Manufacturing in Minnesota in Demand

Manufacturing may be Minnesota’s most overlooked major industry. The sector includes some of the state’s most innovative and best-known companies, notably 3M and medical technology giants such as Medtronic. But most manufacturers are smaller operations, and they’re struggling to attract labor, even though the work is not nearly as physically taxing as it once was.

“Manufacturing has gotten a bad rap,” says E.J. Daigle, dean of robotics and manufacturing technology at Minneapolis-based Dunwoody College of Technology. Why? “The thought was, we offshored most of it to China.” Yes, overseas labor is cheaper. But that low cost isn’t necessarily a huge advantage. “Because of automation—CNC, robotics, automated inspection—the productivity of an American worker is about 10 times what it was 20 years ago,” Daigle says. “We don’t need to offshore for labor anymore,” he says, because manufacturing is not as labor-intensive as it used to be.

Demand for the manufacturing-skills students who come out of Dunwoody and other technical colleges far exceeds the number of graduates. According to Steve Kalina, president and CEO of the Minnesota Precision Manufacturing Association, most of his organization’s membership has been doing strong business the last couple of years. “Many have hit record sales,” he adds. And they need to hire more people to meet their own customers’ demands.

What they need are skilled hires. The work is still hands-on, but it also involves more intellectual as well as physical skills, Kalina says, with a lot more automation and a lot more technology to understand and use.

All this means that manufacturers must innovate to succeed. The five winners of the first-ever Twin Cities Business Manufacturing Excellence Awards demonstrate that creative thinking is just as fundamental to Minnesota’s manufacturers as it is to the state’s tech sector.

High-tech and hands-on came together in a very distinctive way for one Minnesota manufacturer in August 2018. That’s when Eden Prairie-based Starkey Hearing Technologies introduced the Livio AI, a hearing aid that is, well, much more than a hearing aid. It’s a wellness device that incorporates artificial intelligence (thus the AI in its name), Bluetooth, and other technology to help monitor the wearer’s body and brain health.

In addition, Livio AI’s electronic configuration includes an app called Thrive, whose capabilities allow the device to “save” (via geotagging) hearing aid settings for familiar locations and lets hearing-care professionals make adjustments remotely. Earlier this year, the Livio AI added even more features, one of which alerts caregivers and loved ones remotely if the wearer has a fall.

But manufacturing the Livio AI still requires the human touch.

“You have a lot of components and you’re putting it inside a very tiny device,” Starkey president Brandon Sawalich notes. At the same time, “these devices are handmade. There isn’t automation where we’re just spitting them out every 10 seconds.” Outside of the aid’s injection-molded case and automated application of the paint and the water-resistant coating, everything is wired and assembled by hand. With all the flex circuitry and sensors that go into the device, Sawalich says it takes 29 minutes to make a Livio AI hearing aid. That’s about twice as long as it takes to produce a traditional hearing aid—which, after all, has just a single function (namely, hearing).

Starkey developed Livio AI for two years before it was released. The preparation included special training for production employees at the company’s facilities in Mexico, China, and Eden Prairie. It also made sure it met FDA requirements—this is a medical device, after all, not a smartphone or other consumer item. There was one hitch in the planning, though not a bad one: “We oversold our forecast by 63 percent,” Sawalich says. That required Starkey to quickly ramp up production capacity.

The Livio AI demonstrates the kind of ongoing creativity that’s common in the manufacturing space, even, or perhaps especially, among long-established companies. One of Minnesota’s oldest manufacturers, Vadnais Heights-based industrial adhesives maker H.B. Fuller Co., has continuously been adding new products as it adds manufacturer customers in new sectors. Case in point: a new hot-melt adhesive designed to provide a strong bond on cases and cartons that have to withstand both heat and freezer conditions. Now with 72 production facilities worldwide, H.B. Fuller has more than doubled in size from a decade ago, reaching $3 billion in revenue last year.

Along with those new adhesives, the company has added improvements to its production processes. “The concept of zero defects has grown dramatically,” notes H.B. Fuller president and CEO Jim Owens. For instance, one of its customers makes diapers. “One problem with a baby diaper can become a major liability over the internet,” Owens says. “So for us, every dot of adhesive is critical to our customer.”

To meet those requirements, H.B. Fuller does not do random batch inspection, particularly in the hygiene and electronics spaces. Instead, “we have a 100 percent inspection regimen—both automated and manual, in some cases,” Owens says.

The customers that Plymouth-based Pelican BioThermal supplies also require failure-free performance. A subsidiary of California-based case and travel-gear maker Pelican Products, Pelican BioThermal manufactures temperature-controlled packaging used by major pharmaceutical companies around the world, company president Dave Williams says. These customers are shipping medications and tissue worldwide. (The company has production facilities in the U.K. and France as well as in Minnesota.)

“We have very high-quality products that perform 100 percent of the time,” Williams says. “Our customers know they can sleep at night if they use our products.” These containers, which are generally transported by truck or plane and occasionally by rail or ship, need to “stand up to the thermal rigors of being shipped around the world 10, 15, 20 times a year,” he adds. The length of use typically ranges from 70 to 140 hours; the containers range from a couple of liters to the size of a full pallet. Some are single use, which the customer discards when done.

But Pelican BioThermal offers more than reliable packaging—it also provides customers the option of making their logistics operations more efficient. The bulk of the company’s recent growth has been in rental of reusable containers. In 2018, Pelican BioThermal increased its rental container “fleet”—and the revenue that fleet brought in—by 90 percent. Reusable containers, whether purchased or rented, now make up 60 percent of the company’s U.S. revenue.

A customer may need to ship their product to Europe from Southern California, for example, Williams says. “At that point, we offer the customer the option to return our boxes to one of our service centers in Europe. Or the customer can reuse it on a return flight, shipping a different product back to the U.S.”

To serve this growing cohort of customers, Pelican BioThermal has set up 50 rental service centers around the globe. “When a customer receives a container on their dock, they want to be able to put the product in it, have their shipping company take it away—they don’t want to deal with it again,” Williams says. “They’re worried about the next life-saving or life-changing drug. They don’t want to worry about the packaging they have to ship it in. We try to make it as seamless as possible for them.”

New approaches for ‘old school’ makers

While the manufacturing sector has embraced technology, there also are companies that follow more of a “craft” approach. (Craft breweries, for example, are actually craft manufacturers.) For this type of manufacturer, production excellence often takes different forms.

Mercury Mosaics produces ceramic tile for both commercial and residential clients. Founder and CEO Mercedes Austin launched the company in 2002, making tile out of her small apartment. Today, her company is located in the Thorp Building in Northeast, which General Mills used for manufacturing during World War II. The 15,000-square-foot building, with its open flow and abundance of natural light, provides “a return to what manufacturing looked like at the turn of the 1900s, when manufacturing was rooted in humans,” Austin says. Her team of 30 has plenty of space to produce tile by hand, from cut to glaze, in 125 colors and 49 shapes.

Accordingly, she strives to balance volume production and individual creativity. Indeed, creativity means improved production. Once a new employee learns a skill, “we allow them to contribute to process refinement,” Austin says. “Especially at the front end, when we’re helping clients, we allow them to have their own input on what something could look like if we planned it out like this or that. We very much include much of our staff on those kinds of things.”

Mercury Mosaics has continually incorporated process improvements, including lean manufacturing approaches you’re more likely to find at a much larger company such as Toyota. In 2015, Austin and her colleagues saw a pattern in the company’s sales history: Three shapes were particularly popular. So the company began spotlighting those shapes in its sales and marketing efforts. This has allowed Mercury to control demand “so that we can make parts and pieces before they’re ordered,” Austin says. If a customer orders, say, green “fish scales” (one of those top-selling shapes), employees produce inventory to replace them. This approach helps make production more efficient, instead of having to make every order from scratch, she adds. That’s important, as Mercury Mosaics now produces products for large clients including Room & Board and P.F. Chang’s.

A nimble inventiveness is something farmers are particularly known for. That’s been the case with Tom and Jenni Smude. In 2010, a drought hit their farm near Pierz, Minn.; that sent them searching for a less moisture-dependent crop. The Smudes turned to sunflowers. This allowed them to produce high-protein feed pellets for their livestock operation and sell the byproduct oil to the processed-food industry. But not long afterwards, Asian sunflower-oil producers flooded the market, making the Smudes’ bulk oil unsellable.

“So, I said, ‘Let’s start retailing,’ ” Tom Smude says. He converted his facility to food grade, thus launching Minnesota’s first cold-press sunflower oil company. He had no experience in bottling. “We started slow,” filling a bottle at a time, Smude recalls. Still, he had enough oil to sell to area farmers’ markets. To his surprise, he was selling out the family’s inventory.

What’s more, “we went into Pierz and put it on a supermarket shelf and everybody thought it was completely nuts,” he says. “All of a sudden, it got into a couple more stores.” Soon, St. Cloud-based supermarket chain Coborn’s began stocking Smude oil on the shelves of its stores. Smude sunflower oils now are sold in all 50 states, in stores and online.

Why the success? Smude says his family’s sunflower oil is heart-healthy and chemical-free; it’s also something of a handmade product, the type of item many consumers seek out. He also cites its “buttery” taste—a flavor characteristic that has led him into yet another food product.

In 2011, the highly entrepreneurial Smude started Midwest Sales and Construction, which sells and installs equipment for handling and processing grain. A few years ago, he discovered that a customer was supplying to a microwave popcorn maker. Smude suggested using his oil for the popcorn; the popcorn company was delighted with the result. But standard popcorn packages can’t hold liquid oil—they fall apart (which is why companies typically use solidified oil). So he hunted around and found a highly refined paper that can keep the oil from dripping out. Two years later, the Smude brand of popcorn is sold nearly everywhere where its oil can be purchased.

Whether process-driven or craftily creative (or both), this year’s Manufacturing Excellence Awards honorees prove that innovative thinking isn’t solely the preserve of retailers or tech firms. Minnesota manufacturers of all kinds are building on that kind of thinking.

http://tcbmag.com/news/articles/2019/september/manufacturing-excellence