While question marks still hover as the economic recovery lurches along, one thing’s for sure: Wisconsin manufacturers of all sizes are riding the recovery wave with a close eye on their companies’ purse strings and many are looking for innovative ways to expand their horizons.

These days, just about every manufacturer is facing some kind of economic challenge. From cancelled products to reduced spending to legislative changes that will affect their bottom line, Wisconsin businesses are working hard to retain their market share.

Wisconsin as a whole still has its manufacturing base in place, but it is becoming increasingly clear that changes must happen for many to remain viable. So how are Wisconsin manufacturers faring in light of the recession?

“Relatively speaking, the Wisconsin manufacturing economy is faring as well the rest of the nation and in many cases better than comparable states,” says Mike Klonsinski, executive director and CEO of Wisconsin Manufacturing Extension Partnership (WMEP).

“Wisconsin benefits from a diverse manufacturing base so catastrophic declines in one industry aren’t as damaging to our state as others.

For example, we were hit by the automotive downturn, by declines in recreational spending (e.g. motorcycles, boats) and by the slow housing sector (window, fabricated housing). But a number of other industries have held up relatively well and those manufacturers involved in defense vehicle production and alternative energy products are seeing a benefit from those government contracts.”

Wisconsin manufacturers are a resilient, patient and innovative bunch. Some are finding growth opportunities by looking at other stable or growing industries such as alternative energy or medical equipment. Other manufacturers are identifying growth opportunities in new markets in the U.S. or outside our borders. And some are building and redesigning their products for use in new applications.

For example, Cardinal Glass, a company with multiple locations throughout Wisconsin, is recycling heated water from manufacturing processes and using it to heat office areas and will be using heat from factory equipment to warm warehouse space. CalStar of Caledonia is producing ‘green’ bricks from fly ash, a by-product of coal power generation. And Lindquist Machine in Green Bay has invested over $4 million in new equipment, working with individual entrepreneurs with promising ideas, helping them move into the manufacturing stage.

“These are just a few examples of companies thinking of ways to reshape themselves to win in a recovery,” Klonsinski says. “Lean was already becoming a standard requirement of being a manufacturer before the recession. Today, it’s even more important in order to survive.”

For many companies, focusing on the internal processes and investing in their most important assets—their employees is paramount to their success.

“We have hardworking, dedicated associates with a ‘never say die’ attitude,” says Kenneth Heins, CEO and president of KLH Industries Inc. in Germantown. “Even in recessionary times somebody is doing the work and we want our share. If you are waiting for the phone to ring, chances are you may not survive.” For KLH, business is down 20 percent from their seven-year average.

In addition to its continuous pursuit of excellence, KLH has demonstrated consistent financial growth, innovative sustainable practices and a solid work force training program.

In fact, by looking internally and making investments to enhance people and processes, manufacturers are now more efficient and lean in this challenging economy.

“Most businesses remember how hard it was to find good talent and do not want to lose them, therefore some have invested in work force training (since they did not have anything else to do) to become more efficient at labor intensive processes,” Heins says. “Lean minimizes the waste in a process and Six Sigma minimizes the deviation in a process. The use of both tools together is an organized approach to maximum efficiency. By the middle of 2010 we will have invested just shy of $500,000 in advanced training over the past eighteen months to improve our competitiveness.”

Key concerns

Staying afloat is top of mind for most Wisconsin manufacturers and many are concerned that the economy will not really recover at a pace that everyone hopes. “There has been some positive movement but we are still far from a stable recovery,” Klonsinski says. “We can’t control what the economy does but it is a concern, as are concerns about potential added costs from government actions.”

More immediate concerns include securing working and expansion capital, retaining and motivating good people, and identifying new markets for their products.

Heins recommends manufacturers elect government representatives that understand how small business and the entrepreneurial spirit creates jobs.

“We will all die if government continues its relentless attack on businesses with things like cap and trade, card check, health care mandates and increased taxes,” Heins says. “Because we are spoon fed slogans like, ‘live better and pay less,’ there is an attitude that everyone is entitled to more for less. When does it become cheap enough? When all the jobs are gone the government will have succeeded in creating a dependency that will destroy our freedom and every principle this country was founded on.”

Heins also sees the need to focus on the age of the current work force, the size of the available work force in the future and our competitiveness in a global economy.
“Also be conservative with your cash,” Heins says. “Do not overextend your debt commitments to a point where they become unsustainable in a down market. Growth seems like a distant goal right now, our current future is survival.”

“There are some important competitive benefits that come with being a lean company today,” agrees Klonsinski. “The first is speed: A company that can respond quickly to a customer need has a huge advantage in today’s marketplace. The second is flexibility: A lean company can react to different product mix and volume demands very quickly. A third is cost: A lean company does not have to carry a lot of inventory and all the overhead costs (e.g. warehouse space, obsolete material) that exist in a ‘nonlean’ firm.

“Finally, companies that are lean start differentiating themselves in other areas such as more rapid product development, more effective back-office operations and better customer support.”

While in survival mode, KLH Industries plans on extending its marketing efforts nationally. “Ten years ago 90 percent of our business came from inside Wisconsin,” Heins says.“Today 51 percent of our business is from out of state.”

In fact, it is initiatives such as expanding manufacturers’ reach nationally or identifying new growth opportunities that can be accomplished with the help of WMEP.

Take Medalcraft Mint, for example. This company recently used WMEP’s Eureka! System to identify potential new markets for exploration.

“The process involves describing a population of relevant markets, going through a qualification procedure to reduce the opportunities to a prioritized ‘finalists’ group, and then to use formal analytical processes to qualify the strongest ‘winner’ that has the highest likelihood of success,” says Jerry Moran, president and chief executive officer at Medalcraft Mint in Green Bay, a company that specializes in minted die-struck awards, such as coins. “This experience is interactive and analytical with key information gathered both internally and externally to justify the markets or products to be considered.”

 The end result? Medalcraft Mint was able to secure new business from the GSA and other government entities as a result of this process.

“We have successfully expanded our footprint with federal government customers,” Moran says. “We have acquired direct GSA orders that we had not received before. Additionally, we’ve expanded other direct sales with government agencies through our focused support of this market.”

What the future holds

Moran believes that Wisconsin-based manufacturers need to focus on being “right-sized” in these challenging times. That includes a need to strongly focus existing resources to survive and thrive during this cycle. “Wasting efforts to expand in areas that have not been properly analyzed can be destructive,” he says. “Being static is not necessarily a wise reaction either. Our sense is to make use of internal and external knowledge (for instance, WMEP), to effectively and efficiently determine areas of real opportunities to adjust profitably.”

So what does the future hold for Wisconsin manufacturers in light of the current economy?

“That all depends on whether government gets out of the way or continues to interfere with the free market system,” Heins says. “Without innovation and development of new products there is no need to build anything. Our future depends on how long it takes for government to wake up and understand that America cannot survive on a service economy and to stop penalizing manufacturing businesses.”

By Maura Keller

Maura Keller is a freelance writer originally from Wisconsin.

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