By Angela Rose | Mar 20, 2023
Whether you've been doing business in Arizona for decades or have only recently launched a company in the Grand Canyon State, you're likely aware of Arizona's meteoric rise as an integral part of the U.S. manufacturing economy. Contributing more than $37 million in GDP in 2021 and making headlines across a wide range of industries for months on end, the state led the nation with the fastest year-over-year manufacturing job growth in 2022 -- adding more than 15,000 manufacturing positions.
"Arizona has become one of the top states for manufacturing in the nation," David Garafano, executive director of AZ MEP told us in a recent interview. "We see companies from all over the country and across the globe setting up shop in Arizona. The business-friendly climate, attractive tax structure, relatively low cost of doing business, proximity to Mexico, and freedom from natural disasters make Arizona very attractive."
AZ MEP, which stands for Arizona Manufacturing Extension Partnership, is part of the MEP National Network, a private-public partnership that aides U.S. manufacturers with the purpose of fueling growth in and advancing U.S. manufacturing. The network was created by the Commerce Department in 1988 and falls under the purview of the National Institute of Standards and Technology.
"Some MEPs are part of the state's economic development organization," Garafano explains, "like here in Arizona. Some are standalone nonprofits, and others are part of their state's university or community college system."
Regardless of structure, all MEPs have the same goal: to aid their state's manufacturers. In the transcript below, Garafano takes us deeper into the mission of AZ MEP, the services it's providing, and how local manufacturers are benefiting.
CompanyWeek: How would you describe the current opportunities and challenges Arizona manufacturers are facing?
David Garafano: AZ MEP's primary focus is small- and medium-sized manufacturers, which make up about 97 percent of the state's manufacturing base. These smaller companies are the suppliers to large manufacturers not only across the U.S. but all over the world -- and the opportunities are really bountiful.
We have industries like aerospace, defense, and semiconductors that have had a presence in the state for decades and are still growing. And then we have a lot of new industries like electric vehicles, autonomous vehicles, high-capacity batteries, biomedical devices, and advanced manufacturing that are also growing and creating more opportunities for Arizona suppliers.
As far as challenges, I think they're similar to what we see in other states. Things like rising interest rates and the overall slowing down in the economy, although manufacturing in Arizona has remained pretty strong.
CW: So, what role is AZ MEP playing in helping manufacturers combat these challenges and embrace these opportunities?
DG: The mission of the Arizona MEP is to make every manufacturer the most successful business it can be. Everyone on the AZ MEP team has decades of experience in industry with a focus on engineering, operations, and business leadership. So, our advisors understand the opportunities and challenges facing our clients because they've been there, and that experience helps them work with clients to determine the best solutions for their company. We'll never tell the client what their goals should be; We simply work to understand the client's goals and how we can help achieve them.
CW: Let's take a look at some of your services. How are AZ manufacturers benefitting from them?
DG: Our goal is to help manufacturers with anything they need. If a client needs something that we can't deliver, we'll tell them up front, but that hardly ever happens. We tend to think of our services in two broad categories. The first is on the business side, and those services include things like strategy development, business planning, financial management, R&D tax credits, organizational development, leadership development, sales and marketing, training, staffing, workforce development, and cybersecurity.
An example is the skills mismatch challenging many manufacturers in the state. A lot of people think of it as just a shortage of workers, but there are plenty of workers out there. There's just a mismatch in skills. The AZ MEP provides a variety of workforce services that have been really successful in helping employers find and recruit new employees and also in training and educating existing employees to develop the skills they need. We've also seen these efforts do a good job of helping our clients keep their labor costs under control.
The second category of services we offer falls under operational excellence, which covers any activity that improves manufacturing operations. These services include Lean manufacturing and continuous improvement, quality management, supply chain and inventory optimization, automation and robotics, safety, and technology planning.
Our performance is measured though client input that is collected by a third-party survey company contracted by NIST. This assessment includes questions about how MEP engagements help the company grow sales and profits, reduce costs, make new investments, and improve competitiveness. In fiscal year 2022, our clients reported $80 million in new sales and retained sales, $26 million in new investments, $7 million in cost savings, and 585 new jobs. So, that's a pretty significant impact.
CW: Are these services free to manufacturers or how is the organization compensated?
DG: As the saying goes, there's no free lunch. We're partly funded by a federal grant and partly funded by the fees that clients pay for services. But we're not out to make a profit, and MEP services tend to be lower cost than services available elsewhere.
When I think about my 20-plus years of experience working with manufacturers, I've never seen a value proposition as attractive as that of the MEP system -- and not just here in Arizona but nationwide. We're structured to be easy to do business with, and we use fixed fee pricing for all projects along with a well-defined scope of work so there are never any surprises. We also discuss the potential impacts with the client before any project starts. And if it appears that there isn't enough benefit expected, we'll advise the client not to do the project.
CW: Why do manufacturers choose to work with AZ MEP rather than other advisors or consultants?
DG: In my experience both with smaller companies and bigger companies, many people have had bad experiences with consultants. Many of those consultants are unprofessional and just try to sell whatever service they have regardless of the company's true needs. But the AZ MEP is different. As I mentioned, we're not out to make a profit. And because we have such a broad set of services, we feel like we can provide unbiased, objective advice with the sole focus of putting the client's interests first. If it's not going to benefit the client, we have no interest in doing it.
We also find that clients sometimes use MEP services because they need specialty expertise but don't have a big enough need to justify hiring a full-time employee. And sometimes our larger clients have the in-house expertise, but they don't have enough of it and not enough capacity to handle all of their projects. They supplement their in-house capabilities with MEP experts.
Many of our clients use a variety of our services and have multiple project underway at any given time. Other clients only need help once in a while. Our goal, overall, is to be there to help them with whatever they need and whenever they need it.
CW: How many manufacturers have used AZ MEP's services? Can you provide any demographic details?
DG: More than 400 Arizona manufacturers have benefitted from AZ MEP services, and those companies range from startups to fourth-generation family-owned businesses to Fortune 100 public companies. It's the full spectrum. Our smallest client is a two-person machine shop and our largest has more than 10,000 employees. The typical client is probably between 20 and 200 employees.
CW: Anything else our readers should know about AZ MEP and how you can help them?
DG: I'd like Arizona manufacturers to remember that AZ MEP is here to help whether they have an opportunity or a challenge that might benefit from additional support. Contact your MEP Advisor if you have one, or call us at (602) 845-1256. You can also email us at firstname.lastname@example.org or visit our website at azmep.com and fill out the contact form.
Angela Rose is executive editor of CompanyWeek and the Arizona Manufacturing Report. You can reach her at email@example.com.