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Containment Manufacturer Implements Quality System with Georgia Tech Assistance

Atlanta-based Precision Technik developed a patented mobile containment device that could safely handle a wide range of deteriorated, unstable and unknown containers.

Dealing with dangerous materials such as hazardous compounds and chemical or biological weapons requires high-quality containment systems. Jeffrey Gold, president and founder of Atlanta-based Precision Technik, was all too aware of this as he developed a patented mobile containment device that could safely handle a wide range of deteriorated, unstable and unknown containers. Today, Precision Technik’s equipment has been operated worldwide for nearly a decade.

“In 2003, we built a prototype for a mobile containment device because I thought we could do better than what was available then,” Gold recalled. “This is life and death. Semiconductor companies deal with gases that are incredibly toxic, so they have zero tolerance for a problem.”

Gold began considering the manufacturing process and the necessary quality control, and decided to call on Georgia Tech’s Enterprise Innovation Institute (EI²), a comprehensive university-based industry assistance program, for help in implementing ISO 9001. Gold was already familiar with the work of EI², because Precision Technik’s parent company, Integrated Environmental Services, was a graduate of Georgia Tech’s Advanced Technology Development Center (ATDC).

ISO 9001 is an international quality management system that certifies the application of formalized business processes. The standard takes a systematic approach to managing the organization’s processes and ensuring a consistent product that meets customer expectations.

Craig Cochran, a quality specialist with EI², assisted Precision Technik in 2006 with its implementation of ISO 9001. He conducted a gap audit to identify areas of improvement, developed an implementation plan and trained the staff in quality issues and internal auditing. He returned in early 2010 to assist with the company’s re-certification.

“As soon as we got into ISO, we realized what a big deal it was, but we were committed to it because we knew we had to standardize the product,” said Gold. “For something of this nature that’s used in a critical situation, you’ve got to make sure the product is uniform and consistent.”

Evan Mass, product manager for Precision Technik, took over the ISO implementation and maintenance and said Cochran’s knowledge and experience was invaluable.

“I’m not an engineer, but the person in this position previously was. I didn’t even know what ISO was, so there was a huge learning curve,” she noted. “Craig came in about a month after I started and spent the day with me and brought me up to speed. Everything is smoother as a result and we’re able to anticipate what’s coming next.”

In addition to the initial certification and then the re-certification, Precision Technik has seen a number of benefits, including more effective execution in the field, a culture change with company personnel and an improvement in on-time delivery from 80 percent to 90 percent.

Today, Precision Technik is the only manufacturer in the world that makes these commercial units and has developed a family of related products covered by more than 30 patents. Between 30 and 50 percent of their products are sold overseas in countries such as China, Israel, Singapore, Australia, Korea, Mexico, Russia, Belgium, England and India.

“The true benefit of Georgia Tech’s program has been much larger in terms of our personnel – how they think and how they look at their work,” Gold said. “Craig lends a very practical but very comprehensive perspective. He can tell us what to focus on and that’s been extremely useful.”

About Enterprise Innovation Institute:

The Georgia Tech Enterprise Innovation Institute helps companies, entrepreneurs, economic developers and communities improve their competitiveness through the application of science, technology and innovation. It is one of the most comprehensive university-based programs of business and industry assistance, technology commercialization and economic development in the nation.

Research News & Publications Office

Enterprise Innovation Institute

Georgia Institute of Technology

75 Fifth Street, N.W., Suite 314

Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986); E-mail (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright

Newnan Manufacturer Competes by Improving On-time Performance, Cutting Set Up Time

Scott Bunn, Groov-Pin’s operations manager, discusses opportunities for implementing lean principles with EI<sup>2</sup>’s Sam Darwin. — Scott Bunn, Groov-Pin’s operations manager, discusses opportunities for implementing lean principles with Sam Darwin of the Enterprise Innovation Institute.

When the leaders of Groov-Pin, a manufacturer of engineered fasteners, were thinking of ways to improve the company’s business, they went all the way to China. Ironically, the 2007 trip was made to determine how Groov-Pin could remain competitive – against similar Chinese manufacturers.

“It’s tough to be profitable today when you’re up against the rising cost of metals and the availability of labor. When Asian manufacturers came onto the scene, they were able to make inserts like ours for less money,” said Scott Bunn, Groov-Pin’s operations manager. “Four of us took a trip to China, Taiwan and Hong Kong to see how they were doing business and the kind of equipment they were using. We came back and decided the way for us to be more competitive was to deliver faster.”

After returning from Asia, Groov-Pin President Scot Jones asked Bunn to attend a lean manufacturing seminar. Bunn discovered Georgia Tech’s lean boot camp, a four-day class led by the Enterprise Innovation Institute (EI²) that teaches participants how lean techniques impact profit, lead-time, inventory, quality and customer service. By the end of the course, he knew that he and others within the organization could map current and future value streams, identify appropriate techniques for improvement, develop a lean strategy and plan the application of specific lean techniques, a set of tools widely used in manufacturing to help identify and steadily eliminate waste from an organization’s operations.

“I really liked the hands-on aspect of the Georgia Tech training. We sat in a classroom and went over the literature, but then we actually did a factory simulation,” Bunn recalled. “It demonstrated how, if you made some simple changes, you could become more efficient at doing things.”

The Georgia Tech class generated enthusiasm among the Groov-Pin leaders, and at corporate headquarters in Smithfield, RI, they decided to initiate the company’s lean journey. Groov-Pin worked with Rhode Island Manufacturing Extension Services (RIMES), a nonprofit organization funded by the National Institute of Standards and Technology (NIST) that works with small- and medium-sized manufacturers to improve operations, increase efficiency and raise profits. When it came time to implement lean solutions in the Newnan facility, Bunn contacted EI², which operates the Georgia Manufacturing Extension Partnership, similar to RIMES.

Sam Darwin and Bill Ritsch, EI² lean specialists, visited Groov-Pin in March 2010 to assess the company’s needs, and they proposed a series of kaizen events. Kaizen, or rapid improvement, is a focused activity on a particular process or activity that identifies and quickly removes waste. The first event was held in April around Groov-Pin’s scheduling process.

“The first day you tear apart the whole process and ask yourself what things aren’t working. The second day you take those ideas and brainstorm ways of doing new things,” Bunn noted. “It was so simple what we did with scheduling that it blew everyone’s minds.”

Prior to the scheduling kaizen event, Groov-Pin was scheduling the production of orders based on when they were required by customers and by putting a priority on orders with the highest dollar value. Now, the shop floor workers use visual scheduling boards that provide visibility of all orders and machine capacity over rolling five-week blocks of time. The scheduling boards allow everyone to see when every order in the plant should run, not just those within a two-week timeframe.

“We started to see results in just a couple of weeks. Before, we just looked at the due date, but we were also focused on how many dollars we could get out the door for the month. It was all about sales,” explained Bunn. “Georgia Tech helped us realize that if you’re producing on time, the sales are going to come.”

As a result of the scheduling kaizen event, Groov-Pin’s Newnan facility improved its on-time performance by nearly one-third, to 94 percent. Bunn also notes that staff mindset has changed considerably as a result of the project.

“Some of these guys have been working here a very long time, more than 20 years. When they see something grinding away at the same pace and not improving, that’s tough to do every day. But when they come in and see that some change has been made that makes their lives easier, those are improvements that people really think are fantastic,” Bunn observed. “It’s still a push to get people to do things above and beyond what their regular job is, but when they see progress, they are more apt to do it. That’s part of what we see as Groov-Pin’s culture change.”

In addition to the scheduling kaizen event, Groov-Pin conducted additional events in setup reduction, outside services and parts flow – all with impressive results. Setups that were taking eight hours and four hours have been slashed to 50 minutes and 30 minutes, respectively. Bunn also projects production and sales increases, and says that as the economy rebounds, Groov-Pin will add jobs.

The team also applied 5S (sorting, straightening, shining, standardizing, and sustaining), a method for organizing the workplace. After the company’s last business meeting, managers and sales staff from across Groov-Pin’s two locations toured the Newnan facility and were impressed with what they saw.

“We have a 25-year-old building with a machine shop and it can be a dirty, oily environment. We really cleaned the place up, made it brighter, and made a lot of improvements and we showed people the improvements we made,” Bunn said. “Georgia Tech has helped us do in less than a year the things that we tried to do for years and couldn’t get done. The proof is in the pudding. On-time performance is up, lead times are beginning to go down and setups are now being done in a fraction of the time. That’s measurable.”

Groov-Pin Corporation was founded in 1926 to address a growing market for patented press fit fasteners used in a wide variety of industries, including food processing, irrigation, automotive, aerospace and military, among others. Over the years, the company has played a leading role in establishing commercial and military standards for engineered fasteners.

About Enterprise Innovation Institute:

Research News & Publications Office

Enterprise Innovation Institute

Georgia Institute of Technology

75 Fifth Street, N.W., Suite 314

Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986); E-mail (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright

First Offshore Wind Farm in the United States To Be Built in Georgia?

Southern Company and the Georgia Institute of Technology announced today that they will collaborate on the Southeast’s first offshore wind power project off the coast of Savannah, Georgia… “We remain interested in finding viable renewable energy options that can play a part in meeting the growing demands of our customers,” said David Ratcliffe, president, chairman and CEO of Southern Company. “Our partnership with Georgia Tech presents us a unique opportunity to assess offshore wind power as a cost-effective option for generating power in our region.”… Though many discounted the Southeast as a possible site for offshore wind turbines, the Georgia Tech group, led by Dr. Sam Shelton, was able to prove that there may be enough wind for power generation by analyzing six years of wind data collected from Navy platforms located off the coast of Savannah. The strong westerly winds that blow along Georgia’s coastal waters coupled with the technological advances seen in the last few decades make this offshore region the best site in the Southeast for an offshore wind demonstration project.

To read the full article, click here: http://solarcellpower.net/wind-power-usa-first-offshore-wind-farm-in-the-united-states-to-be-built-in-georgia/

SETAAC Helps Brunswick Manufacturer Improve Marketing and Customer Relations

Dave Erickson, president and CEO of Haven Manufacturing, says the metal tube processing machines that his company makes is ubiquitous to manufacturers in a number of industries – automotive, furniture, construction and exercise equipment, to name a few. However, the widespread need for Haven’s products put the Brunswick, Ga. manufacturer’s customers squarely in the bull’s eye for foreign competitors.

“If you start thinking about everything you’ve seen with tubes in it – automotive airbags and seat frames, indoor and outdoor furniture, construction equipment and scaffolding, bicycles and scooters – you realize how expansive it is,” Erickson explained. “There’s really quite a variety to our customer base. And even though we were not directly affected by foreign trade, many of our customers were and still are.”

Haven manufactures tube processing machines, including the dual-blade shear cutoff, supported shear cutoff, secondary finishing machines and a new flying shear tube cutting machine that delivers high-quality, dimple-free cuts for tube forming mills. The company was founded in 1956 in New Haven, Mich., and moved to coastal Georgia in 1971, where it currently employs 29 people.

To address the issue of foreign competition, Erickson applied for support from the Southeastern Trade Adjustment Assistance Center (SETAAC), a program based at Georgia Tech’s Enterprise Innovation Institute that helps manufacturers develop and implement turn-around strategies to better compete with imports. SETAAC director Marla Gorges conducted an initial review of Haven and helped the company prepare an application for the U.S. Department of Commerce. Once the company was approved for funding, she developed an adjustment plan that detailed projects to receive funding support, including assistance in marketing and sales, web site development and customer relationship management.

“Our number one challenge was figuring out what to do and what would be the biggest bang for our buck,” recalled Erickson. “One of the first things we thought of was building up our brand. We used a creative team in Atlanta to develop a new eye-catching, yet simple, logo. That started the whole brand imaging concept, from logo to web site to search engine optimization.”

Haven has also increased the effectiveness of its web site, taking into account the company’s sales and conversion rates, lead generation, landing page effectiveness and the amount of time customers spend on the site. According to Erickson, this is a major improvement over Haven’s prior web site, which was not designed to be optimized for searching.

“Being in a global market – and Haven is very involved in international trade – it is very important to have exposure. If you don’t have the exposure, you don’t get the inquiries,” he said. “Our international inquiries and even our domestic opportunities have increased substantially over the last couple of years.”

Last year Haven formed a strategic alliance with SOCO Machinery Co., Ltd. of Taiwan to sell and service each company’s respective lines of tube cutting equipment. Erickson said the partnership provides Haven an outstanding opportunity to grow within the Asian markets, while SOCO’s growth in the U.S. market is enhanced through Haven’s broad market knowledge and reputation. Haven will have exclusive U.S. rights to sell SOCO’s line of automated tube saws, solid bar saws and tube and bar machining centers, while SOCO will represent Haven in China and Southeast Asia for its line of dual-blade and supported shear tube cutting machines.

To increase sales, the SETAAC plan also focused on launching a new prototype, updating factory sales support communications and designing a new product process for end-finishing equipment.

“In general, this has opened us up to new companies and industries that we had not worked with before. That alone says that our customer base is expanding,” Erickson said.

Firms that are accepted into the SETAAC program pay for 25 percent of the initial diagnostic visit and adjustment plan. The Department of Commerce generally pays half of the cost of project implementation for activities to benefit the company. Private sector consultants submit quotes for implementing the identified projects and the company chooses which consultant to hire to execute the outlined changes.

“With Marla’s guidance and input, we were approved for the SETAAC funding, something we wouldn’t have been able to do without her,” Erickson said. “This has been a great experience and I would recommend Georgia Tech to anyone.”

About the Southeastern Trade Adjustment Assistance Center:

The Southeastern Trade Adjustment Assistance Center (SETAAC), based at Georgia Tech’s Enterprise Innovation Institute in Atlanta, helps manufacturers develop and implement turn-around strategies to compete better with imports. Last year, SETAAC helped more than 30 companies in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee. On average, these companies received $42,000 in matching funds. In the last three years, SETAAC’s clients have increased sales by 26 percent and improved productivity by 28 percent. Over the past five years, 49 SETAAC clients reported sales increases of more than $39 million and productivity improvements of more than 43 percent.

About the Enterprise Innovation Institute:

Research News & Publications Office

Enterprise Innovation Institute

Georgia Institute of Technology

75 Fifth Street, N.W., Suite 314

Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986); E-mail (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright

Georgia Tech Featured at Energy Conference in Kazakhstan

Experts from Georgia Tech’s Enterprise Innovation Institute (EI²), the National Renewable Energy Laboratory of the U.S. Department of Energy and Oak Ridge National Laboratory recently participated in a two-day conference in Kazakhstan under the auspices of the U.S.-Kazakhstan Energy Partnership, the Ministry of Industry and New Technologies and the U.S. Department of Energy. More than 100 representatives from government, industry and various organizations attended the September seminar to learn how to address barriers and incentives for renewable energy and energy efficiency.

Robert Hitch, an EI²energy specialist, discussed an industrial approach to energy management, as well as issues in the development and implementation of ISO 50001, an energy management standard developed in part by Georgia Tech experts. ISO 50001 establishes a framework for industrial plants, commercial facilities or entire organizations to manage energy and targets broad applicability across national economic sectors. It is estimated that the standard could influence up to 60 percent of the world’s energy use.

“Kazakhstan has large reserves of coal, natural gas, uranium and petroleum, and as a Kyoto Protocol participant, the country has new requirements for energy efficiency,” explained Hitch, whose trip was sponsored by the U.S. Department of State and the U.S. Department of Energy. “They will need to focus on operational changes and ISO 50001 – as well as lean manufacturing approaches – will give them the tools to do that.”

The renewable energy discussions focused on the economic value of developing Kazakhstan’s renewable energy potential, methods to address barriers to renewable energy and use of analytical tools to map wind resource potential. The energy efficiency group explored ways to implement an energy management program and surveyed industrial energy efficiency tools and standards. Participants stressed the need for policies that provide long-term, stable support for clean energy development.

The United States and Kazakhstan have long cooperated in the energy sector. U.S. President Obama and Kazakhstan President Nazarbayev met on the margins of the Nuclear Security Summit in Washington, D.C. on April 11, 2010, and issued a joint statement that pledged to intensify bilateral cooperation to promote nuclear safety and non-proliferation, regional stability in Central Asia, economic prosperity and universal values. Specifically, the presidents underscored the 15-year track record of close cooperation between Kazakhstan and the United States and success in the reduction of the threat of nuclear weapons around the world. They expressed their intention to enhance cooperation on nuclear energy and alternative-energy sources.

For more information on EI²assistance in energy management, contact Bill Meffert, program manager, at 404-894-3844 or bill.meffert@innovate.gatech.edu.

About the Enterprise Innovation Institute:

Enterprise Innovation Institute

Georgia Institute of Technology

75 Fifth Street, N.W., Suite 314

Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986); E-mail: (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright

New Book Explores Best Ways for Organizations to Solve Problems

Effective problem solving is the most neglected organizational competency, often perpetuated by complacence about the status quo, a culture of blame, reluctance or inability to pursue true causes and lack of time. To address these issues, author Craig Cochran has written a new book, Problem Solving in Plain English (Paton Press, 2010).

“Managers need to re-examine their processes and problem-solving and think beyond the surface. If they understand their current process, then they can consider causes and potential causes of problems,” said Cochran, who is the north Atlanta region manager for Georgia Tech’s Enterprise Innovation Institute. “Rarely is there a single root cause to be acted upon; most problems have a web of interrelated causes and potential causes.”

According to Cochran, effective problem solving is equal parts art and science, and he explains why problem-solving efforts that start out strong with motivated team members and supportive managers often fizzle out before they produce any benefits. Cochran suggests using a structured problem-solving method that focuses on processes rather than people.

“There are two problem-solving myths: the perfection myth and the punishment myth. The perfection myth is the belief that if everyone tries hard enough, no mistakes will be made. The punishment myth says that if we punish wrong-doers, fewer mistakes will be made,” he explained. “Using a structured problem-solving method ensures a degree of consistency and provides the framework for the successful application of analytical tools.”

This book is written for managers with long-standing business problems, as well as front-line employees who are often intimately familiar with dealing with them. Cochran covers a variety of topics, including selecting the right problem; forming effective problem-solving teams; planning and implementing corrective actions; verifying effectiveness; writing a problem statement; identifying root causes; and defining the current process.

Cochran has an M.B.A. from the University of Tennessee and a bachelor’s degree in industrial management from the Georgia Institute of Technology. He is a Certified Quality Manager, Certified Quality Engineer and Certified Quality Auditor through the American Society for Quality. He is also certified as a Quality Management Systems Lead Auditor through the Registrar Accreditation Board of the Quality Society of Australasia (RABQSA).

Cochran is also the author of The Continual Improvement Process: from Strategy to the Bottom Line; Customer Satisfaction: Tools, Techniques, and Formulas for Success; Becoming a Customer Focused Organization; and ISO 9001: In Plain English, all available from Paton Press (www.patonpress.com). He has written numerous articles in national and international publications and is frequently featured as a speaker at conferences on quality, performance improvement and management.

For additional information about this book or Georgia Tech’s quality services, please contact Craig Cochran (678-699-1690); E-mail: (craig.cochran@innovate.gatech.edu).

About the Enterprise Innovation Institute:

Enterprise Innovation Institute

Georgia Institute of Technology

75 Fifth Street, N.W., Suite 314

Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986); E-mail: (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright

Georgia Tech Helps Pickens County Manufacturer Implement Quality System, Lean Principles

Smith Tool and Design – a small, 16-employee, high-tech manufacturing facility located in the foothills of the north Georgia mountains – normally wouldn’t have access to cutting-edge technology, innovation and research. However, through Georgia Tech, the company was able to tap into the resources of the Enterprise Innovation Institute (EI²), the largest and most comprehensive university-based program of business and economic development assistance in the United States.

Since 1979, the Jasper, Ga.-based Smith Tool and Design has been supplying its customers in industries as varied as medical, dental, cryogenics, automotive, electronics and aerospace with CNC machined parts, components and assemblies. Despite its success since starting in the basement of the founder’s home, there was room for improvement.

“We’re basically a manufacturing company. We don’t build any particular product and sell it; we have several customers that build products and we build the components for their products and distribute to them,” said Brian Smith, plant manager. “We wanted to streamline our system, and ‘lean’ was the big buzz word.”

David Apple and Andy Helm, both project managers with EI², conducted a lean manufacturing assessment and a business competitiveness review for Smith Tool and Design. While they both saw many positive aspects to the business, including well-maintained, capable equipment, clean and neat work areas and a near-perfect record in on-time delivery, they still suggested opportunities for improvement.

“We needed to improve inventory and production control,” recalled Jenny Caudill, director of sales. “We also needed to reduce the company’s dependence on our largest customer by increasing sales to other customers and gaining new customers.”

Following up on advice from Apple and Helm, Caudill took a two-day course at Georgia Tech, Understanding ISO 9001. ISO 9001 is an international quality management system that certifies the application of formalized business processes. The standard takes a systematic approach to managing the organization’s processes and ensuring a consistent product that meets customer expectations.

“We have several customers that we’d been doing work with for several years and we had been grandfathered in on their ISO policy, although they did strongly recommend it,” Smith explained. “Between that and the fact that ISO helps to streamline our business and potentially gets our foot in the door with new customers, we decided to go for the certification.”

Craig Cochran, a quality specialist with EI², first began working with Smith Tool and Design in October 2009. He conducted a gap audit to identify areas of improvement, and helped the team develop an implementation plan. He also trained the staff in quality issues and internal auditing, helped them meet project milestones and reviewed all company documentation.

“After the initial audit, we made all of the recommendations suggested to us by Craig,” Caudill recalled. “Our registrar came in December and we passed our certification with flying colors.”

As a result of the lean and quality implementations, Smith Tool and Design has seen a number of improvements, including the development of a new web site, a more diversified customer base and a better-trained workforce. Since then, Smith has seen significant enough business opportunities to justify purchasing more than $350,000 in new multi-tasking type equipment to allow for turning, milling, and Swiss capability improvements. The new equipment has vastly increased quality and efficiency and the flexibility to better help with customer’s needs.

“With help from Georgia Tech in initiating these programs, our sales have increased by approximately 15 percent in an economy where many businesses have had to fold up,” Smith said. “We have several new customers now, and the entire shop has a new energy level.”

Caudill also noted that she would recommend Georgia Tech’s quality services to any manufacturer seeking ISO certification.

“Before Craig came to help us with ISO, we had a consultant work with us for several days. It wasn’t a disaster, but it was overwhelming. When I met Craig, the light bulb went off,” Caudill said. “I would tell anyone wanting to implement ISO that their lives would be a lot easier if they started with Craig and Georgia Tech.”

About Enterprise Innovation Institute:

Research News & Publications Office

Enterprise Innovation Institute

Georgia Institute of Technology

75 Fifth Street, N.W., Suite 314

Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986); E-mail (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright

Recession Makes Innovation More Critical Than Ever for Competitiveness

The recession has expanded the business advantages of Georgia manufacturers that compete on the basis of innovation in new or technologically improved products, processes, organizational structures or marketing practices. These innovative companies are more than twice as profitable as firms competing on the basis of low price.

That’s one conclusion of the 2010 Georgia Manufacturing Survey, which also found that companies are preparing for post-recession growth, expanding export capabilities, addressing sustainability issues — and still dealing with out-sourcing and in-sourcing. The survey, which included nearly 500 manufacturers, was conducted by Georgia Tech’s Enterprise Innovation Institute, the Georgia Tech School of Public Policy, and Kennesaw State University, with support from the Georgia Department of Labor and accounting firm Habif, Arogeti & Wynne, LLP.

Georgia has approximately 10,000 manufacturers that provide nearly 350,000 jobs and account for 11 percent of the gross state product. Workers in manufacturing companies earn wages averaging nearly twice those of workers in retail companies.

The survey found a widening profitability gap between manufacturers that compete on the basis of innovation compared to those that use other competitive strategies. That gap has grown in each survey conducted since 2002.

“Companies that compete on the basis of innovation are much more profitable, pay higher wages and more likely to benefit from in-sourcing opportunities than firms that compete on low price,” said Jan Youtie, the survey’s director and a principal research associate in Georgia Tech’s Enterprise Innovation Institute. “Adoption of an innovation strategy can be useful to manufacturers regardless of industrial segment, and is especially important during difficult economic times.”

As part of the survey, companies were asked to rank six competitive strategies for their importance to winning sales. More than half of the respondents mentioned “high quality,” while approximately 20 percent chose “low price” or “adapting to customer needs.” Fewer than 10 percent reported “innovation/new technology” as a primary competitive strategy.

Across all six strategies, innovation was associated with the highest mean return on sales: 14 percent, compared to just six percent for the low-price strategy. And those financial benefits extended to workers, whose annual salaries averaged $10,000 per year more at innovative manufacturers than at other companies.

The top five innovative tactics reported by respondents were (1) working with customers to create or design a product, process or other innovation, (2) signing a confidentiality agreement to access a new product or process, (3) working with suppliers to create or design a product, process or other innovation, (4) purchasing new equipment, and (5) conducting research and development activities in-house.

While manufacturers of technology products are most often associated with the strategy, innovative companies can be found in all industrial segments, said Philip Shapira, co-director of the survey and professor in the Georgia Tech School of Public Policy.

“Many people think that innovation is something that has to be done in a lab, but our results show that innovation occurs more broadly, particularly as companies partner with customers and suppliers to take into account their needs for a new product or process,” he explained. “While high technology companies tend to be innovative by their nature, innovation occurs across all segments, and every firm has opportunities to be innovative.”

Companies often cite cost as a reason for not innovating, but Shapira noted that only 10 percent of companies take advantage of R&D tax credits; fewer still use investment tax credits. “While financial incentives can assist innovation, there is a greater need to build awareness and capabilities among more of the state’s firms to undertake innovation,” he said.

Though more than two-thirds of Georgia’s manufacturers have cut jobs or lost sales in the recession, many of these companies are now looking toward the future with plans for locating new customers, boosting capital investment, expanding research and development and continuing to reduce costs.

“When we look at their plans, Georgia manufacturers are in an expansive mood, looking for new customers and getting ready for the next phase of economic growth,” Youtie said.

The survey found that 70 percent of respondents were looking for new customers, 20 percent planned to expand capital investment, and 15 percent planned to increase expenditures on research and development. At the same time, 60 percent of respondents said they still planned to cut costs.

Another trend studied was growth in the number companies selling to international markets. More than half of the responding manufacturers said they were exporters — and those manufacturers reported 50 percent higher profitability than non-exporters. Some 22 percent of respondents had increased their export sales since the last survey in 2008.

“We don’t find much difference between exporting companies when comparing them by the amount they export,” Youtie noted. “What seems to be important is the capability to export. We think there is some learning that takes place, and some capability that a company develops to become an exporter. That capability translates into improved performance across the board, in addition to creating new markets and different margins.”

The survey also found that out-sourcing of work has leveled off, with approximately 16 percent of manufacturers affected by the loss of business in 2010. At the same time, the percentage of firms benefitting from in-sourcing — movement of work to Georgia — has grown to nearly 15 percent.

“Out-sourcing isn’t going away, but it has stabilized,” Youtie said. “In-sourcing appears to be growing, which creates opportunities for good manufacturers to benefit from consolidation of production from other U.S. facilities or even from overseas.”

The study also looked at sustainability issues, and found that 60 percent of companies recycle and attempt to reduce waste — one form of sustainability. However, just 11 percent of respondents had inventoried their carbon footprints or emissions, and fewer than five percent were using renewable energy.

The bottom line for manufacturers?

“The results of our survey can point manufacturers to a way forward for getting ready for the next phase,” said Youtie. “Companies can develop innovation capabilities; they can look into exporting and they can collaborate more with suppliers and customers.”

Research News & Publications Office
Enterprise Innovation Institute
Georgia Institute of Technology
75 Fifth Street, N.W., Suite 314
Atlanta, Georgia 30308 USA

Media Relations Contact: John Toon (404-894-6986) (jtoon@gatech.edu).

Writer: John Toon