Holding Their Own – Smaller NJ Manufacturers Carve out a Niche

Martin Daks | NJBIZ

There are thousands of manufacturing companies in New Jersey, directly employing close to 250,000 workers, accounting for nearly 90 percent of all New Jersey exports and contributing more than $30.9 billion to New Jersey’s GDP, according to Choose New Jersey, a nonprofit economic development organization. Many of these businesses have 34 or fewer employees, according to Sally White, director of business development at the New Jersey Manufacturing Extension Program.

“But plenty of them are mid-sized and large too,” she added. “There’s room for all of them here. At NJMEP, we work with a variety of companies, and we focus on three ‘pillars’ or foundations: delivering operational excellence, providing them with a suite of business-grade consulting and other services, and a focus on workforce development.”

A company’s operating model will often influence the size of its workforce. At Zago Manufacturing, a family-owned, 26-year-old Newark-based company that manufactures self-sealing screws, nuts and other components primarily for the military and aerospace industries, Chief Executive Officer Gail Friedberg Rottenstrich said her employee base of 22 is just the right number.

Smaller can be better

“Sometimes, smaller is better since we’re very hands-on,” she noted. “We can also quickly determine if we’re at the right size, since we track metrics like overtime, or a backlog of orders and we can quickly respond. So far, though, at 22 employees we’re able to fill orders on time and keep a lid on expenses.”

Still, figuring out the right size “is an art, not just a science,” Friedberg Rottenstrich said. “Instead of looking to expand our skilled labor force, we’re focusing on making them more efficient.”

One of the drivers behind her stay-small approach is the difficulty in finding skilled labor. After all, the manufacturing sector nationally got a bad name after it experienced a “precipitous and historically unprecedented decline in employment in the 2000s, which coincided with a surge in imports, weak growth in exports and a yawning trade deficit,” according to a 2018 research paper, Understanding the Decline of U.S. Manufacturing Employment, by the W.E. Upjohn Institute for Employment Research, a not-for-profit research organization.

Manufacturing employment registered strong growth after the end of World War II, peaking at more than 19 million in 1979, according to the paper. But then, as production shifted to lower-cost countries like China, South Korea and Vietnam, there was a “decline in manufacturing employment in the 2000s” that was “historically unprecedented.” Since 2000, manufacturing employment plunged by nearly 5 million, or more than 28 percent, as the number of manufacturing establishments dropped by more than 78,000, a 22 percent decline.

At survivor companies like Zago, employee count is a balancing act. Take on too many people, and excess employees could be idle. “But if you have too few, people are stressed,” said Friedberg Rottenstrich. “That’s why keep monitoring operations, to be sure we’re at the right headcount.”

The company also leverages efficiencies. “We keep our lead time short, maintain a reliable supply chain, and keep our inventory at lean levels,” she added. “At one time we had excess inventory, but NJMEP has helped us and our employees with training in lean practices. Besides keeping our inventory at lower, cost-saving levels, the training has helped our employees to be more efficient and reduced our turnaround time, which is important in filling customer orders more efficiently.”

Different sweet spots

Another Newark-based manufacturer, Unionwear, has hit its own sweet spot with about 175 employees. “Many businesses in our industry, textiles, have closed or moved out of New Jersey, which means there are a lot of trained textile workers,” said Mitch Cahn, a former investment banker who started the company — which primarily makes hats and bags for the U.S. military and other customers — in 1992. The shop, as its name implies, is unionized and uses that as a selling point for the military, politicians, unions and corporations that are either required to buy “made in the U.S.A.” products or want to burnish their image by doing so.

And as more states and localities raise their minimum wage, the competitive gap between union and nonunion pay is shrinking, according to Cahn, president of Unionwear who also serves as a director of the Newark Workforce Development Board. “We’re one of the largest employers in our zip code,” he noted. “The fact that we’re near a train station helps. Wages may be lower down South, but you don’t have the availability of skilled labor and access to advisors and other resources that we have here in New Jersey.”

The company gets about 20 job applications a week, but for now Unionwear doesn’t plan to add to its workforce. “All of our output growth will come from productivity gains,” Cahn said. “The textile industry has been slower to move to automation, compared to some industries, but we’re work-ing with NJMEP and others on lean manufacturing and other improvements. We want to produce 30 percent more goods with the same number of people.”

Unionwear is using smarts, instead of machines, to reach that goal. “We’re leveraging information technology to work more productively, with more efficient raw material ordering and tracking,” he noted. “And we’ve reengineered the production area to make it easier for machine operators to do their [sewing and assembly] work more efficiently.”

One big change is the layout of the factory floor. Forget about the laser-edge columns of sewing machines that used to characterize the typical textile factory. “Today, our workstation arrangement looks like it’s set up in a haphazard pattern, but it’s actually done in a way that lets employees manage their work-in-process inventory more efficiently. They can reach their pieces and feed them on to the next station with less supervisory management and less motion. Basically, they finish a task and it falls into a bin that’s easily reached by the person responsible for the next stage of the process.”

Of course, being relatively small means that overhead is spread over a narrower base. But that doesn’t worry Cahn. “The benefits of being in New Jersey outweigh the savings we’d get from moving to Pennsylvania,” he noted. “Also, we own our 70,000-square-foot building, and the property taxes are high, but they’re not a big percentage of our overall expenses.”

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