The manufacturing industry has been in the midst of a growth spurt, with peaked interest from companies moving into the Silver State. This growth is presenting workforce challenges for the industry. Leaders in manufacturing recently met at the Reno offices of City National Bank to discuss the challenges and opportunities facing their businesses moving forward.
Tarah Richardson, editor-in-chief of Nevada Business Magazine, served as moderator for this event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
What factors are influencing industry growth?
TERRY MCGINNIS: What I always explain to people is if you’re in an office, whether it’s Indianapolis, Pittsburg or New York, and you’re running a freight analysis model and you do a site location, you look at the West Coast. It’s not brain science to determine where the population centers are. Then you have to look at your business and depending on what your economies of scale are, if you’re of size, you’re going to have one location on the West Coast to serve West Coast needs. You take into account two-day shipping, etc. and that model’s going to land in Sacramento. Then everybody’s going to say there’s three strikes against that: it’s in California, it’s in California, it’s in California. You start looking at those move dynamics and it puts Reno on the map.
RAY BACON: They do things out [at the Tahoe Reno Industrial Center (TRIC)] that you can’t get done anywhere else in the country. It’s pretty amazing what takes place. Nevada state requirements are seven days, but the paperwork and everything is ready to go in about six hours to one day [for TRIC projects]. That doesn’t happen any place else in the country. That has allowed the Panasonics, the Teslas and Schweitzers to come take a look and say, “We can make this thing work. They get things done in record time. They built million square foot buildings in six months.”
JOE DUTRA: My issue was always the time we had to ship. I could never really catch up with domestic retailers. When I put the factory here, what ended up happening was, I was able to supply on time. Somebody calls up and says they need 10,000 pounds of candy tomorrow, I can make it and ship it out. It allowed us to grow so we’ve been having this double digit growth every year just because of having manufacturing here.
What staffing challenges have come up due to industry growth?
KJ TJON: [Finding] people is really an issue. We have open reqs (requisitions) in our manufacturing areas and also in the area of technology. I think it’s becoming harder and harder to get good people. When I was seeing Tesla coming out here and I think Apple’s building out here, I said, “Oh, boy,” because we employ a lot of technology folks right here in Reno. A lot of our staff is technology-related. It’s game designers and system engineers. In Las Vegas we have more traditional manufacturing-level people there, but in both areas, we’re seeing trouble hiring the right profile at the right time. That would be my number one concern here.
DUTRA: We’re now the largest candy manufacturer in the state of Nevada, so our manufacturing floor is a little different. We use a lot of limited English-speaking people on the floor because we’re training people on very basic technology. It’s kind of an art form and has to be taught over a period of time. So we’re finding more that those people are available because we find big companies don’t want to hire somebody who doesn’t speak English. They either don’t have management that relates to that or they don’t have people who can speak Spanish that can be managers. We find we’re having our issue not on the floor, we’re having it in the mid-administrative positions and QA (quality assurance) and QC (quality control) people. Warehouse management has qualifications that take a little bit more technical skills.
SONNY NEWMAN: My biggest problem, by far, is Panasonic and Tesla. All of the employees we train and I’ve lost 82 people in nine months to Panasonic. They’re hiring them in and most of them are in the $19.00 [per hour] range. Some haven’t even graduated from high school that we trained and some have been here for years. We’ve lost a tremendous amount and backfilling and that has been painful. All of our work instructions are already in English and Spanish. About one-third of our workforce in Reno is Hispanic. Being the owner of the company, it’s really painful. I’ve even written a letter to Governor Sandoval about giving tax incentives to these people and postponing any kind of business tax, yet we have to pay. We’ve been here in the community. I give personally to all the charities that I can. I’m on the athletic board up at the University [of Nevada, Reno]. I see a lot of these guys coming into town that aren’t giving back. I understand they’re trying to build up Northern Nevada and it’s all about the dollars and the tax revenue that they’ll eventually get with the people moving here and the construction. But personally, I’m not a big fan because it has hurt me tremendously.
MCGINNIS: What we’re finding is that the training is being impacted because we’re in survival mode in terms of staffing. Spending that extra time to train and develop has been really a challenge. I recently had a gentleman who was my production manager and he’s now at a PPG [Industries] facility that’s inside of Tesla. His observations are, he’s never seen anything like it. Going back to the education piece, fundamentally, the unemployment dynamics are almost 4 percent or less. If we’re targeting those unemployed people, that’s a question right? My coworker, who’s just been in operation doing startup in Tesla has already had two terminations. It goes back to fundamental expectations in the workplace in terms of time, commitment and engagement. That’s a two-way street, but I don’t think people in school get a real life picture of that responsibility factor.
What is being done to address staffing issues?
KYLE DALPE: I’m dean of the Applied Industrial Technologies Technical Science division at TMCC (Truckee Meadows Community College), so your problems are my problems. We find that, at a community college, our main mission is to respond to the needs of the community. Normally what happens when the unemployment rate goes up, our enrollments go up because nobody’s working and they want to retrain. This has been the craziest last two years where the unemployment rate is so low, everybody seems to be working and yet the employers are still crying for people at entry-level and so many others. We can’t get people in the pipeline fast enough. When we talk to big companies like Panasonic who want 3,000 people trained by Q1 of next year and I have 150 in the pipeline, that’s their problem but they’re looking at me like when can we get them through. That’s what we’re feeling and we’re doing so much right now with the support of the local agencies and the Governor’s office to try to get the trained workforce. It’s tough because the unemployment rate is so low.
BACON: The career and technical high schools in Southern Nevada are doing a good job. Tesla’s already hired kids from Southern Nevada to Northern Nevada. They’ve got more people at that end of the state than we do at this end. I don’t know that that’s a solution, but it’s at least something. I don’t remember the last time people migrated from Southern Nevada to Northern Nevada for a job, but it’s starting now.
DALPE: I look at the numbers in the country and the state as well; half of the jobs require some training beyond high school but less than a four year degree. That puts it right at the community college. One of the things is, you can’t have someone with just a high school diploma start messing with a robot. Training on the robot is a big piece. Where we’re fortunate is that we’ve got some extra money from the last legislative session to help support the production labs that we created under federal grant funding. The federal money we expect to [lessen] but the state money has come up a little bit to help us so we can do the training. One of the frustrations we have in the training is, we can’t really do it out at TRIC or any of your places unless you have the same robot. So the training has to be at our facility, but some people have said why don’t you go out to the industrial complex? That’s where all the people are. Well, we’d have to ramp up another campus and that’s not cost effective.
What advances has the industry seen?
BACON: Every one of the manufacturers that I’ve [visited] in the last two years is doing something to increase their automation at some level. Some of it’s simple. Some of it’s complex. Some of it’s outrageously expensive and some of it’s pretty reasonable.
TJON: I think it’s one of the big problems when people talk about manufacturing jobs going away. They like to talk about Mexicans or the Chinese or whatever other group, but it really is automation more than anything if you think about it.
BACON: I believe that automation is going to make it feasible for companies to stay in the US more than they have in the past. And some of the things we thought would never go overseas that finally did, just because of shipping costs and shipping time alone, will come back.
DUTRA: We were talking about the capabilities of mixing candy with one of those robots. It made sense because, in the past, I could throw a person at it or two people can be mixing candy because it’s very delicate-type stuff. But this robot can do it just as gently. It costs $20,000 or $30,000. Well, I pay that in one year for an employee, then after that it’s free. And he never complains and his back never hurts.
TJON: Paper is very heavy… the big rolls of paper that we use to print instant tickets and all that kind of stuff. When you’re talking about the packaging, our facility where we make our lottery tickets, we have this huge mechanical arm and we don’t have anybody with a back problem anymore. Now it’s all being picked up and all the packages are being put together and sorted. It’s all going in that direction.
How have regulations affected industry growth?
DUTRA: In Washoe County, I had another little factory and ended up having some issues with all the reqs. They said you’re in this conundrum. There’s three things that intersect on your building so you have to deal with three different entities. Well, how come nobody told me this? They said, “well, you just didn’t ask.” It took me forever to get the little factory up and running. I had to go buy water rights and do the sewage and it was a fight all the way down the line because it was just a pilot plant. I eventually just bought a new building, so we’re in a bigger facility and we moved everything in the one building so we didn’t have as many problems.
BACON: Reno just imposed a new annual building license fee structure. To show you how crazy it is, their old annual fee permit basically was trying to bill people based on their gross receipts for their operation. You can’t legally do that for stuff that’s leaving the state. They tried to do that with one of the distribution centers. Their fee went from $2,200 to about $240,000. They figured that was a little bit excessive, so they hired a lawyer and got into the thing. It’s clear that Reno’s going to have to change their fee. They need to keep the same revenue in place, so they decided to go to a per square foot fee, which is just insane.
MCGINNIS: On the regulatory side, my air permit is probably the most complex of any other of my facilities when it comes to emissions reporting and in terms of the amount of details. That’s not a plus. Specifically out in TRIC, and I don’t know what the status is in Reno, there is a wastewater problem in the industrial park. I have the most stringent wastewater discharge requirements in North America for a PPG facility. Those are some of the barriers.
What is the outlook for manufacturing going forward?
DALPE: We’ve shifted from everybody’s going to do the four year degree and the technical stuff is all going overseas to now we’re back the other way around. We’re bringing things back and it’s flipped the economy. It’s going to take some time to catch up. We have to educate.
BACON: If you go back 15 years ago, the specialization we had for machine tools and things like that didn’t [work] in the chemical market and didn’t necessarily work with the electronic stuff. Now the code base for most of the robots and things like that is pretty common and someone who works in a machine shop one week can go work in [another] place two weeks later and be functional. We reached a point where the technology, as far as the automation, is getting common enough that that common training is all of a sudden starting to pay off. Long term, I think that’s got huge advantages.
DUTRA: If you think about food manufacturing in this area, it’s growing. We talked about logistics. You’re seeing a lot of companies come in and looking at Reno as a place to not be in California. They’re coming to Reno because they feel that eventually, on the manufacturing end, they’ll be able to do well in this area. You’re going to see more and more [manufacturing] coming to this area.