Point of View

Building it in N.C.

September 27, 2010 

— The announcement that Empire Foods plans to bring 200 jobs to Halifax County is significant for two reasons. First it illustrates that manufacturing - here, food manufacturing - is still an important part of the North Carolina economy. Second it shows how practical application of technological advances made at the state's universities - N.C. State University in this case - is crucial to developing a globally competitive manufacturing enterprise here.

North Carolina is still a manufacturing state. Data for 2008 show that 20 cents of every dollar of economic activity in our state come from manufacturing. This is twice the amount from real estate, three times the amount from health care and eight times bigger than the contribution from hotels and restaurants. It's almost twice as large as the contribution of manufacturing to the national economy.

The output from North Carolina's factories has also grown over time. The quantity of production is one-fifth higher than in the late 1990s and twice the amount in the late 1970s. Manufacturing output did slip during the recession - as it always does - but there are already signs manufacturing is leading the way out of the downturn. Exports to foreign buyers of some manufactured products - such as optical fibers, integrated circuits and semiconductors - have been surging.

Admittedly, manufacturing is not as dominant here as it once was. In the early 1960s manufacturing production accounted for almost 40 percent of aggregate economic activity. Part of the subsequent loss is due to production moving to foreign sites, particularly in developing countries.

But other reasons are more benign. Consumers have shifted relatively more of their expenditures to services. And, since 1970, the prices of services have risen twice as fast as the prices of manufactured products, thereby helping to grow the earnings of service firms at a faster rate.

Still, the continuing strength of North Carolina's manufacturers has been accomplished by two factors - improved technology and more productive workers. Computerized machinery, tighter coordination between suppliers and factories, and improved inventory management have reduced production costs per unit and made our producers "leaner and meaner."

Improved worker training and the pairing of workers with modern equipment have boosted factory output per worker. The latest data show North Carolina has the ninth-highest labor productivity rate among the 50 states. This has allowed factory output to expand even while the number of manufacturing workers has dropped. Moreover, every additional $1 million of manufacturing output is associated with between three and 10 more workers in the state, when supplier firms and the impacts of extra consumer spending are taken into account.

There have also been dramatic shifts within North Carolina's manufacturing sector. Technology, transportation, machinery, pharmaceutical and food manufacturers have experienced tremendous growth, while "legacy" sectors like tobacco, textiles, apparel and furniture have had cuts in output.

But the legacy manufacturing sectors are adapting. Scientists are exploring potential new uses for tobacco in the medical field. Domestic furniture manufacturers are focusing on custom products and customer service. And textiles and apparel producers are shifting to acoustical products, military applications and high- tech textile fabrics.

This transition to a new North Carolina manufacturing is being helped by faculty at N.C. State in three ways: new product development or improvement, new business startups and process improvement in the manufacturing sector.

More than 70 companies trace their beginnings to N.C. State. An example of innovative textile manufacturing firms is 3Tex, Inc., a world leader in 3-D woven and braided composite reinforcement materials for body and equipment armor. A new startup is LAMMscience, which has developed a specialized coating that inactivates viruses and bacteria when exposed to visible light, with applications to face masks and gowns as well as filters and purifiers. The new food processing plant in Halifax County will use technology developed at N.C. State.

The university's Industrial Extension Service (IES) provides training and technical assistance to increase the competitiveness of manufacturing firms. Consider the nonprofit RLCB (formerly the Raleigh Lion's Club for the Blind), which manufactures textile products for the military. This company showed a $4 million increase in sales, productivity gains and new products as a result of IES services.

These are all examples of the transformation of North Carolina's manufacturing into a 21st century sector.

Michael L. Walden is a William Neal Reynolds distinguished professor and James J. Zuiches is vice chancellor of Extension, Engagement and Economic Development, both at N.C. State University. A statewide tour sponsored by the university, "Manufacturing Makes It Real," is continuing through Oct. 1.

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