WisBusiness: New study says Wisconsin manufacturers must adapt and upgrade to thrive

By Brian E. Clark


SUN PRAIRIE — William J. Lenling, vice president of Thermal Spray Technologies, isn’t sure if he wants to be the poster boy for the future of Wisconsin industry.

But if Badger State manufacturing is going to thrive in the 21st Century, high-tech companies like TST — which makes engineered coatings for everything from motorcycle gears to medical instruments — will lead the way. To say nothing of producing higher profit margins.

That was one of the main themes of a study released Tuesday by the Wisconsin Manufacturing Partnership. The report, which analyzes the state’s major industries, was financed by grants from the U.S. Economic Development Administration and the Waukesha-based Kern Family Foundation.

“We’re certainly not the only ones who are adding value through technology,” said Lenling, whose company’s roots go back to research he did as a UW-Madison graduate student in the early 1990s.

“But our engineers are always looking for ways to move things forward and to do them better and more efficiently,” said Lenling, whose firm has 75 employees. “We have to do that to compete and thrive.”

John Brandt, CEO of the Ohio-based Manufacturing Performance Institute, directed the 400-plus page report. He said Wisconsin is well-positioned to become a 21st Century industrial leader.

“Wisconsin could be a powerhouse,” said Brandt. “That’s the take-away from this big study.”

Though some of the state’s industries have struggled in recent years, manufacturing remains strong in Wisconsin. In 2004, he said, the state’s 10,000-plus manufacturers industry and related companies employed 512,000 workers and generated more than $46 billion in what he called gross state product.

But for industry to grow to an estimated $54 billion in 2008 and prosper in decades to follow, Badger State manufacturers “must seize the opportunities before it.

“They must adapt to emerging trends in management and technology, and find new ways to compete globally if they want to continue to be a vibrant and vital part of the economy,” he said.

Brandt said companies all over the United States — including Wisconsin — are coming to a “fork in the road.”

He said they can choose to follow a dubious “commodity strategy” by trying to be the lowest cost producer.

“But that only works if you are Wal-Mart,” he said. “If you are not No. 1 or No. 2 in the market, you will slump.”

It is a much wiser policy, he said, to pursue a “value-added strategy,” by which companies like Thermal Spray Technologies enhance the performance of products.

Mike Klonsinski, CEO of WMEP, praised the report for showing which manufacturers are “drivers” and most important to the state’s economy.

“Industry is still a big deal in Wisconsin,” he said. “But we have challenges ahead of us that range from image to regulation to workforce development. This study will help guide us.

“The first thing we need to do is change the way we think about manufacturing,” Klonsinski said. “There is a perception out there that manufacturing is dying — or going away. It’s not.

“But manufacturing is changing. And we’re hopeful that this study will provoke public discussion and heighten awareness on the need to transform our manufacturing sector so it can continue to generate wealth and good jobs for years to come.”

Nick George of Wisconsin Manufacturers and Commerce said the state’s industries would do well to follow recommendations in the report to upgrade their technology.

“But we also need to get control over rising health care costs, tort reform and tax reform,” he said.

And in addition to engineers and researchers, he said Wisconsin’s schools need to produce graduates who can read and write, count and do basic math and have the responsibility to show up on time.

“If they do that, our state’s manufacturers can train them and do the rest,” he said.

Here are some other highlights of the report:

  • Manufacturing and its related industries comprise almost one half of the state’s economy. In 2004 alone, manufacturers generated more than $46 billion in gross state product (GSP), exported $14 billion in manufactured goods and employed 512,000 workers. Manufacturing gross state product is projected to grow to $54 billion in 2008.

  • Wisconsin has a strong and diverse industrial economy and is home to 13 categories of “driver” industries. These industries give Wisconsin a significant competitive advantage over other states and drive Wisconsin’s manufacturing economy.

  • The top five statewide driver industries are paper; machinery; fabricated metals; electrical equipment/appliance; and wood products.

  • Manufacturing suffers from an outdated image in Wisconsin and nationally, hindering efforts to attract qualified and skilled workers into jobs that pay good wages and benefits.

  • Exports represent a significant growth opportunity for Wisconsin’s many smaller manufacturers because smaller firms may be more agile in adapting to global opportunities. Between 1992 and 2001, the number of smaller firms exporting grew twice as fast as the number of larger firms exporting in the U.S.

  • Wisconsin’s productivity lags that of many of its competitor states, including California, Illinois, Indiana, Michigan, Minnesota, Ohio, Tennessee and Texas. Wisconsin’s average output per manufacturing employee is 86 percent of the national average.

  • Wisconsin manufacturers can succeed against global pressures by shifting from commodity to value strategies in which products and services are bundled and customized to meet the fast-changing customer needs. Value strategies yield higher profit margins.

  • A survey of 75 state manufacturing executives predicts a decline in corporate headquarters, research and development and production from the state in the next five years.

  • Manufacturing has a poor image in Wisconsin, making it difficult to attract and retain high quality workers. This is especially true when it comes to finding dedicated replacement workers for the generation of older employees who will be retiring soon.

  • Taxes of all types are high in Wisconsin, compared to border and competitor states.

  • Businesses are unable to contain manufacturing costs, due to spiraling healthcare, liability insurance, on-the-job training and new machinery and technology costs.


    To capitalize on its 21st century manufacturing potential, the study suggests that Wisconsin needs to create a business climate that fosters growth-oriented manufacturing industries. The study recommends Wisconsin should:

    • Build on its driver industries because they are the most competitive and have the greatest potential for growth.

    • Create greater focus on manufacturing in government, industry and economic development, including the creation of a bipartisan manufacturing task force in the State Legislature.

    • Take immediate action to address skill shortages because the availability of talent is the most important factor for the long-term success of Wisconsin’s driver industries.

    • Consider a broad-scale legislative package based on a close examination of the policies affecting driver manufacturing industries and their industry clusters with the goal of supporting Wisconsin manufacturing.