Manufacturing has changed greatly in the past 20 years in Rhode Island. We’ve moved from a mass- production environment to a mass-customization environment and many facets of this transformation are now critical to the region’s economic vitality. Let’s take a look at how local and global influences have had an impact on the Ocean State and how the state can move forward based on what can be learned from its recent experience.
More than 200 years ago Samuel Slater started America’s Industrial Revolution here in Rhode Island. Our state was an industrial powerhouse in the early 1900s, with factories churning out textile, metal and machine products sold across the country. But that changed in the years following World War II and accelerated toward the end of the 20th century. As a result, manufacturing’s share of the state economy fell from 29 percent in 1963 to 16 percent in 1997.
More recently, we watched the globalization of manufacturing and felt the impact of low-cost countries on price competition. Tom Friedman told us the “World is Flat,” and the ability to communicate and easily ship goods around the world moved the low-value-added work to India, China, the Philippines and other countries with low-cost labor. As a result, manufacturing lost 11,900 jobs between Rhode Island’s peak employment in 2006 and December 2012.
Some say Rhode Island manufacturing is dead due to its performance over the past decades. These people see this as the end of the story, and draw their conclusions from there.
However, as we look forward from that 2012 low point, we still have more than 1,700 manufacturing companies in the state. Many are thriving, with strong profitability and growing employee counts.
In 2013 Rhode Island manufacturers added 700 jobs after decades of job loss. The average annual salary for a manufacturing job today is $45,000. The sector employs more than 40,000 people, approximately 10 percent of nonfarm private-sector employment. Clearly, these jobs improve Rhode Island’s economy.
OK, now that we see improvements in the state’s manufacturing output and employment, we have to ask: Why has this work stayed local, reversing the long-term trend?
Four factors stand out:
- Overseas mass manufacturing and supply-chain environments get complicated and expensive for small production runs.
- Overseas prototyping is difficult, costly and a lengthy process.
- An innovative product introduction is more successful when launched locally.
- Our large defense systems won’t be moved overseas anytime soon
Today’s Rhode Island manufacturing environment remains strong because it has transformed itself into a community of customized and innovative manufacturers. This trend will continue to spread as more companies recognize what they need to do and adapt.
One company that has recognized this trend is Colonial Mills in Pawtucket, which has been making braided rugs for 37 years. The economic downturn hit it hard. At the same time, its product was becoming commoditized. The company needed to revitalize itself while sticking to its core manufacturing competency. The management team decided to innovate the product line and test new markets. Shapes, colors and materials helped launch new areas of business, including braided baskets.
“Our business has increased 20 percent over each of the past three years. We’ve hired 10 new manufacturing positions,” said Don Scarlata, president of Colonial Mills. “We recognized that the manufacturing landscape had changed, and we needed to change with it by getting away from commoditized products with innovation.
“Our management team will continue to push into new markets using new product ideas which require fast market feedback. We expect our manufacturing business to grow. We aren’t looking to compete with globalized manufacturing on cost – we are looking to win by providing a superior product that our customers want.”
For people who have not looked past 2012, this story and others must seem foreign. But it’s true, manufacturing in Rhode Island is strong and growing. Our state is home to innovative manufacturing companies that are healthy, hiring all disciplines and fueling our economic recovery.
In upcoming chapters of this story, we will cover these topics:
- Support systems customized for the new environment.
- The educational-system influence.
- Looking forward to the flatter future.
- The maker-community influence.
- Military and defense-industry growth.
Christian Cowan is center director of Polaris MEP, the University of Rhode Island Research Foundation’s federally funded, statewide manufacturing business resource. He can be reached at [email protected]and (401) 270-8896, x413. This is the first in a six-part series on the Rhode Island manufacturing landscape.
Post also published on Providence Business News.