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Key Cross-Cutting Themes

Several cross-cutting themes emerged from the workshop presentations and discussions:

• Importance of public–private partnerships in advanced manufacturing—Various speakers described the relationship between a robust manufacturing sector and national security, job creation, and economic growth. They also described the results of past disinvestments in domestic manufacturing and explained how market failures may impede progress in U.S.-based advanced manufacturing.
• Role of the Manufacturing USA institutes—Multiple presenters emphasized the role of the manufacturing institutes in connecting university research to manufacturers, drawing new manufacturing technologies and techniques into small and large firms, fostering regional innovation ecosystems, and developing the skilled technical workforce.
• Lessons from foreign programs—A number of workshop participants drew comparisons and contrasts with the nature and scale of efforts in China and Germany to accelerate the development and adoption of advanced manufacturing techniques.

In addition, the workshop included an overview of recent assessments of the Manufacturing USA institutes by Deloitte, by the Government Accountability Office, and by the Advanced Manufacturing National Program Office (AMNPO) within the National Institute of Standards and Technology (NIST). Suggestions also were gathered from participants in all panels on improving the strategy and operations of the Manufacturing USA institutes. These ideas ranged from improving workforce training, to networking more effectively with state and regional organizations, to more effectively demonstrating to policy makers the return on public investments in the institutes.

Finally, participants addressed the challenge of sustaining the Manufacturing USA initiative.

IMPORTANCE OF PUBLIC–PRIVATE PARTNERSHIPS IN ADVANCED MANUFACTURING

Several participants mentioned the decline in U.S. manufacturing and the spillover effects on the entire economy as an impetus for the federal role in this public–private partnership. They made the case that a strong domestic manufacturing sector is important to sustain economic growth, create high-value employment, and carry out national missions in defense and national security.

Susan Helper, a professor at Case Western Reserve University, pointed to data showing that manufacturing matters to the United States because it provides high-wage jobs, spurs commercial innovation, improves competitiveness and reduces trade deficits, and makes a large contribution to environmental sustainability. She added that manufacturing plays a disproportionate role in innovation, accounting for 68 percent of private-sector research and development (R&D) spending.¹ Further, she argued that the existence of a wage premium in the manufacturing sector—the idea that at higher skill levels, manufacturers pay more—contributes to a higher standard of living for Americans.

Mark LaViolette, a specialist leader at Deloitte, emphasized the positive impact of advanced manufacturing across the U.S. economy. Through a multiplier effect, he said, manufacturing activity supports trillions of dollars of production in other parts of the economy through transactions covering more than 80 different industries, ranging from transportation to education.²

Erica Fuchs of Carnegie Mellon University made the point that jobs materialize when workers in the United States “make products no one else can.” The result, she said, is the need for policies that drive innovation in production technologies and practices, as exemplified by the manufacturing institutes.

Sridhar Kota, a professor at the University of Michigan, asserted that the United States needs a strong advanced manufacturing base to carry out missions in defense and national security. Maintaining a qualitative overmatch in technology, he argued, provides a competitive advantage for the military. Arun Seraphin, a professional staff member on the staff of the Senate Armed Services Committee, agreed, adding that policy makers support the need to manufacture advanced technological products and components critical to the nation’s security in trusted and reliable domestic production facilities.

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¹ Susan Helper, Timothy Krueger, and Howard Wial, Why Does Manufacturing Matter? Which Manufacturing Matters? A Policy Framework, Washington, DC: The Brookings Institution, 2012.

² See Robert E. Scott, The Manufacturing Footprint and the Importance of U.S. Manufacturing Jobs, Washington, DC: Economic Policy Institute, 2015. Access at http://www.epi.org/publication/the-manufacturing-footprint-and-the-importance-of-u-s-manufacturing-jobs.

In his keynote address, Jeff Wilcox, vice president for engineering and program operations at Lockheed Martin, noted that the link between manufacturing and national security was established early in the history of the republic. Alexander Hamilton, he said, “understood just how precarious the situation was that we did not have a defense industrial base in the colonies at that time. He proceeded to advocate for those policies.”³ Hamilton’s arguments proved persuasive, Wilcox continued, and President George Washington declared in his first State of the Union address that the safety and interest of a free people require that they promote such manufacturers as necessary to render the new nation independent of others for essential supplies. Taking this notion forward, Hamilton established a state government–industry partnership that harnessed the waterfalls in Paterson, New Jersey, to power mills and stimulate a new industrial cluster.⁴

The Decline of U.S.-Based Manufacturing and Its Impacts

The advantages gained from domestic innovation and production, some workshop participants warned, are threatened by the atrophy of the U.S. manufacturing sector, particularly over the first decade of this century. The manufacturing institutes, they observed, were designed to regenerate production in the United States and to capture its associated benefits through introduction of much more efficient production technologies and processes, restoring a competitive edge.

Documenting the decline, Susan Helper noted that “we had a fairly constant size manufacturing sector—15 to 17 million people—then it fell off a cliff between 2000 and 2010. We lost a third of manufacturing jobs then, and there has been a comeback—about 900,000—since.”⁵ The factors behind this decline, she said, have “to do with globalization, trade agreements, strong dollar, automation, financialization, a focus on short-term corporate results, and a lack of support for sustaining the so-called industrial commons.”

André Gudger, founder and CEO of Eccalon, noted that the industrial commons—a reinforcing network of research organizations and manufacturing facilities—was further degraded when U.S. businesses began to disinvest in large-scale, billion-dollar research organizations.⁶ Although research

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³ Alexander Hamilton, Report on Manufactures, Communicated to the House of Representatives, Washington, DC, December 5, 1791.

⁴ Similarly, in 1794, the War Department created government-owned armories in Springfield and Harpers Ferry for improved arms production; these facilities led to machine-made interchangeable parts and early mass-production technologies. See Merritt Roe Smith, Harpers Ferry Armory and the New Technology, Ithaca, NY: Cornell University Press, 1977, p. 28.

⁵ Justin R. Pierce and Peter K. Schott, The Surprisingly Swift Decline of U.S. Manufacturing Employment, CESIFO Working Paper No. 4563, Munich, Germany: Center for Economic Studies and Ifo Institute, January 2014. Access at https://www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19104020.

⁶ Gary P. Pisano and Willy C. Shih, “Restoring American competitiveness,” Harvard Business Review, July–August 2009 Issue.

organizations such as Bell Labs generated intellectual property, he added, “such long-term research and development investments didn’t look good on corporate balance sheets, so out they went. As a result, we further eroded that part of our industrial base.”

Citing her research, Erica Fuchs further explained that when production of existing technologies is moved abroad to take advantage of lower wages and costs, production of the most advanced technologies developed in the United States can also become unprofitable.⁷ Her research showed that in the case of advanced composites, older technologies may still be profitable abroad, but there is no incentive for domestic innovation. In the case of optoelectronics, she found that large minimum efficient scale of production and the dysfunctional effect of separating R&D from manufacturing, which had largely shifted abroad, created barriers to domestic production. In this way, she drew a direct connection between the loss in U.S. production capability and the nation’s loss in ongoing innovation.

Kirk McConnell, a professional staff member on the staff of the Senate Armed Services Committee, linked the collapse of manufacturing employment to serious negative social impacts, including—in some cases—rising mortality rates and high levels of opioid addiction, particularly among working-class white Americans. He observed that the decline of the manufacturing sector also coincides with poor gains in productivity, adding that “if you don’t gain in productivity, you have a moribund economy. And if you don’t have a healthy economy, you don’t have a strong defense.”

Several speakers held out the possibility of an alternative, more positive narrative. Helper suggested that the decline of the manufacturing workforce need not be preordained. She cited Germany—where 20 percent of the workforce is engaged in the manufacturing sector, compared with 8 percent in the United States—as an example of a high-wage, developed economy that has successfully maintained a high level of manufacturing employment.

Nickolas Justice, executive director of the PowerAmerica institute, acknowledged that the offshoring of production and related research activities raises questions about the future of manufacturing in the United States. But he argued that the Manufacturing USA institutes present an important opportunity to reestablish “the lost connection with our people by designing here, by working together with people, and then trying to figure out how you are going to translate that into the economy.”

Sridhar Kota agreed that “the government in partnership with the private sector has a role to nurture and mature these technologies and reduce the technical and market risk.” And, he added, “we want to ensure that we anchor manufacturing of these technologies here; you cannot just mature the technology and give it to your friends and competitors overseas.”

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⁷ Erica R. H. Fuchs, “Global manufacturing and the future of technology: Where you manufacture changes what you get,” Science Vol. 345, Issue 6196, August 1, 2014.

The Need for Partnership Mechanisms

Advancing manufacturing through research and into production is a complex challenge. Susan Helper and others observed that misaligned incentives may inhibit the emergence of market solutions, requiring new public–private partnership mechanisms to promote cooperation.

Economic theory, Helper noted, predicts that private companies are unlikely to invest in producing new knowledge, which tends to spill over to rivals. This “market failure” means that companies will normally underinvest in R&D when other firms can benefit from their effort at little or no expense, and when there is, as a result, no relative advantage to be gained from the investment. Her point was that collaboration through partnerships reduces the risk and cost of developing innovative production technologies to individual firms, and speeds up adoption across industry.

The nature and degree of market failure varies over the R&D cycle. In this regard, Helper described three obstacles to the cooperation that can lead to a better manufacturing sector. The first is what she called the “missing middle”—the gap between investment by government and universities in emerging technologies at the earliest stages and investment by the private sector in the later stages.⁸ She argued that public–private partnerships such as the Manufacturing USA institutes have a role to play in sustaining investments in manufacturing-related R&D to bridge this gap.

The second obstacle derives from weaknesses in the supply chain. Helper noted that large companies used to do a great deal of R&D in house. As firms have restructured to rely more on outside suppliers, she explained, their incentive to invest in research has diminished because the suppliers can offer the benefits of an innovation to the company’s rivals as well. The innovative small startup firms that increasingly advance the technological frontiers and supply the larger aggregators also face a variety of obstacles, from securing financing to commercializing new and unknown technologies.⁹ While small manufacturers represent 98 percent of manufacturing establishments, Helper observed, they perform only 33 percent of R&D. She suggested that the manufacturing institutes can help overcome these obstacles; by bringing supply chains in an industrial sector together, the institutes can enable smaller firms to obtain much better access to production innovations.

Helper identified a poorly trained workforce as the third obstacle to a more robust manufacturing sector. She noted that students and workers face a variety of challenges in linking to and persisting with appropriate training programs, as well as in keeping in pace with the changing needs of the

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⁸ For a description of the “missing middle” in the manufacturing ecosystem, see National Research Council, 21st Century Manufacturing: The Flexible Electronics Opportunity, Washington, DC: The National Academies Press, 2014, pp. 13–15.

⁹ For a review of challenges facing small innovative manufacturers, see National Research Council, 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program, Washington, DC: The National Academies Press, 2013, Chapter 2.

manufacturing sector.¹⁰ Here, too, manufacturing institutes could serve as a new training delivery mechanism to educate firm workforces in the new technologies they are delivering.

Helper concluded by observing that “we have a fragmented ecosystem, with a lot of potential for sharing and a lot of interdependence that is not being captured. Manufacturing USA could be a key hub to overcome that and become a key lynchpin of future policy.”

ROLE OF THE MANUFACTURING USA INSTITUTES

Mike Molnar, founding director of the Office of Advanced Manufacturing (OAM), National Institute of Standards and Technology (NIST), described the mission of the Manufacturing USA program as one of “connecting people, ideas, and technology to solve industry-relevant advanced manufacturing challenges, thereby enhancing industrial competitiveness and economic growth and strengthening our national security.” In line with this mission of growing and strengthening the manufacturing ecosystem in the face of a rapidly and ever changing environment, other presenters shared their views on how the institutes help to develop and commercialize new technologies, grow networks among research organizations and small and larger companies, and develop a skilled technical workforce.

Connecting University Research to Industry

The directors of several Manufacturing USA institutes described how their organizations have served as a bridge between universities and research laboratories and firms.

Lawrence Brown of Lightweight Innovations for Tomorrow (LIFT) explained that his institute’s goal is to take the new technologies that emerge from universities and government laboratories, develop these ideas, and connect them to industry in a way that has impact.

Kelvin Lee of the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) stated that manufacturing paradigms and technologies in biopharma are relatively immature. He asserted that NIIMBL plays an important role in forging the cooperation needed to bring the research being conducted in this area to the next level. “In order to increase automation,” he said, “in order to address some of the needs of patients going forward, we need to find a way to bring the stakeholders together.”

Describing the role of the PowerAmerica institute, Nickolas Justice observed that “the process of cooperatively developing a roadmap with academic and industry partners helps to share ideas and build trust needed to

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¹⁰ For a review of workforce training and education challenges, see National Academies of Sciences, Engineering, and Medicine, Building America’s Skilled Technical Workforce, Washington, DC: The National Academies Press, 2017.

grow the manufacturing ecosystem.” Through dialogue and the sharing of ideas, he said, “you start building that supply chain because you [are] building a roadmap, but you [are] also building trust.”

Yoel Fink of Advanced Functional Fabrics of America (AFFOA) suggested that although universities are often reluctant to give up intellectual property developed by their researchers, the institutes could act as their agent and facilitate their use. “By giving AFFOA this right to license or sub-license, universities could draw in investment and dedicated marketing resources to get their intellectual property to the market,” he said.

Drawing Innovation into Large Firms

Jeff Wilcox explained that the Manufacturing USA institutes help large companies draw in innovation by facilitating cooperation with universities and other large and small businesses. Today’s technologies are so complex that multidisciplinary teams comprised of researchers from multiple companies and universities are required to establish new “technology platforms,” which then enable applied R&D in individual companies. The Manufacturing USA institutes are designed to play a leading role in creating these platforms. Later on in the technology life cycle, after commercialization and considerable production and marketing experience, “feedback loops” occur, where innovation from the factory floor of the small- and medium- sized enterprise makes its way back to the design community and the field sustainment community. The institutes can also help close these feedback loops.

He added that the emerging suite of manufacturing institutes gives large firms and their supply chains (which are made up of smaller tier 1, 2, and 3 manufacturers) access to new technological developments across many fields. He cited specific new capabilities coming from the Digital Manufacturing and Design Innovation Institute (DMDII), LIFT, America Makes, NextFlex, and AIM Photonics that could bring important enhancements to his firm’s products through their work in the areas of digital manufacturing, lightweight metals, 3D printing, flexible and hybrid electronics, and photonics, respectively. The institutes also have demonstrated their value by linking Lockheed Martin to new suppliers, he said, and by developing technological roadmaps that coordinate the company’s research and innovation activities with those under way in universities and small businesses.

Christopher Murray, an assistant director with the Government Accountability Office (GAO), reported on a survey conducted by his agency in which large manufacturers credited their participation in Manufacturing USA with helping them accelerate their technology by 2 to 5 years and get their products ready for commercial release more quickly.¹¹

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¹¹ Government Accountability Office, Advanced Manufacturing: Commerce Could Strengthen Collaboration with Other Agencies on Innovation Institutes, GAO-17-320, Washington DC, 2017. Access at https://www.gao.gov/assets/690/683973.pdf.

Wilcox also noted that the institutes provide members access to equipment, allowing them to test new manufacturing approaches before making large investments in machinery. This access is even more critical for manufacturers who form the supply chain for companies like Lockheed Martin because they often do not have the wherewithal to do these tests on their own. The institutes play an important role as well in training skilled technical workers, he said. Overall, he concluded, Lockheed Martin has realized a very high return on its cost-sharing investments in the institutes.

Driving Innovation to Small Businesses

Speakers noted that the Manufacturing USA institutes, in conjunction with the Manufacturing Extension Partnership (MEP) program, help move advancements in technology out to small firms.

Through its national network of affiliated manufacturing extension centers and field offices, MEP provides small and medium-sized manufacturers access to technical and management expertise.¹² Jennifer Hagan-Dier, director of the Tennessee MEP program, noted that small manufacturers contribute 42 percent of the nation’s production output. For these firms to be globally competitive, she asserted, “advanced manufacturing technologies need to reach them. Otherwise it simply won’t be adopted pervasively in the U.S. and the potential production efficiencies won’t be achieved.”

In his remarks, Nickolas Justice argued that it is essential for the institutes to be engaged with small and medium-sized manufacturers “so that you can educate them on what is coming, and about what problems it can be applied to solve.” Thus, he asserted, reaching out to small businesses is important to the mission of the institutes. “When you work with a MEP, you are instantly plugged into economic development in your state,” he said. “This is also why PowerAmerica embeds MEP staff in its offices—to bring all of them into the organization.”

Christopher Murray noted that in the GAO survey, small manufacturers cited networking opportunities as a key benefit of Manufacturing USA partnership. Membership helped them establish connections with both large and small manufacturers and suppliers and enabled them to obtain contracts they might otherwise not have been able to secure.

Networking with State and Regional Organizations

Mike Molnar emphasized that the institutes should not just conduct research. Rather, he said, “the ultimate goal of every successful institute is to really catalyze that regional manufacturing hub to have national impact.”

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¹² National Research Council, 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program, 2013.

Mark LaViolette asserted that although the assessment by Deloitte covered only the then eight operational institutes and these were still at an early stage of their maturity, their networking effects were already in evidence.¹³ Pointing to the dense network of collaboration depicted in the center of a diagram that connected the key actors, he observed that “although there are only 753 organizations that have formal memberships with these 8 institutes, there are almost 1,200 that have some sort of affiliation and want to be part of this. And then what you're looking at right there is, over 9,000 relationships amongst the organizations.”

Katie Stebbins, assistant secretary for technology, innovation, and entrepreneurship for the Commonwealth of Massachusetts, noted that her state links state funding with the Manufacturing USA institutes to foster development in “places where manufacturing used to thrive, and where manufacturing in some respects still does thrive. These are the real touch points around the state,” she said, “where we see the interaction between innovation and science.”

Susan Helper added that states and regions traditionally implement economic development strategies that entail attracting existing industry with tax breaks, encouraging a “race to the bottom.” She suggested that the Manufacturing USA institutes help states and regions evolve to a strategy of investment in shared assets, which helps create a “stickiness” so that companies will want to grow, thrive, and contribute to a locally based but globally linked productive cluster.

Developing the Skilled Technical Workforce

André Gudger observed that addressing workforce development is essential if advanced manufacturing is to take root on U.S. soil, because companies will move to where the skills and talent are located. Noting that many students do not view a career in manufacturing as adequately high-status or remunerative, he suggested that a key challenge is to educate students and workers about what manufacturing looks like today. “The next generation of shop-floors,” he added, “doesn’t look like they did 20 years ago.”

Brennan Grignon, senior advisor and program director in the Office of the Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy, noted that a decline in the number of people in manufacturing is coincident with an increasing number of new types of manufacturing jobs that are remaining unfilled. Even as the institutes develop and commercialize new manufacturing technologies, she stressed, “we have to ensure that we have a skilled technical workforce that can support at all points in the life cycle.” Grignon added that institutes such as America Makes, LIFT, and DMDII are

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¹³ Deloitte, Manufacturing USA Program Design and Impact: A Third-Party Assessment, January 2017. Access at https://www2.deloitte.com/us/en/pages/manufacturing/articles/manufacturing-usa-program-assessment.html.

identifying core employability and technical skills needed in many areas of advanced manufacturing.

Katie Stebbins agreed that making large investments in advanced manufacturing technologies and developing the skilled technical workforce go hand in hand. They remain big challenges, she acknowledged, even in a high-technology state like Massachusetts. Many traditional manufacturers, she observed, struggle with making long-term investments in technology and workforce training, focusing instead on satisfying their immediate hiring needs.

Jennifer Hagan-Dier emphasized the need for states to provide leadership in building a skilled technical workforce that can support locally based advanced manufacturing. Echoing a point made by André Gudger, she identified as one obstacle to this goal the fact that many students believe manufacturing work is dirty and dangerous. She argued that the institutes can play a role in improving the image of manufacturing and can work to enhance the portability and standardization of certifications and technical skills.

LESSONS FROM FOREIGN PROGRAMS

Introducing the panel on advanced manufacturing strategies around the world, Bill Bonvillian, a lecturer at the Massachusetts Institute of Technology (MIT), stressed the need to learn more about U.S. competitors’ ambitions, strategies, and investments. He observed that the world’s two most successful manufacturing nations, China and Germany, both are pursuing advanced manufacturing “all-out.” He added that other competitor nations, including the United Kingdom, Japan, Korea, India, Singapore, and now Australia, also understand the need to support advanced manufacturing. If the United States wants to stay in the game, he argued, it has little choice but to likewise pursue advanced manufacturing.

The Role of Germany’s Fraunhofer-Gesellschaft

Patrick Bressler, executive vice president of Fraunhofer USA, described Fraunhofer-Gesellschaft (the Fraunhofer Society) as a network of German institutes for applied research. Its primary mission is to perform contract research for German industry, particularly small and medium-sized enterprises, which translate basic research from universities and non-university research organizations into commercial products and industrial processes.¹⁴ Bressler added that the Fraunhofer Academy provides advanced manufacturing training to supplement the localized apprenticeship programs supported by German manufacturing firms.

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¹⁴ For a summary description, see National Research Council, 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program, 2013, Appendix A2: “Fraunhofer-Gesellschaft: The German Model of Applied Research.”

Bressler also described Germany’s Industrie 4.0 advanced manufacturing effort to advance digital production.¹⁵ He suggested that this effort, which is being coordinated across several Fraunhofer institutes, may provide a model for the U.S. institutes, which could use the Manufacturing USA network capability to support a cross-institute effort to achieve a cross-cutting advanced manufacturing strategy.¹⁶

The annual research budget of the Fraunhofer Society totals 2.1 billion euros, 1.9 billion euros of which is generated through contract research. While the Fraunhofer and the Manufacturing USA institutes differ in particular respects, Sridhar Kota nevertheless suggested that an important lesson from the German institutes is the role and long-term commitment of the federal and state governments in providing matching funds to reinforce private investment.

China’s New Manufacturing Strategy

Jonas Nahm, assistant professor at The Johns Hopkins University, explained that China’s recent indigenous innovation policy focused national government support on developing early-stage research capacity.¹⁷ This effort has not yet resulted in growing a strong early-stage research system, he said. Instead, Chinese firms—responding to incentives created by regional governments and state-owned enterprises—focused on implementing production advances, in many cases drawn from foreign firms, which had the effect of making China the largest manufacturing nation today in terms of output.

Under the new China 2025 strategy promulgated in 2015, Nahm continued, the national government’s funding priority is focused directly on advanced manufacturing engineering. Charactering this as “a very top-down policy framework that comes out of the State Council in Beijing,” he described it as reflecting a “shift in focus from the sort of bottom-up U.S. model of research-based innovation, as China saw it in 2006, to a much more German or Japanese model of trying to upgrade within manufacturing, rather than upgrade out of manufacturing.” He added that the China 2025 strategy includes a $3 billion Advanced Manufacturing Fund, which has already made investments in firms that produce electric vehicles and robots. The Ministry of Industry and Information Technology also has pledged to open 40 Manufacturing Innovation Centers.

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¹⁵ European Commission, Implementation of an Industry 4.0 Strategy: The German Platform Industrie 4.0, January 2017. Access at https://ec.europa.eu/digital-single-market/en/blog/implementation-industry-40-strategy-german-plattform-industrie-40.

¹⁶ Industrie 4.0 is similar to what is known as the “Industry Internet of Things.” See Martin Wollschlaeger, Thilo Sauter, and Juergen Jasperneite, “The Future of Industrial Communication: Automation Networks in the Era of the Internet of Things and Industry 4.0,” IEEE Industrial Electronics Magazine Volume 11, Issue 1, pp. 17–27, 2017.

¹⁷ Jonas Nahm, “Renewable futures and industrial legacies: Wind and solar sectors in China, Germany, and the United States,” Business and Politics, Vol. 19, Issue 1, pp. 68–106, 2017.

Reflecting on Nahm’s presentation, Bill Bonvillian commented that “if China drove to world production leadership while concentrating on an early-stage innovation model, imagine what it will achieve in an effort actually focused on manufacturing.”

A Need for Metrics

Concluding his panel, Bill Bonvillian argued that “tracking the metrics on our international competitors—especially Germany and China—and what they are moving on is going to be crucial, in part to understand our own position, but in significant part to understand lessons that we are going to need to understand and learn from abroad.” He drew attention to Jonas Nahm’s $3 billion estimate for the new China 2025 strategy’s Advanced Manufacturing Fund and Patrick Bressler’s estimate of 2 billion euros annually to support the Fraunhofer Society’s mission to link research to German industry. By comparison, he observed, the 14 Manufacturing USA institutes are funded thus far through cooperative agreements with the Department of Defense (DOD), the Department of Energy (DOE), and NIST totaling about $1 billion in federal commitments, matched by $2 billion in private funding, spread over a 5- to 7-year period.

In his policy roundtable comments, Sridhar Kota emphasized that other leading countries have robust and well-funded national strategies to support advanced manufacturing. In the United States, by contrast, the Manufacturing USA institutes and the MEP system are the only real policy tools currently available to build the nation’s industrial base. While these programs can be improved, Kota argued, “we should absolutely double down on them. How could we not afford to have funding for these new entities?”

RECENT ASSESSMENTS OF THE INSTITUTES

Even though the Manufacturing USA institutes are still young, they have undergone three major assessments to date: an external independent review by Deloitte that looked at the institutes’ role and accomplishments writ large, a review by GAO that examined more narrowly how the institutes are meeting their statutory obligations, and a review by AMNPO within NIST to define metrics for success and gauge how well the institutes are performing against these metrics.

In his presentation, Mark LaViolette, a co-author of Deloitte’s third-party review, outlined the major findings of that review.¹⁸ Overall, the review found that the institutes enabled companies to overcome fragmentation in the U.S. manufacturing sector that had blocked their ability to collaborate in furthering advanced manufacturing. The review also found that the institutes are addressing the skills gap. The report cites the case of the LIFT institute for

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¹⁸ Deloitte, Manufacturing USA Program Design and Impact, 2017.

lightweight metals, which, finding that about 200,000 production jobs were unfilled in its multistate region, expanded its workforce education role to help fill this gap. In general, LaViolette said, the review found that the institutes, and the network, appropriately embraced a “shared services” approach.

GAO’s Christopher Murray said his team examined the status of the Manufacturing USA network and the extent to which manufacturers and other entities have used the institutes.¹⁹ They also looked at the extent to which performance measures are in place to help the Department of Commerce assess progress toward achieving the program’s statutory purposes. A final objective of the GAO review, Murray said, was to gauge the extent to which the Department of Commerce has taken steps to coordinate the efforts of agencies that contribute to the Manufacturing USA program. Overall, he concluded, “We are consistently impressed by not only the complexity of the program but also how deliberately it has been developed over the course of the last few years, starting from the PCAST [President’s Council of Advisors on Science and Technology] reports in 2011 up to the present day, and there are a lot of moving parts.”

Mike Molnar reported that as of 2016, the Manufacturing USA program included 830 members, two-thirds of which were manufacturers, and that two-thirds of these were small manufacturers. Other participants included 177 universities, community colleges, and other academic institutions. There were also 105 other entities participating, including federal, state, and local government agencies; federal laboratories; and not-for-profit organizations.

In terms of financial leverage, Molnar reported that fiscal year (FY) 2016 matching was nearly 2:1—double that called for in the Revitalize American Manufacturing and Innovation (RAMI) Act of 2014. Of $333,808,455 in total institute expenditures, 66 percent of the funding came from nonfederal matching funds and 34 percent from non-program matching expenditures. These expenditures, Molnar said, fund all aspects of institute operation, including technology advancement projects, education and workforce training, and capital equipment. He added that, in terms of technology advancement, there were 191 active R&D projects at the institutes in FY 2016.

Finally, with respect to developing an advanced manufacturing workforce, Molnar noted that institute-led workforce programs reached nearly 28,000 students and workers, including 23,560 students in institute R&D projects, internships, or training. A further 3,386 workers completed institute-led certificate, apprenticeship, or training programs. In addition, 1,023 teachers and trainers participated in institute-led training for instructors.

SUGGESTIONS FOR IMPROVING MANUFACTURING USA

In addition to the observations of the above three formal assessments of the Manufacturing USA institutes, several workshop participants suggested areas for improvement. Some called for developing strategies to improve buy-in

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¹⁹ Government Accountability Office, Advanced Manufacturing, 2017.

and collaboration from federal agencies, state and regional authorities, and participating firms. Others called for stronger efforts to train the skilled technical workforce. Examples include:

• Study networking challenges. Susan Helper noted that beyond advancing new technologies, the institutes face challenges in facilitating the transition of these technologies to the marketplace. In some cases, rules and norms governing particular markets create silos, she observed, inhibiting fuller participation by small innovative firms, while in other cases, incentives created by extant company procedures may not be consistent with the companies’ stated goals of drawing in innovation. More work is needed, she argued, on designing the organization of firms and markets, including through the Manufacturing USA network, so they facilitate the growth of supply chains and linkages binding local and regional clusters. She called for a better framework to make the institutes effective prototypes of innovation clusters, which could then provide the economic infrastructure for regional technology-based growth.
• Get more industry buy-in. Jeff Wilcox called for speeding up and standardizing membership agreements, asserting that “it is disappointing how long it has taken us to get membership agreements concluded and to get projects going.” He proposed further that the manufacturing institutes be more industry-focused, observing that some institutes “tend to have an academic flavor and bent in terms of their initial members.” Third, he suggested that more institutes adopt industry roadmaps as a way of coordinating research teams and industry partners. “The existence of technology roadmaps is something that is not everywhere in all the institutes,” he said.
• Collaborate with the state and regional networks. Jennifer Hagan-Dier suggested that both the Manufacturing USA institutes and the state MEP centers could benefit from closer collaboration. By partnering more closely with MEP, she elaborated, the Manufacturing USA institutes could increase their visibility to manufacturers, researchers, and educators. She argued that greater collaboration also could help ensure the involvement of small and medium-sized enterprises (SMEs) in the processes and activities associated with informing and developing the research agendas of the institutes, increase SMEs’ participation in the research, and ensure the transition of Manufacturing USA research results to manufacturers for implementation.
• Demonstrate return on investment to the states. Katie Stebbins suggested that the institutes and the network more broadly pursue closer engagement with state policy makers and officials with respect to the institutes’ contributions to the regional economy. She emphasized the importance of articulating to state policy makers that

• there is a clear return on investment for the state cost share. This objective, she acknowledged, can create a tension between the real need to organize a complex national system around a series of emerging manufacturing technologies very quickly and the need to integrate these efforts with state economies and demonstrate tangible benefits to local constituents. Mike Molnar stressed the need for metrics that can be used to measure gains and rewards as one way to communicate the return on states’ investments in the institutes, especially as regards “cluster” gains and supply chain gains.

• Connect other R&D agencies to the advanced manufacturing agenda. Erica Fuchs suggested that that the institutes reach out more broadly to federal agencies that support R&D. While the institutes can fund platform technologies, she emphasized that the foundational work behind those technologies is also critical. This means, she suggested, that ways should be found to engage other R&D entities, through the development of research agendas and technology roadmaps with the institutes, which will be important to the success of an advanced manufacturing strategy in the United States.²⁰
• Engage veterans in manufacturing. Brennan Grignon observed that LIFT’s new pilot program targets servicemen and -women 6 months prior to their separation from the military. “Instead of waiting until post-separation for these men and women to figure out what they are going to do and what additional training they might need,” she suggested, “we provide them the training prior to separation. And then when they separate, they are employable.”
• Leverage government workforce training providers. Several participants proposed that institute programs to train the skilled technical workforce link with existing federal and state programs, including those supported by the National Science Foundation; the Departments of Education and Labor; and outside groups such as the Midwest German Chamber of Commerce, which is spearheading efforts to develop apprenticeship programs.
• Learn from each other. Mike Molnar observed that, while the institutes have a common framework, they are characterized by a diversity of approaches that adapt to the needs of their particular industries and technologies. Even so, he said, there is significant scope for them to learn from each other, and he expects that going forward, learning across the institutes will occur more rapidly. To this end, he noted that the program has established the Institute Directors’ Council

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²⁰ Relatedly, Bonvillian notes that “if ongoing federal mission agency R&D can focus more on enabling manufacturing technologies, that could be an important complement to the manufacturing institutes, helping create new manufacturing paradigms.” See William B. Bonvillian, “Advanced Manufacturing: A New Policy Challenge,” Annals of Science and Technology Policy Vol. 1, No. 1, p. 89, 2017.

THE SUSTAINABILITY CHALLENGE

Susan Helper expressed the hope that as the outcomes of the institutes become apparent, it will be possible to demonstrate the broad social and economic benefits of the overall program. There are now a “lot of cool institutes,” she said, and “they are working together.” But “they are small and their funding is not assured. So can we scale up these institutes and give them some kind of long-term lease on life?” Currently, institutes face a five- to seven-year term for federal support, which many feel may prove inadequate to sustaining their long-term impact.

Arun Seraphin asserted that for the Manufacturing USA initiative to survive, it must make its case as to why it is valuable to Congress, to decision makers in the Pentagon, to universities, and to incumbent firms. To this end, he said, the institutes need a communications strategy that pairs data needed for a structured study of economic impact with anecdotal information on the mission value and employment gains resulting from new technologies. He added that there is a “tension between wanting to do good science and technology and manufacturing research at a place like an institute, and then doing nothing to ensure that it actually creates American jobs in America.” While the institutes find support on Capitol Hill for their role in strengthening U.S. competitiveness and in ensuring access to trusted technologies, he warned that there will be “frustration if we start to see the intellectual property generated out of the institutes appearing in overseas production lines.”