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Indiana’s Manufacturing and Logistics Report Card: Good Grades but Looming Threats

Posted 12:36 PM by

More than 250,000 Hoosiers make their living working in advanced manufacturing. Nationally, Indiana has the third highest employment numbers in the sector, and recent data indicates Indiana has a healthy economic outlook going forward compared to other states in the region. But concerns about shortages in human capital and skill deficiencies are a cloud hanging over the state’s continued position as a leader in the industry, which is why efforts to improve education and training are critical.

Industry experts took part in several presentations regarding this issue at an event held June 2, 2016, in downtown Indianapolis by the Indianapolis Business Journal and Conexus Indiana. Keynote speaker Michael Hicks, director of the Center for Business and Economic Research at Ball State University, spoke in depth about the annual Manufacturing and Logistics Report Card, which was produced for Conexus by Ball State.

Indiana’s Staggering Industry Numbers

“Advanced manufacturing dominates Indiana,” said Hicks. “Almost 53 percent of employment in the state is in manufacturing, and approximately 65 to 70 percent of GDP is in advanced manufacturing.”

The Manufacturing and Logistics Report Card assesses nine industry categories and assigns grades to all 50 states. Indiana received an A in overall manufacturing industry health, logistics industry health, tax climate, and global reach. Indiana has high export volume – conducting business with every continent except Antarctica – and state firms are represented in multiple sectors, reducing risk.

Data available through 2013 showed that the post-recession recovery in the state has been positive with total employment growth of just below 2 percent. The available numbers from 2014 and 2015 support this trend, with the expectation that 2015 will have been another record year for manufacturing production in Indiana.

With more than 2,500 advanced manufacturing firms in the state – led by the transportation equipment sector where more than one-third of the jobs are in motor vehicle parts, bodies, and trailers – Indiana’s industry stature remains strong. “Indiana is the most manufacturing-intensive state in the country,” said Hicks.

Shifting Occupational Trends

A closer look at job classification segments adds depth to the story. By breaking down the occupations within advanced manufacturing firms in to three categories – STEM, white collar, and blue collar – Hicks noted that during the past decade, the percentage of jobs in the former two segments have increased, while blue collar jobs have decreased. Hicks added that by assessing the numbers further, many of the white collar jobs are STEM-related. The takeaway is that approximately four out of every 10 jobs require STEM education and training.

“The cautionary thought is to consider what our education system is doing to support STEM, not just in engineering but in supplementary skills as well,” said Hicks.

Hicks presented additional data confirming that growth in advanced manufacturing aligns with the numbers of people who have completed degrees in STEM-related areas within the last decade, specifically noting:

  • Changes in education are positively related to changes in share of advanced manufacturing.
  • Advanced manufacturing firms need an educated pool of workers in order to grow.

Altering the Human Capital Paradigm

Indiana received a C grade in the Manufacturing and Logistics Report Card for Human Capital. “Issues related to human capital are slow-moving targets,” said Hicks. “It’s the area that worries me most.”

For a state with half of its employment in advanced manufacturing, Hicks believes not enough people are graduating with the right degrees to qualify for these jobs. Also factored in to the equation are poor worker benefit costs. Because of increases in health care premiums, Hoosiers are spending more for the same amount of healthcare that people in other states receive.

Panel discussions following Hicks’ presentation featured industry experts discussing their perspectives and efforts to alter trends, including the initiatives to meet the concerns about finding qualified applicants. Mark DeFabis, CEO of Integrated Distribution Services, believes it’s critical that companies and schools partner to offer students higher technology programs while increasing awareness of career paths in logistics and manufacturing. “Greater engagement in logistics from high school onward will help to generate a continuing supply of qualified individuals,” said DeFabis.

Chip Edgington, executive VP of operations for FULLBEAUTY Brands, agreed with the statements by DeFabis. “We can’t find enough graduates with logistics degrees,” he said. Edgington listed four strategies to combat the problem:

  1. Greater curriculum development in logistics
  2. Promotion of first-case competitions to improve hands-on experience
  3. Increased efforts to work with universities
  4. A focus on regional strategic plans to drive funding debates at the state level for future projects

Nicholas Hoagland, COO of Backhaul Direct, said programs that enable students to interact with senior executives have been extremely valuable. Robert Wilson, principal at George Rogers Clark High School in Hammond, Indiana, noted that the Hire Technology Program from Conexus, which was implemented in his school, has had a positive impact on students. “We are providing opportunities to increase career awareness.” Jon Tice, VP at IMMI, added, “Students are looking for a purpose, not just a paycheck.”

The Path Forward

Hicks believes Indiana needs to focus on four key areas of improvement:

  • Strengthening the path to community and technical college success, from the K through 12 system and inside colleges
  • Developing stability of infrastructure funding because it’s a vulnerability that could affect the state’s success going forward
  • Looking for opportunities to diversity manufacturing and logistics employment
  • Reducing costs of healthcare benefits through improvements in wellness and healthcare outcomes

Other states continue to make strides toward competing with Indiana, but the state’s overall grade in the Manufacturing and Logistics Report Card remains favorable. 

About the Author
Jason Patch is a partner in Katz, Sapper & Miller’s Audit and Assurance Services Group and leads the firm’s Manufacturing and Distribution Services Group. Jason works with clients to ensure accurate financial reporting, keeping an eye on their bottom line, helping them avoid risk, and maximizing efficiencies. Connect with him on LinkedIn.

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