States can win the downstream game

May 2013

Our last blog, The prize is downstream made the case that while significant the ethylene derivative complex was overshadowed by the real prize: downstream manufacturing. This is in terms of the Holy Grail for states: investments, jobs and taxes. The question for states is how to attract the coming tsunami in downstream manufacturing. It is a once in a decade opportunity.

We believe that the downstream manufacturing companies will end up clustering in geographic areas, based on the type of manufacturing. This follows established historical patterns. It a region has several similar manufacturing companies it already has a pool of trained workers and support suppliers. Logically it is a more attractive location for the next company. This pattern has been repeated in many industries such as aerospace, automotive, steel, pharmaceutical, high-tech and so on.

A minimum requirement for states is a competitive business climate. If the state does not have competitive wages, good infrastructure, reasonable tax structure they simply can’t be up for consideration. Check egos at the door, you know who you are.

States can make themselves attractive to certain industries. The formula has been proven. It requires a specific focus on trained talent pool. In manufacturing that includes both technical-vocational training geared to that industry. It also includes higher education with research that is focused and can be leveraged by the industry. States play a pivotal role in coordinating and directing these efforts. Manufacturing companies are often eager to support the efforts with requirements, equipment and other resources. This can quickly lead to a virtuous loop of public – educational – commercial community.  

Selecting a new location for companies is a daunting task. States not meeting the two sets of criteria outlined above are eliminated, but that still leaves a complex decision process. States can simply this dramatically by having a clearly defined package summarizing the key issues unique to that industry and how the state addresses it. This covers a wide range from taxes to specific infrastructure to relocation assistance to zoning to permitting and regulations. It also includes a list of specific industrial sites ready for development. Finally companies are looking for a go to organization who will help guide them through the process. This is both a comfort level as well as risk minimization for the decision makers.

States have proven themselves as capable of attracting businesses and industries. Which ones will have successful programs to attract the coming tsunami wave of downstream manufacturing revival? Time will tell, and we are ready to help.

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