Maryland Manufacturing Strategic Plan 1225712553575740 9

February 23, 2006
Maryland Manufacturing in the

Global Digital Economy
Maryland Advisory Commission on Manufacturing Competitiveness
January 2007
Copyright 2006 Archstone Consulting LLC
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February 23, 2006
Table of Contents
Executive Summary
Purpose and Overview: Manufacturing in Maryland
Advanced Technology Manufacturing
Cluster Overview and Benefits
Cluster Identification, Development, and Support
Recommendations and Next Steps
Appendix
Current Situation of Marylands Manufacturing
Competitive Advantages
Challenges
Cluster Background
Cluster Classification
Cluster Policies and Pitfalls
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February 23, 2006
Executive Summary
Maryland manufacturing contributes significantly to the development of the knowledge
economy in the global digital arena
Marylands manufacturing sector is being transformed throughout the state; and although it
appears to have experienced a steady decline
The traditional manufacturing workforce in 2003 was 5.9% compared to more than 9% in early
1990s
Gross State Product (GSP) related to traditional manufacturing was 7.2% in 2001 compared to
approximately 10% in early 1990s
And despite a drop in the job growth and GSP, the manufacturing sector has actually
Steadily increased the total output since 1992
Created significant earnings and jobs in other sectors
And provided a strong foundation for managing the global supply chain
In addition, traditional metrics and classification schema do not fully capture the full breadth of
manufacturing and related capabilities in the state and across the globe
Research and analysis into the multiplier effect across the manufacturing sector in Maryland
revealed that the following industries have traditionally provided the most economic value to
the state
Food and beverage manufacturing
Printing and related support activities
Transportation equipment manufacturing
Chemical Manufacturing
Furniture and related product manufacturing
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Executive Summary (Continued)
To foster manufacturing growth, Maryland should continue to support targeted traditional
manufacturing clusters:
Traditional: Food and Beverage Manufacturing, Printing, Aerospace and Defense, Modern
Agriculture, and Distribution and Warehousing
More importantly though, Maryland should emphasize a manufacturing transition that supports
the knowledge economy and the commercialization of Marylands core research competencies:
Strategic technology: Bio-technology, Information Technology, Nanotechnology, Miniaturization,
Transportation Systems, Energy, Aerospace & Defense, Advanced Agriculture, and Craft
Manufacturing
The focus should be on growing those manufacturing capabilities that leverage Marylands
unique position in the realm of disruptive research competencies and process innovation
Maryland should follow a rigorous approach to promote the creation, development, and
maintenance of clustersespecially those that leverage the global supply chain for Maryland
manufacturing
February 23, 2006
Purpose
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February 23, 2006
Purpose
The State of Maryland:

Has proximity to major markets
Unparalleled access to state and national governments
A base of natural, technological, and transportation resources
A strong history of innovative manufacturing

This suggests manufacturing should have a favorable future in
Maryland

by leveraging its disruptive research competencies and
manufacturing process innovation to enhance its ability to
manage the global supply chain

The purpose of this report is to provide a critical understanding of
where and how the state should focus its key resources
February 23, 2006
Overview:
Manufacturing in Maryland
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February 23, 2006
Manufacturing in Maryland has reached a critical inflection point
The strong role manufacturing has traditionally played in Marylands economy
has been declining since the early 1990s
Its contribution to the states Gross State Product (GSP) declined from 10% to
7.2% in 2001
Employment dropped from 9.3% of Marylands workers to 5.9% in 2003
Though this decline appears to paint a dire picture, it is largely due to faster growth in
other sectors, process automation, and increased productivity
Marylands manufacturing output and growth rate have actually been expanding.
Manufacturing as % of Total Employment
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1
9
9
0
1
9
9
1
1
9
9
2
1
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4
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0
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Time
%
MD
US

Manufacturing as % of GSP
0%
5%
10%
15%
20%
25%
1
9
7
7
1
9
7
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1
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Time
%

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MD

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February 23, 2006
Though Marylands manufacturers have seen steady growth,
not all types of manufacturers have grown at the same rate
Traditional manufacturing is well established and has served Maryland well in the past, but
has limited growth potential and does not capture new industries nor leverage many of
Marylands strengths
Advanced technology manufacturing involves more risk but offers more growth potential
as it supports and aligns with industry throughout the global knowledge-based economy
Traditional Growth Rate Advanced Technologies Growth Rate
Tobacco 1.21% Aerospace and Defense 8.47%
Chemical manufacturing 2.04% Transportation systems 8.94%
Printing and related support activities 2.92% Energy 11.57%
Transportation equipment manufacturing 7.58% Information Technology 12.59%
Food and Beverage 7.75% Bio-technology 19.46%
Furniture and related product manufacturing 11.32% Nanotechnology 25.00%
Miniaturization 34.00%
In addition to offering strong rates of growth, research shows advanced
technology manufacturing provides an additional benefit to the State
economy through strong multiplier effects
(Source: Stern School of Business, NYU, January 2005)
Manufacturing can be broken into the following groups:
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February 23, 2006
Advanced technologys higher growth rates and stronger multiplier
effects can significantly increase economic activity in Maryland
Traditional Benefits to MD* Jobs** Growth
Tobacco $1.92 2.0 Low
Food and Beverage $1.92 2.0 Medium
Printing $1.94 1.1 Low
Transportation Systems $2.01 2.13 Medium
Information Technology $2.06 1.42 High
Biotechnology $1.96 N/A High
The States existing base of traditional manufacturers is relatively established and
slow growing
* Benefits to MD: each $1 activity in the industry generates X amount of activity in other industries.
** Jobs: based on the direct-effect multiplier of employment, each job added in that industry adds an additional number of jobs in the area.
Advanced Tech. Benefits to MD* Jobs** Growth
Example Multiplier Effects
Supporting the development of higher-growth industries will allow Maryland to
increase its economic base without disturbing traditional manufacturing
businesses
Time
Emerging Industries
Traditional Industries
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A
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While Maryland has much to offer high-growth advanced
technology manufacturers, challenges remain to be addressed
Strengths
Proximity to the Federal Government provides
opportunities to enhance lobbying efforts

Access to 92 million consumer base within
500 mile radius provides opportunities to be
close to wide range of customers

Access to the port of Baltimore, one of the
busiest ports in the US offers assembly
opportunities at the dock before exporting

Intensity in R&D demonstrates commitment to
innovation and process improvement

Vibrant economy that has ample access to
venture capital and the value generated by IPOs

Highly educated workforce provides a skilled
workforce base

Manufacturing assistance programs focused
on enhancing manufacturing through tax
incentives, sharing of technology and resources
Challenges
Manufacturing image suffers an outdated
reputation and fails to communicate modern
aspects of the manufacturing environment

Significant drop in the manufacturing
workforce does not bode well with the
manufacturing businesses

Gap in education of the manufacturing
workforce results in lacking in basic skills and
higher training costs

Infrastructure issues such as traffic congestion
and high cost of housing makes it difficult to
attract employees

Taxes and Government regulations lead to a
high cost of doing business

Low export dollar per capita and lack of
significant FDI indicates a lack of openness to
globalization and makes economies less
competitive

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February 23, 2006
By addressing the evolution of traditional manufacturing into world class competencies
and emphasizing the emerging knowledge economy, Maryland can improve
manufacturings image
Messaging should be directed at customers, service providers, and the perception of the
general public
The approach will necessitate aligning and connecting customers to resources, as well as
sharing results throughout the manufacturing industry and with the public
Focus on Public Perception
Identify Key Audiences
Develop successful approaches for changing perceptions
Develop advocates for industrys public perception
Assess Impact
Communicate Results
Focus on Companies
Establish meaningful relationships with manufacturer
Connect Appropriate Solutions
Focus on Business Competitiveness and growth (Supply Chain)
Assess Impact
Communicate Results
Focus on Service Providers
Identify Key Service Providers
Coordinate Among Providers
Align Various Programs of value to the Industry
Make it a customer friendly system
Reduce costs through cooperation
Assess Impact
Communicate Results
To emphasize the role of the emerging knowledge economy and
traditional manufacturing, one must address the manufacturing image
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February 23, 2006
The Pappas Commission Report has identified near-term actions
Maryland should take to support the growth of advanced technology
The reports recommendations are intended to:
1. Make Maryland more competitive in attracting and growing
technology companies
2. Increase the commercialization of research and development
(R&D) being created by the many government laboratories
and universities within Marylands borders
3. More effectively market Maryland as a center of valuable R&D
and as a home to many leading technology companies
The following pages provide specific recommendations to enhance Marylands ability
to attract high-growth manufacturers
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February 23, 2006
To make Maryland more competitive in attracting and growing
technology companies
1. Increase state pension funds investment in private equity
2. Raise investment by Maryland banks in Small Business Investment
Companies
3. Restore and increase funding for investment financing programs
4. Encourage foundations in Maryland to invest in technology companies
5. Use State tax incentives to affirm that Maryland welcomes and encourages
advanced technology investments
a. Promote investment in advanced technology equipment and
construction materials
b. Align Marylands tax policy for capital gains on technology
investments to be similar to Federal tax policy
c. Increase research and development credits for businesses
d. Provide investment tax credits for early stage investors
6. Survey CEOs on regulatory processes
7. Invest in the Business/Technology Case Management Program
Maryland should:
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February 23, 2006
To increase the commercialization of R&D being created by the
laboratories and universities within Marylands borders
1. Establish a permanent State Chief Technology Officer
2. Increase utilization and effectiveness of Maryland Technology Councils
3. Encourage entrepreneurial initiatives and technology transfer
4. Support the States incubator network with capital and operating funds
for best practices
5. Allow State higher education institutions greater leeway under State
personnel and procurement rules for activities that are not directly
supported by State General Funds
6. Increase state funding for academic research
7. Encourage Maryland research consortia to compete for large federal
funding opportunities
8. Create alternative financing vehicles to create more laboratory space at
Marylands Universities
9. Promote increased coordination at University and college technology
transfer offices
Maryland should:
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February 23, 2006
To more effectively market Maryland as a center of valuable R&D,
and as a home to many leading technology companies
1. Increase state pension funds investment in private equity
2. Leverage the Office of the Governor to encourage and sustain
Marylands advanced technology enterprises
3. Develop a comprehensive marketing strategy to brand Maryland as a
leading home for technology business and innovation
4. Create a central database of Maryland academic and federal laboratory
technology resources
5. Pursue targeted international investment in Maryland
6. Create an Executive Job Corps
7. Create a Governors Science Advisory Board
To effectively capitalize on its manufacturing strengths and overcome existing
weaknesses, Maryland must focus its limited resources on strategically supporting
key manufacturers.
The following section provides a model for identifying these opportunities and
optimizing use of the States resources.
Maryland should:
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February 23, 2006
To this end, Maryland should marshal its manufacturing resources from
around the state and across the globe to reinforce this transformation
The approach outlined herein is intended to:
1. Make Maryland more competitive in attracting and growing
manufacturing companies that emphasize disruptive
innovation and research
2. Increase the emphasis that Maryland places on
manufacturers who provide creative advances in processes
3. Encourage manufacturers who aggressively engage
customers beyond the current customer set, particularly in
terms of leveraging the global supply chain
The following pages provide specific recommendations to enhance Marylands
ability to attract high-growth manufacturers in the new IT Innovation and
Transformation
February 23, 2006
Cluster Overview and Benefits
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February 23, 2006
Promoting industry clusters is an effective means for a state to
foster economic growth
Core companies form the basis for the cluster
and the impetus for the value from the cluster
Supporting companies and institutions (e.g.,
universities) provide crucial support to the core
and may include customers, suppliers and
partners to the core companies
Related businesses provide a more indirect
support to the core by enabling supportive
companies or providing services to the core
companies
Impacted businesses are affected by the
cluster but do not directly relate to the
activities of the cluster, such as restaurants or
real estate support
A Cluster and its Levels of Interdependency
Clusters are geographically related networks of businesses that promote efficiency
with varying degrees of interdependency
Core
Supporting
Related
Impacted
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Clusters provide economic advantages to business, which in
turn drive benefits to the state
Higher Employment
Retention of existing companies and jobs
through high switching costs
Creation of new jobs in growing industries
Creation of new jobs through spillover and
multiplier effects
Higher Incomes
Increased demand for labor
Higher average skill level
Increased Tax Revenue
Higher personal incomes
Higher corporate incomes
Increased economic activity (sales tax,
gasoline tax, telecom tax, per capita tax,
property tax, etc.)

State Benefits Business Benefits
More Efficient Access to Inputs:
Raw materials
Industry-specific suppliers
Skilled labor
More Efficient Processing:
Fast diffusion of knowledge, innovations,
benchmarking, etc.
Economies of scope and scale
Industry-specific services (e.g., legal,
finance)
More Efficient Access to End Markets:
Existing customers
New customers

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Success Factors Value to Clusters Example
Skilled Labor Force
Most important determinant for a clusters success
Knowledge of the industry supplemented by formal
education drives the cluster and attracts new
members
Specialized skills were vital to the
development of the semiconductor in the
Silicon Valley
R&D Capability
Availability and accessibility of research centers
and expert individual researchers to provide
cutting-edge research and solve pressing problems
Specialized optics and imaging institutes
and active professional associations
provided channels for developing an optics
and imaging cluster in Rochester, NY
Proximity of
Suppliers
Proximity of suppliers assist in reduced inventory
carrying costs, innovation, and delivery time
Quick dissemination of information between cluster
members and knowledge sharing reduces product
development and R&D costs
Hosiery cluster in North Carolina also
encompasses yarn, needle, dyestuff and
packaging materials suppliers
Proximity assists the cluster in organizing
events for exchange of knowledge
Access to
Specialized
Services
Specialized services provide functions tailored to
industry and are integral to clusters success
The Industrial Technology Institute in Ann
Arbor, MI was established to support the
modernization of the auto industry
Entrepreneurial
Energy
Small firms rely on research institutions,
associations or other special services in order to
remain competitive
Entrepreneurs highlight benefits of the cluster and
will attract new members
Entrepreneurial energy was one of the key
reasons for the success and expansion of
the Silicon Valley
Shared Vision and
Leadership
Increases competitiveness and profitability of its
member firms
North Carolina, hosiery industry
strengthened the buying power against
major customers such as Wal-Mart by
negotiating collectively
Having a skilled labor force is one of the key factors for the
success of clusters
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Cluster Identification,
Development and Support
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Clusters can be classified in six main groupings
Competitive Clusters with scale, such as Hollywood, Silicon Valley, or Detroit
Strategic Clusters with high growth rates, such as biotech
Emerging Clusters which are small but vital to regions interests
Potential
Clusters with some core competency that might be developed, such
as environmental technology
Mature Clusters with low or no employment growth
Stabilizing
Clusters which add diversity to economy, such as tourism or
business services
While there is no set criteria by which to classify clusters, there is value in
assessing them to determine which have the potential to add the most value to
the state economy
Using the taxonomy discussed above, emerging clusters should receive first
attention followed by strategic and potential, as these are most likely to
promote manufacturing growth
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Maryland should focus on developing strategic clusters which
are well-positioned for strong growth
Manufacturing can be broken-down in into two main groups:
Traditional Including mature, competitive and stabilizing clusters
Advanced Technology Including emerging, strategic and potential clusters
Traditional Manufacturing
Food and beverage
Tobacco
Advanced Technology Manufacturing
Bio-technology
Information Technology
Nanotechnology
Miniaturization
Transportation systems
Energy
Aerospace and Defense
Advance Agriculture
Craft Manufacturing
If Maryland can establish itself as a leader in advanced technology
manufacturing, it will be well-positioned for future prosperity
Traditional manufacturing is well established and
has served Maryland well in the past, but needs
to find way to grow and remain profitable
Advanced technology manufacturing has risk but
much more growth potential because it supports
new technology and industry throughout the global
knowledge-based economy
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February 23, 2006
source of labor
close to wide range of customer
Maryland has multiple characteristics that make it attractive to
strategic technology manufacturing
Industries such as Bio-technology,
Information Technology and
Aerospace & Defense require a
highly educated workface
A strength in R&D is also critical in
emerging industries such as
Nanotechnology and
Miniaturization
Venture capital is critical to
developing new technologies,
products and industries
Maryland Strengths
These strengths will also help support the transition of Marylands existing
manufacturing base to benefit from the global knowledge-based economy
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February 23, 2006
Maryland should not solely focus on advanced technology to the
detriment of the traditional manufacturing base
Both traditional and advanced manufacturing clusters can be
cataloged and characterized
One valuable analysis tool assesses traditional and advanced
manufacturing based on importance to Maryland and potential
industry growth
High
Low
Low
High
V
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Growth Potential
Advanced Traditional
Clusters beyond the
Investment Threshold
are prioritized for support
and development
Clusters near or below the
Investment Threshold
can be developed to
transition to higher value
High
Value
Medium
Low Value
Medium
Investment
Threshold
Value Threshold Chart
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February 23, 2006
With proper support, traditional clusters can transition to
advanced technology clusters or high value clusters
Company
Strategy
Operational Advantage
Program
4
Program
Management
2
Operational
Objectives
1
Strategic
Objectives
3
Improvement
Initiatives
Company
Strategy
Operational Advantage
Program
4
Program
Management
2
Operational
Objectives
1
Strategic
Objectives
3
Improvement
Initiatives
-Driven by company
strategy and goals
-Structured root cause
analysis turns
problems into projects
-Knowledge is captured
into the program
-Complete set of
training materials
-Comprehensive
project definition and
planning process
-Chooses tools based
on the problem to be
solved
-Embedded project
management
requirements
-Results sustained
through ongoing
iterative program
-Project status
monitoring and
reporting
-Incentive
compensation
program
-Job descriptions
-Metrics and goal
setting
The Operational Advantage
TM
framework can be used to identify and execute
operational process improvement initiatives based on their alignment with
corporate objectives
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February 23, 2006
TM
Program features a
comprehensive, easy to use toolkit
Confidential 1
Guide for Choosing Improvement Initiatives
Improve
Customer
Service
Shareholder Value
Performance Expectations Strategic Objectives
Improve
Product
Quality
Develop
New
Products
& Tech.
Reduce
Cost
Enter New
Markets
Profitability Growth
Strategic
Objective
Participants identify
the company strategy
1
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Reduce Cost
Operational Objective
Improve Sales,
General &
Administrative
Processes
Improve
Engineering
Processes
Improve
Scheduling
& Production
Control
Processes
Improve
Sourcing
Processes
Improve
Production
Processes
Improve
Dispatch &
Transportation
Processes
Improve
Field
Service
Processes
Reduce
Cost
Through
High
Quality
Improve
Inventory
Management
Processes
Improve
Maintenance
Processes
Improve
Accounts
Receivable
Processes
Improve
Asset
Management
Processes
Improve
Safety
Processes
Back
Reduce
Cost
Operational
Advantage
TM

processes guide the
selection of the
highest priority
Operational Objectives
and Improvement
Initiatives
2
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Process Cost Process Time Process Quality
Improve Engineering Processes
Improvement Initiatives
Improve
Engineering
Processes
Improve
Accuracy of
Engineering
& Drawings
Reduce
Cost of
Engineering
Processes
Reduce
Engineering
Cycle Time
Improve
Producibility
of Designs
Back
Comprehensive diagnostics
drive to the identification of
the root causes of
performance issues
3
All necessary analytical
tools link directly from the
diagnostics
4
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1
Process Design Tool
Allows the company to ensure that a project is on task,
will be completed on time, and solve problems as they
arise
Benefits
A team of people who have an understanding of all
aspects of the business that will be effected
People, who have experience with Continuous
Improvement and many of the tools and concepts
Cross-functional team members, to provide a variety
of perspectives
Also known as, DMADV, it is an advanced process for continuous improvement.
5 step data driven process for designing processes
Eliminates unnecessary steps
Often focuses on new measurements
Utilizes many of the current tools
DMADV is an acronym for the phases:
1. Define (the business objective)
2. Measure (develop measurement criteria)
3. Analyze (the process design options)
4. Design (develop new process)
5. Verify (test new process)
In this document, each of these phases will be addressed on separate tabs.
Note: You may have to revisit a phase if you do not have enough information. An example of this
would be while in the Analyze phase you are reviewing the data and you find that you do not
have enough to isolate the root cause. In this case you would need to go back to the Measure
phase to gather more data.
This tool differs from Process Improvement in that this tool is about designing, not making
incremental improvements to an existing process
People to Involve Description
A process is not in existence at your company and one needs to be developed, or
The existing process has been optimized but still doesn't meet customer specification levels
Applicable
Situations
Process Design Tool
Opportunity
Implementation & Benefit
Tracking
Process Step
Process which is not meeting
customer expectations
Challenge
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Define Phase
Deliverables
Project Charter
Project Plan
Organizational Change Plan
Risk Management Plan
Review presentation and Storyboard presentation
Steps
1. Develop the charter
2. Develop the project plans
3. Develop the organizational change plan
4. Identify the risks
5. Hold a review
Main Activities
Validate/Identify Business Opportunity
Validate/Develop Team Charter
Develop Team Guideline & Ground Rules
Questions
What are the strategic drivers for the project?
What is the problem or opportunity we are trying to address?
Why is process improvement (DMAIC) not adequate?
What is the scope of the project?
What is the project timeline and completion date?
What team resources are needed?
What are the major risks associated with the project? When and
how will we address those risks?
How can we make sure the organization embraces and supports
the changes resulting from the design?
Tools
Project Charter tool Pareto Chart tool
Barrier Analysis tool Project Plan tool
WBS tool Statistical Process Control tool
Customer Focus tool
Tips
At the top level, the goals will be the organization's strategic
objectives, such as higher return on investment or market share
At the operations level, the goal might be to increase the
throughput of the engineering department
At the project level, goal might be to redesign the project
management process
Definition: Define the goals of the design activity. What is being designed? Why? Note: make sure that the
goals are consistent with customer requirements and business strategy
Objective: To identify and/or validate the process design opportunity, develop the business process, define
critical customer requirements, and prepare to be an effective project team.
Processes, diagnostics and tools are simple to understand and use and contain
numerous examples so employees with little familiarity can successfully participate
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February 23, 2006
TM
Program has defined five major strategy-
level improvement objectives focused on profitability and growth
Improve Quality
Develop New
Products &
Services
Improve
Customer
Service
Reduce Costs
Enter New
Markets
Strategic Objectives are tied to critical
business metrics, providing the initial
links in the accountability chain
Grow Revenue
Increase
Gross Margin
Reduce
Working
Capital
Increase
Operating
Earnings
Improve
Return on
Assets
Profitability
Growth
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Each Strategic Objective is further decomposed into Operational
Objectives that focus on a companys specific transitional needs
Profitability Growth
O
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e
r
a
t
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n
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l

O
b
j
e
c
t
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S
t
r
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e
g
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c

O
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Reduce Cost/
Low-Cost
Provider
Improve Prod.
Quality/
High Quality
Provider
Improve Cust.
Service/
High Service
Provider
Improve
SG&A
Improve
Engineering
Processes
Improve
Inventory
Management
Processes
Improve
Sourcing
Processes
Improve
Production
Processes
Improve
Scheduling
& Production
Control
Processes
Improve
Maintenance
Processes
Improve
Accounts
Receivable
Improve
Asset
Management
Processes
Improve
Safety
Improve
Quality of
Engineering
Improve
Quality of
Production
Improve
Quality
Processes
Improve
On-Time
Delivery
Improve
Customer
Service
Processes
Develop New
Products &
Technology
Enter New
Markets
Improve
Mfg.
Flexibility
Improve
Product/
Technology
Development
& Launch
Improve
Sales
Pipeline
Processes
Improve
Marketing
Capabilities
Improve
Field Service
Processes
Reduce Cost
through
High Quality
Improve
Dispatch &
Transport.
Processes
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February 23, 2006
Identifying and developing clusters requires a similar
systematic and disciplined approach
Identify major
companies in the
area
Conduct survey
with select
companies
Identify trends
across major
industries
Develop selection
criteria
- Promising
Technology
- Economic Benefit
- Competitive
Advantage
Identify impact on
strategic technology
manufacturing sector
Develop cluster
strategy for each
of the clusters
Prioritize clusters
Identify gaps in
the clusters
Allocate
resources, funds
and efforts based
on prioritization
Develop minimum
requirements to
qualify for state
sponsorship
Conduct quantitative
and qualitative
evaluation
Develop a committee
of government and
private sector
Take measures
to formalize
cluster
communications
Organize
committee for
each cluster
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Carefully plan
and manage
processes
designed to
diversify a
culture
Develop detailed
execution plan
Attributes of the
execution plan
- Project management
team
- Project timelines
- Communication plans
- Legal documents
Develop Communication
Plan
- Improve
manufacturing image
- Facilitate
manufacturing
education initiative
- Facilitate risk taking
for entrepreneurs
Confidential
32
February 23, 2006
Maryland has ample data available to identify traditional and
emerging advanced technology manufacturing clusters
Marylands manufacturing sector has experienced steady decline
Workforce in 2003 was 5.9% compared to more than 9% in early 1990s
Gross State Product (GSP) was 7.2% in 2001 compared to approximately 10% in early
1990s
Despite a drop in the job growth and GSP, the manufacturing sector has
Research and analysis into the multiplier effect across the manufacturing sector in
Maryland revealed that the following industries provided the most economic value to the
state*
Food, beverage and tobacco manufacturing
However, advanced technology manufacturing offers significant opportunity for
Maryland to invest in the future

* The multiplier effect accounts for the total impact of the manufacturing sector on Marylands output, employment and earnings, indicating that it is larger than the
direct manufacturing measures indicates
Profile Manufacturing Industry
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
33
February 23, 2006
Promising technology and economic benefits are key criteria
for developing clusters
Qualitative Criteria
Promising Technology

Environmentally Friendly

Legal Requirements

Resources Requirements

Location and Area Requirements

Quantitative Criteria
Economic Value to the State

Size of the industry

Growth Potential

Funding Requirements

Tax incentives

Impact on Other Industries

Tax Revenues
Institutionalizing an unbiased evaluation process for
developing clusters depends on both qualitative and
quantitative criteria
Classify Mfg Industry into Clusters
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
34
February 23, 2006
Cluster classification assists in focusing resource and fund
allocations
Clusters can be classified into one of the six categories:
Competitive Those that have scale, such as Hollywood, Silicon Valley
or Detroit
Strategic Small but vital to regions interest
Emerging Those with high growth rates, such as bio-tech
Potential Those with core competencies that might be developed, such as environmental tech.
Mature Those with low or no employment growth
Stabilizing Those that add diversity to economy, such as tourism or business services
The table below classifies major Marylands industries into clusters based on jobs and
GSP growth information
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Industry Cluster Type Companies Within the Cluster
Leather and Leather Products Strategic Cluster Fila, Clemco
Textile Mill Products Strategic Cluster Krenik Manufacturing Company, Offray, Gore, MD Screen Printers, Inc.
Lumber and Wood Products Strategic Cluster
Large variety of companies that use wood as an intermediate product during the manufacturing process
and others that produce finished wood products. i.e. American Woodmark
Fabricated Metal Products Emerging Cluster
Fabricators Steel and Manufacturing Corp., Industrial Knife Company, Stromberg Sheet Metal, Swales and
Associates, Master-Halco, DynCorp, MaTech, Thermoform, East Alcoa
Chemicals and Allied Products Competitive Cluster
Millenium Inorganic Chemicals, WL Gore, FMC Corp., Alpharma, Proctor and Gamble Cosmetics, WR
Grace, Qiagen, Unilever, Medimmune
Food and Beverage Products Competitive Cluster
Giant Food, Nafco, Dreyers, Marktek Biosciences Corporation, Faidleys Seafood, Clipper City Brewing
Company, Solo Cup, McCormick, BD Biosciences, Phillips Seafood, Breyers, Perdue Chicken
Industrial Machinery and Equipment Mature Cluster Micros Corp., BP Solar, Mack Trucks, Black and Decker, GM Powertrain, National Jet
Printing and Publishing Mature Cluster Harland Company, Custom Direct LLC, Moore Wallace BCS, Cadmus
Confidential
35
February 23, 2006
Traditional manufacturing industries add value to other sectors in
areas such as product development, environment and transportation
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Food and
Beverage
Manufacturing
Printing
Aerospace and
Defense
Modern
Agriculture
Distribution and
Warehouse
Bio-Technology
Environmental Friendly,
Product Development
Product Development
Information Technology
Print Management
Software
Miniaturization, Product
Development
Nanotechnology
Genetic Modifications
Printing Material
Development
Development, R&D
Genetic Modifications
Miniaturization
RFID, Product
Development
Development
Bio-intensive Growth
RFID, Product
Development
Transportation System
Transportation Solution
Development
Development
Intelligent Transportation
System Solutions
Development, Product
Development
Development
Energy (hydrogen, fuel
cell, alternative energy)
Environmental Friendly Environmental Friendly Environmental Friendly
Aerospace and Defense
Next generation sensors
for process control,
Defense, Security
Advanced Agriculture
Genetic Modifications,
Environmental Friendly
Product Development,
Genetic Modifications,
Environmental Friendly
Craft Manufacturing
Industries
Environmental Friendly Transportation
Traditional Manufacturing Industries
E
m
e
r
g
i
n
g

M
a
n
u
f
a
c
t
u
r
i
n
g

I
n
d
u
s
t
r
i
e
s

Confidential
36
February 23, 2006
Security Defense Miniaturization
Environmental
Friendly
Next
Generation
Sensors for
Process
Control
Protecting
Intellectual
Property
Transportation
Product
Development
(Commercializing
Technology)
Traditional
Manufacturing
Industries
Food and Beverage
Manufacturing
X X X
Printing X X X
Aerospace X X X X X X X
Modern Agriculture X X X X
Distribution and
Warehouse
X X
Strategic
technology
Manufacturing
Industries
Bio-Technology X X X X X
IT X X X X
Nanotechnology X X X X
Miniaturization
(actuators with
computing technology),
RFID
X X X X
Transportation X X X X
Energy (hydrogen, fuel
cell, alternative energy)
X X
Aerospace X X X X X
Advanced Agriculture X X X X
Craft Manufacturing X X X
Cross cluster themes that support multiple industries will also enhance
Marylands strategic ability to focus critical manufacturing resources
Cross Cluster
Themes
Industries
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
37
February 23, 2006
Maryland should develop a strategy specific to each of the
target clusters
3
Allocate Resources
1
Prioritize Clusters
2
Identify Gaps
Qualitative Criteria
Quantitative Criteria
Tier 1
Tier 2
Tier 3
Prioritization
Core
Supporting
Related
Impacted
Core
Supporting
Related
Impacted
Required
businesses/
institutions
Marketing R&D
Education Incentives
Develop Cluster Specific Strategy
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
38
February 23, 2006
The state should then determine the policies that will best
foster the targeted clusters
Increase Cluster
Networking and
Learning
Reestablish or recognize cluster associations and alliances
Facilitate external connections
Encourage inter-cluster communications
Efficiently Organize
And Deliver
Services
Aggregate and publish information by cluster
Form cross-agency quick response teams
State Policy Levers
*,**
Make Targeted
Investments
Invest in cluster R&D
Establish cluster-specific technology centers or parks
Support cluster-based entrepreneurial activity
Improve Workforce
Develop a more skilled and specialized labor force
Establish cluster skills centers
Qualify people for employment
* From A Governors Guide to Cluster-Based Economic Development
** These recommendations should be planned and executed conjunction with the recommendations of the Pappas Commission
Develop Policy and Communications
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
39
February 23, 2006
...formalize cluster communication targeted and tailored for
specific constituencies
education business
Education initiatives
University outreach
Trade shows
Business journals
Newsletters
Trade associations
Mass media
advertising
Community out-reach
Develop Policy and Communications
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
40
February 23, 2006
recruit companies by approaching a broad set and then
progressively narrowing the field until the best remain
O O O O O O
Negotiation

Opportunity
Development
Initial
Communication

Opportunity
Assessment

Follow-up
Communication

Proposal
Presentation

Potential
Companies
Potential
Companies
Cluster
Company
Recruit Companies to Fill Gaps
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
41
February 23, 2006
develop a rigorous implementation plan to execute the
strategy
Activities
Project Milestones
Week
1 2 3 4 5 6 7 8 9 10 11
Initiative Kick-Off
Tier 1 Plan
Define project management team
Finalize approach
Craft communication plans
Integrate cluster companies
Draft legal documents
Tier 1 Plan
Finalize approach
Tier 1 Plan
Finalize approach
Develop Execution and Communication Plan
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
42
February 23, 2006
and implement a comprehensive communication strategy that
builds on success to create more and better clusters
O O O O O
Publicize
Wins
Share
Learnings
Improve
Image
Attract More
Companies
Document
Successes
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Profile
Manufacturing
Industry
Classify
Manufacturing
Industry into
Clusters
Develop a
Cluster
Specific
Strategy
Establish
Policy for State
Sponsorship
Formalize
Cluster
Communication
Recruit
Companies to
Fill Gaps in
Cluster
Develop an
Execution
Plan
Develop
Communication
Plan
O O O O O
O
O
O
Confidential
43
February 23, 2006
Recommendations
Maryland should pursue multiple activities to promote manufacturing:
1. Follow a rigorous approach to identify, create, promote, develop, and
maintain new and existing manufacturing clusters
2. Develop and promote a pro-manufacturing image for Maryland
3. More effectively market Maryland as a center of valuable R&D, and as
a home to many leading technology companies
4. Purse policy measures to attract technology companies to Maryland
5. Support the operational improvement of existing tradition
manufacturing capabilities within the state
If Maryland follows the above recommendations it will be well positioned to thrive
well into the future
Confidential
44
February 23, 2006
1. Establish a permanent State Chief Manufacturing Officer
2. Increase utilization and effectiveness of Maryland Manufacturing and Business
development Councils
3. Encourage entrepreneurial initiatives and technology transfer, especially for those
Maryland companies who can leverage manufacturing and the global supply chain
4. Support the States targeted manufacturing clusters with capital and operating
funds for best practices and operational excellence
5. Allow State higher education institutions greater leeway under State personnel and
procurement rules for activities that are not directly supported by State General
Funds
6. Increase state funding for academic research related to the broader view of the
Extended Enterprise represented by manufacturing
7. Encourage Maryland research consortia to compete for large federal funding
opportunities supporting the emphasis on Advanced Technology Manufacturing
8. Create alternative financing vehicles to create more laboratory space for applied
research and commercialization opportunities at Marylands Universities
9. Promote increased coordination at University and college technology transfer,
applied research, and advanced manufacturing offices
To increase the manufacturing commercialization of R&D being created by the laboratories and
universities within its borders, Maryland should:
Recommendations
Confidential
45
February 23, 2006
Next Steps
Apply lessons learned from Maryland biotechnology and education (Career Clusters) efforts to other
traditional and strategic technology clusters
Build a commission-based role to coordinate cluster activities across the states multiple constituencies
(including business, academia, government, and advisory services)
Further develop cluster concentrations to determine ways to marshal resources and develop
implementation plans for proposed manufacturing clusters
Pursue ways to consolidate/coordinate multiple constituencies interested in supporting manufacturing
across the state
Use academias unique position to optimize competing government (federal and state) and business
interests and gain consensus
Identify the most effective levers to pull in support of manufacturing clusters
Institutionalize the Maryland Manufacturing Strategy Process to build on the momentum generated by
coordinating activities across business, government, academia, and industry advisors
Assess Progress
Continually Revaluate Initiatives and Clusters
Continue to emphasize those efforts to support the relationship between disruptive research,
innovation, and manufacturing competencies that lead to new products, processes, customers and
markets.
February 23, 2006
Appendix
February 23, 2006
Current Situation
Confidential
48
February 23, 2006
The manufacturing sector has steadily increased output as well
as assisted other sectors in increasing earnings and job growth
Marylands manufacturing sector has experienced steady decline in the last decade
Workforce in 2003 was 5.9% compared to more than 9% in early 1990s
Gross State Product (GSP) was 7.2% in 2001 compared to approximately 10% in early 1990s
Despite a drop in the job growth and GSP, the manufacturing sector has
Research and analysis into the multiplier effect across the manufacturing sector in Maryland
revealed that the following industries provided the most economic value to the state
Food and beverage manufacturing

Confidential
49
February 23, 2006

Category Metric
US
Rank
Maryland Current Situation
Current
Manufacturing
Sector
Total Mfg Employment
Mfg Output/GSP
43

46
148K jobs in the manufacturing sector
represents only 5.9% of Marylands
workforce
Manufacturing sector is suffering from a poor
image among the students
Quality of the
Work Force
Workforce Education
Manufacturing Education
1
32
Despite the highest ranking in overall
education, Marylands manufacturing
workforce lacks basic skills
16.5% workforce represented by unions
Taxes,
Government and
Policy
Budget Deficit/Stability

Taxes
AAA
Bond

43
Despite having AAA Bond rating and a low
budget deficit, environmental and
government regulations coupled with high
taxes were hurting the businesses
Proximity to the Federal Government is a big
plus
Infrastructure
Rental Cost for two bedroom
apartment
Travel Time to Work

Household with internet access
39

49

6
Second longest commute time and
comparatively high cost of living dont favor
well with the businesses
Maryland has access to 92 million
consumers within 500 mile radius and one of
the busiest ports in the US
58% of households have access to the
internet
Proximity to the federal government, access to 92 million consumers,
a vibrant economy and fiscal stability entices businesses
Confidential
50
February 23, 2006

Category Metric
US
Rank
Maryland Current Situation
Economic Dynamism
Venture Capital
Initial Public Offering (IPO)
5
7
Maryland has a vibrant economy and is
ranked high in both venture capital dollars
and number of IPO
Technology
R&D Intensity 4 4.6% of GSP spent on R&D compared to
national average of 2.66%
Quality of Life
Most Livable State 14 Maryland ranks fairly high as a state to live
in, despite high number of crimes and
second worst homicide rate
Openness
Exports Per Capita
Foreign Direct Investment
(FDI)
44
26
Marylands $926 export-dollar per capita is
well below the US average of $1900 per
capita
despite a decline in manufacturing jobs, low export-dollar per
capita, and high representation of labor union
Confidential
51
February 23, 2006
Leveraging manufacturing strengths and working on overcoming
major challenges will be the key to attracting companies
Strengths

close to wide range of customer




workforce base

Challenges
Manufacturing image suffers an outdated
reputation and fails to communicate modern
aspects of the manufacturing environment

Significant drop in the manufacturing
workforce does not bode well with the
manufacturing businesses

Gap in education of the manufacturing
workforce results in lacking in basic skills and
higher training costs

Infrastructure issues such as traffic congestion
and high cost of housing makes it difficult to
attract employees

Taxes and Government regulations lead to a
high cost of doing business

Low export dollar per capita and lack of
significant FDI indicates a lack of openness to
globalization and makes economies
less competitive

Confidential
52
February 23, 2006
Category Metric MD % of Total RANK
US Avg or
Total
% of Total
Total Mfg Employment (in 000s) 148 5.9% 43 14,525 11.18%
# of Mfg Companies 4,519 1.2% 13 386,863 N/A
Mfg Output/GSP 7.2% N/A 46 14% N/A
Unemployment Rate 4.0% N/A 10 5.6% N/A
Avg Annual Mfg Wage $48,568 N/A 5 $44,097 N/A
% of Labor Force Represented by Unions 16.5% N/A 38 14.3% N/A
Work Force Education 60.9 N/A 1 49.2 N/A
Education Level of Manufacturing Force 0.95 N/A 32 1 N/A
Information Technology Jobs 2.40% 5 1.70%
Managerial, Professional and Tech Jobs 33.30% 2 29.10%
State Corporate Taxes 7.0% N/A 25 6.72%
Budget Deficit as % of GSP 1.9% N/A 21 2.10%
Average benefit per First Payment, for Unemployed $2,879 N/A 30 $2,830 N/A
State Bond Rating AAA N/A N/A
Electricity cost, Avg. revenue/KWH $0.039 N/A 9 $0.053 N/A
Households with Computers % 64.1% N/A 8 N/A
Households with Internet Access % 57.8% N/A 6 N/A
Travel Time to Work 30 min. N/A 49 22 min. N/A
Rental Cost 2 Bedroom Apartment (Land Cost) $865 N/A 39 $720 N/A
Venture Capital Per Capita 1,226 $ N/A 5 N/A
Employer Firm Births p/ 100,000 Inhabitants 377 N/A 10 N/A
Employer Firm Terminations p/100,000 Inhabitants 383.4 N/A 16 N/A
Initial Public Offerings 6.5% N/A 7 5.0% N/A
R&D Intensity 4.6% 4 2.7%
Numbet of Patents 467 1.7% 19 27,017
Science and Engineering per 100,000 Inhabitants 237.7 2.3% 14 206
Scientists and Engineers as % of Labor Force 12.6% N/A 6 8.6 N/A
Online Manufacturers 81.7% N/A 39 84.5% N/A
Reported Crime per 100,000 habitants 4,747 2.4% 40 3,900
% Change in Crime Index -3.4% N/A 23 -330.0% N/A
Murders per 100,000 Habitants 9.4 4.1% 49 4.6 N/A
% of People w/o Health Insurance 12.0% N/A 23 14.7% N/A
Most Livable State 28.7% N/A 14 N/A N/A
Exports per Capita 926 0.97% 44 1,900
FDI 4.1% 26 4.7%
Economic Dynamism
Technology
Quality of life
Openness
Work Force
Current Manufacturing Sector
Taxes, Government and Policy
Infrastructure
State of Maryland Ranked in Selected Metrics
Confidential
53
February 23, 2006
Maryland Manufacturing
Manufacturing remains an important part of Marylands economy, accounting
for 7.2% of the gross state product
The total output of the manufacturing sector grew steadily from 1992 to 2001
The multiplier effect magnifies the importance of manufacturing across the
state
Declining
Manufacturing
Base
Government Industry
Academia
Industry
Advisers
Maryland
Manufacturing
Strategy
Manufacturing
Strategy
Development
Confidential
54
February 23, 2006
Gain Consensus
Academia is uniquely positioned to optimize competing government
(federal and state) and business interests and gain consensus.

Business
Interests
Government
Interests
Low taxes
Skilled employees
Low regulation
etc.
Tax revenue
Full employment
Environment
etc.
Confidential
55
February 23, 2006
A few of the states have successfully implemented cluster policy include
Arizona The Greater Tucson Economic Council has adopted cluster policies as framework for the
overall direction of the economic development activities and allocation of limited resources
Connecticut The state has embarked on a cluster-based strategy built around the idea that
nurturing the states key industries improves the competitiveness of businesses within these industries
Minnesota The University of Minnesota, in association with state and local policy programs, are
examining rural knowledge clusters as a model for innovative, dynamic rural economies
Maryland has successfully implemented cluster policy for secondary and post-
secondary education
Additional examples of cluster policies implemented by other states are listed below

State Organization Description of Activities
Kentucky Center for Urban and Regional Studies at UNC,
Chapel Hill
Used a sophisticated benchmarking technique to identify
clusters in Kentucky.
Maine Maine Science and Technology Foundation Commissioned a report to promote economic development
through the application of science and technology. The report
outlined eight clusters that exist in the New England area.
New York Empire State Development Identified 12 industry clusters in the state to help guide
development strategies.
North Dakota Greater North Dakota Association The association's New Economy Initiative uses a cluster
approach to build relationships between businesses in each
cluster area.
Oregon Oregon Department of Community and Economic
Development
Developed cluster groups with firms and associations in key
productive industries between 1990 and 1996.
Wisconsin Wisconsin Department of Commerce The Department of Commerce has made the cluster approach a
focus of its economic development strategy.
Arizona, Connecticut and Minnesota have successfully
implemented cluster-based policies
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February 23, 2006
One of the key goals of cluster-based policies is to direct funds to
the most productive industry channels
Cluster-based economic development policies contain important spillover
effects that extend their influence beyond the specific business that are targeted
for support

Cluster-based policies reinforce two linkages that help to perpetuate a skilled
and educated workforce
Providing residents with more jobs in growing industries
Forging a healthy collaboration between industry and educational institutions

Cluster policies improve the scope of community involvement in the corporate
sector
Coordination efforts between communities and cluster leaders can lead to development of child
care services, transportation improvements, and home ownership programs
Industry clusters make it easier and more effective for town planning commissions to target
potential businesses seeking to locate in the area
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February 23, 2006
Public policy makers should know when to pursue them and when
to push them aside for cluster-based policies to be successful
Policy makers should avoid following pitfalls while developing cluster-based
policies:
Cluster-based policies are not the same as industrial policies cluster-based
policy initiatives must promote the competitive advantages of an interlinked group
of related industries

Cluster creation is best left to the market policy makers should refrain from
the temptation to create new clusters and leave cluster formation to the market
mechanism

Let research, not politics, drive the facilitation of clusters policy makers
must not bow to the pressures of political lobbyists pulling for certain industries,
unless it is supported by specific research indicating tangible benefits

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February 23, 2006
Cluster Pitfalls
Cluster-based policies are not the same as industrial policies
Cluster creation is best left to markets
Let research, not politics, drive the facilitation of clusters

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February 23, 2006

Success Factors Value to Clusters Example
Skilled Labor Force
Most important determinant for a clusters success
Knowledge of the industry supplemented by
formal education drives the cluster and attracts
new members
Specialized skills were vital to the
development of the semiconductor in the
Silicon Valley
R&D Capability
Availability and accessibility of research centers
and expert individual researchers to provide
cutting-edge research and solve pressing
problems
Specialized optics and imaging institutes and
active professional associations provided
channels for developing an optics and
imaging cluster in Rochester, N.Y.
Proximity of Suppliers
Proximity of suppliers assist in reduced inventory
carrying costs, innovation, and delivery time
Quick dissemination of information between
cluster members and knowledge sharing reduces
product development and R&D costs
Hosiery cluster in North Carolina also
encompasses yarn, needle, dyestuff and
packaging materials suppliers
Proximity assists the cluster in organizing
events for exchange of knowledge
Access to Specialized
Services
Specialized services provide functions tailored to
industry and are integral to clusters success
The Industrial Technology Institute in Ann
Arbor, Mich., was established to support the
modernization of the auto industry
Entrepreneurial Energy
Small firms rely on research institutions,
associations or other special services in order to
remain competitive
Entrepreneurs highlight benefits of the cluster and
will attract new members
Entrepreneurial energy was one of the key
reasons for the success and expansion of the
Silicon Valley
Shared Vision and
Leadership
Increases competitiveness and profitability of its
member firms
North Carolina hosiery industry strengthened
the buying power against major customers
such as Wal-Mart by negotiating collectively
Having a skilled labor force is one of the key factors for the
success of clusters
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February 23, 2006
Focus communication plans to improve the image of manufacturing
industry and facilitate manufacturing education initiative
Universities
Trade Schools
Primary
Schools
Management Workforce
Coordination &
Feedback
Training &
Education
Literacy
Basic PC Skills
Skilled Trades
Managerial Skills
Engineering Abilities
Educating the workforce and managers will be key to the success of the
cluster strategy.
Engineering Business

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