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Manufacturing Still Important for the Region

They still make things in San Diego, just not bombers, rockets and hunting knives.

While a good deal of manufacturing here has gone elsewhere, mainly to Asia, a great deal remains and some of the jobs that were exported several years ago are returning, according to a report by the South County Economic Development Council.

“There’s still plenty of classic manufacturing going on here, but it’s more as part of the supply chain. It’s not necessarily a company that puts its name on the product,” said Jo Marie Diamond, chief executive of the East County Economic Development Council, which was a partner in the study along with two other business groups.

The study, which was done as one part of a $150,000 federal grant, set out to discover what companies are still alive and kicking, some of the challenges they face in operating in high-cost San Diego and what can be done to mitigate or overcome those challenges.

Some parts of the report, based on responses from 283 manufacturers, weren’t surprising. Asked to list issues of concern, the two largest responses were government regulations and taxes, but a significant number also listed utilities’ costs and availability.

The region’s manufacturing base has shrunk considerably from the peak period of the early 1990s when a massive downsizing after the Cold War ended. By 2000, the sector still had nearly 129,000 employees, but by 2010, it was down to about 95,000, the report stated.

91,000 Manufacturing Jobs

According to the most recent jobs report for May from the state, the county had 91,000 manufacturing jobs.

These types of jobs are more important than service jobs, the report says. Citing a Manufacturing Institute study, every manufacturing job supports 2.5 other jobs.

Some of the jobs that were moved overseas for cost purposes are coming back because of the increased costs of doing business in places like China, the report found.

Diamond said she and other local economic organizations have heard from manufacturers that some of the work is returning as the cost advantages from outsourcing to foreign manufacturers drops. “(The shift) is more than enough to call it a trend,” she said.

Rick Urban, chief operating officer at QCMI Inc., an outsourced contract manufacturer of customized parts, said the savings that some companies achieved by making goods overseas has compressed in recent years and causing several to move back to this country.

“What we’re doing is moderate to complex manufacturing,” Urban said. “The simple stuff (where items are made in thousands) stays over there.”

QCMI in Santee added about 20 new jobs over the past year, mainly machinists, and could use more workers, but it’s difficult to find people with experience, he said.

To solve the problem, the company is forming its own apprenticeship program it hopes to begin by the end of this year, Urban said.

The Link: Connectory.com

Manufacturers were also often unaware of how they could reduce their costs by obtaining raw materials and other parts from local vendors rather than buying them from out of state or foreign suppliers. One way of making such connections is through the Connectory.com, a database of more than 5,000 local firms that list their core capabilities.

Another finding of the report is that many new companies within the innovation cluster should get better at finding local sources for any needed manufacturing, or other services.

One notable local startup ecoATM is doing just that by having its kiosks made here in Rancho Bernardo by D&K Engineering. The automatic kiosks receive unwanted cellphones in exchange for cash or rebate coupon. “We just produced the 100th unit for them off our line recently,” said Diane Law, vice president of marketing.

D&K, a designer and manufacturer of complex electro-mechanical items, has been consistently growing in recent years, and increased its local staff from 85 in 2009 to 225, Law said. “Right now our floor space is so overcrowded, we’re looking for more floor space,” she said.

EcoDog Inc., a Rancho Bernardo maker of energy monitoring equipment, is another business that supports buying locally whenever possible. CEO Ronald Pitt said he is looking for a local vendor for a software engineering project. Pitt is no fan of outsourcing, particularly to China.

“I’ve been making electronics for a long time and in my opinion (outsourcing to China) is a losing game,” Pitt said. “It always ends up costing you more even if the labor rates are lower, and now they’re not that much lower.”

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