’s domestic suppliers of aluminum and steel have already raised prices, 10% to 20%, in response to tariffs. The catch is that to bid on the aerospace work, Southern Manufacturing Technologies is required to buy American. “It’s either that,” says Sweatman, “or you don’t get any materials.”

Straw is a bit more pragmatic, saying the long-term goal of tariffs should override the short-term pain. "It's long overdue," Straw says. "We have said for years, American manufacturers can compete with anyone on a level playing field."

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