Manufacturing group to honor 3 state firms at annual dinner

More than one-fourth of all manufacturing jobs in Arizona have been lost in the past four years as companies move work offshore or streamline their operations to increase efficiency.

But that doesn’t mean manufacturing as an industry is dying, according to the president of the Arizona Association of Industries. In fact, it appears the revenue of Arizona manufacturers is increasing even as the work force shrinks because companies are figuring out how to produce more with fewer employees, said Stuart Banks, the association’s chief executive.

Also he said manufacturing employment may be starting to turn around from its slump after the Sept. 11, 2001, terrorist attacks as the federal government places more orders with local aerospace and defense contractors.

“This (loss of manufacturing jobs) has been a concern for many years,” he said. “It’s a matter of how do you deal with global competition? We just weren’t prepared for it, and now we’re trying to catch up.”

As a result, many Arizona manufacturers are working on retooling both their staffs and machinery, he said.

“Now they’re thinking in lean manufacturing terms,” he said. “Is your supply chain moving things efficiently?”

Arizona manufacturing will be in the spotlight Tuesday as the association recognizes three Arizona manufacturers at its annual Manufacturer of the Year awards dinner at the Arizona Biltmore Resort and Spa in Phoenix. The winners, who will be announced at the dinner, are judged on innovation, environment awareness, commitment to employees, civic involvement and entrepreneurial spirit.

Last year’s winners were Intel, Lincoln Laser and ArmorWorks.

According to the association, Arizona is home to 6,178 manufacturing compa- nies employing 246,321 workers. But about 100,000 Arizona manufacturing jobs have been lost in the last four years, Banks said.

The East Valley is the home to 1,764 manufacturers, or about 28 percent of the state’s total. The largest category is electronics, which includes the semiconductor sector. Most of the locally made products are exported overseas to be put in devices like computers and cell phones that are then shipped back to the United States for sale to consumers. Another big category is defense and aerospace manufacturing.

Arizona also is becoming a hub for machined products, many of which go into wares made by larger corporations, Banks said. For example, he said Boeing has a network of about 300 subcontractors in Arizona that make parts that go into its Apache military helicopters, which are built in Mesa.

Although figures are hard to come by, it appears that Arizona manufacturers have been increasing their revenue in recent years despite the downsizing of their work forces. Banks cited export figures compiled by the U.S. Department of Commerce that show that Arizona exports increased 22 percent last year to $18.2 billion. The vast majority of exports, about 92 percent, are manufactured goods, he said.

The total value of locally manufactured goods is difficult to ascertain because many of Arizona’s manufacturers are multinational companies based out of state who do not break down their income by state, he said.

The major challenges facing Arizona manufacturers are reducing the impact of factors that increase structural costs such as health care, taxes and environmental regulations, Banks said.

Also, finding skilled workers is a constant challenge, he said. Although there are fewer jobs, the ones that exist are tending to require a higher level of training, he said.

The Boeing Co. in Mesa is an example of a company that has adopted “lean” production processes to maximize production without increasing the size of its work force.

Al Winn, vice president of Apache programs for Boeing, who will be the guest speaker at the awards dinner, said the lean techniques also give the company more flexibility. During times when orders and production are slow, the company can transfer workers to other assignments in the company. Then when production increases, they can be returned to the assembly line, he said.

“We want to keep our skilled work force in place because it’s a big part of our ability to execute,” he said.

Warren Wagoner, chief executive of Butler National Corp., a publicly traded Kansas-based company that makes controls for the Apache’s machine gun at a plant in Tempe, said his company has to face global competitive pressures and could probably perform its work more cheaply overseas.

“But in the military sector, there is a national interest in maintaining that domestic link,” he said. He said the company, which has about 25 employees in Tempe, also focuses on producing high-reliability products in relatively low volumes for the commercial aircraft market.

“We will not compete with Sony or Samsung in making TVs,” he said. “We have to specialize.”

Manufacturing facts in Arizona

• Manufacturing accounts for 9 percent of Arizona’s gross domestic product.

• Every $1 in manufactured goods generates an additional $1.37 worth of economic activity — more than any other economic sector.

• Manufacturing company employees made an average salary of $54,616 per year in 2005. In total, manufacturers paid $2.5 billion in wages in 2006.

• 92 percent of Arizona’s exports are goods that are manufactured in the state. The value of exported manufactured goods was $13.74 billion in 2005. Thirty-two percent of those goods were sent to Mexico.

• Computers and electronics made up the biggest sector of manufactured goods in Arizona, with a total value of $6 billion in 2005. Source: National Association of Manufacturers