Articles

Houston manufacturing has the wind at its back. Are storm clouds gathering?

By Bart Taylor, GHMA

Consider why Houston is America’s most desirable destination to locate or relocate manufacturing:

Now consider why companies might choose to go elsewhere – or consider relocating: 

Texas ranks 8th in the US in average manufacturing wages, or, as I wrote in a previous column: “The company it keeps in the top 10 have a reputation for being higher-cost states to do business”:

Wage growth in Texas is all about its changing industry makeup. Industry employment in Houston is dominated by fabricated metal products and equipment manufacturing, mainly on behalf of oil and gas customers. For that reason, wages in Houston are moderate compared with other southwest states. Even then, average wages are Top 10-ish:

Texas Manufacturing Industry Wages

And with more "advanced manufacturing" jobs coming to Greater Houston, average wages are poised to rise. Good for the pharma, electronics, aerospace and semiconductor labor markets; challenging for current Houston manufacturers competing for the limited amount of talent to go around.

Technology is a game-changer – for Houston manufacturers as much as any. Or, as AI summed up for me, US manufacturing is  “navigating significant challenges that require adaptation and technological innovation to sustain growth.” 

The rate of technology adoption is a difficult statistic to quantify, but generally correlates with the type of manufacturing, and industry. But to remain competitive, anywhere, manufacturers of every stripe must continue to find ways to invest in new equipment – and expertise. In the future, companies will also be answering to customers: automation will be a requirement, not a luxury.

It’s fascinating to come across manufacturers that are crossing the tech divide – in the same building. We witnessed one example in a GHMA site tour at Star Precision. CEO Akil Umatiya would gladly give you a personal tour if you asked. It’s worth it.

Houston is the place where products get made – in part, because of the sheer size of its manufacturing ecosystem. 

It's also important that OEMs, brands, and product manufacturers can find what they're looking for, and in Houston, it can be a challenge. Better supplier mapping and sourcing will help. To be fair, "supply-chain management" is a work in progress across the US -- not just in Houston. And despite investments in digital tools and a national effort to connect buyers and suppliers, one "model" has yet to emerge that's proven to be a game-changer. 

Communities able to match capabilities with demand will benefit. In the competition for business, smaller is sometimes better. Improving the connectedness, and transparency, of Houston manufacturing will go a long way.

Roughly four million Texans – more than in any state except Florida – may see their health-care premiums increase at the end of 2025 as current ACA parameters change. The financial burden will certainly put added pressure on small and midsized manufacturers that today, largely share the health-care expense burden with employees.

Houston has also been spared, thus far, the extreme disruptions facing other regional outposts where immigrant populations are heavily relied upon – like California’s agricultural communities. But let’s call it like it is: US immigration policy is broken, and until it’s reformed in meaningful bipartisan ways, business stands to suffer.

Food manufacturing is Texas' second largest industrial base of manufacturing employees, and Houston’s fourth largest, meaning that Texas’ leading manufacturing ecosystem looks up to other outposts when it comes to food manufacturing.

Houston’s bluechip food and beverage brands and co-mans are noteworthy – from Saint Arnold Brewing to Goya Foods to Consolidated Mills.

But look around Texas and notwithstanding the COVID slowdown, food and beverage is a growth sector that bleeds innovation and attracts a new generation of manufacturing employees. 

Houston’s epicurean chops are well established. Competing with Austin's entrepreneurial food and beverage cluster and DFW’s impressive bluechip roster, among others, for F&B manufacturing jobs and influence, should be a priority.  

Bart Taylor is executive director of the Greater Houston Manufacturing Association. Reach him at [email protected]. 

How one Houston-area machine shop is changing with the times – and winning

By Bart Taylor, GHMA

Jim Cheatham rode out of Odessa and a family history of oil field machining and services in West Texas to stand up Minco CNC in Conroe, in 1978. Good fortune favored Cheatham with a bank loan, warehouse space, and Wayne Gentles, a machinist who helped manage the initial workload and is still with the company today.

It follows that Jim’s son, J.B. Cheatham, found his way through the shop growing up and is today General Manager, leading the company into a bright future. “My Dad and Wayne, they’ve built this business together,” Cheatham says. “I came here as a kid, obviously, working in high school and everything. And so I learned a little bit, but not much,” he laughs. 

He learned enough, it turns out, to see what was important. “This business has had the same customers and made a lot of the same parts, the entire time. That’s changing; we're making completely different parts now, but we have the same basic customers, which is amazing,” he says. “I don't think that's something you see very often.” 

Yet an oil and gas customer base is inherently volatile. “There have been some tough times. I know in the mid-80s, it was bad here and he almost lost the business, just with the lack of work and cash flow and all those problems. The business has grown, it's contracted, it’s grown, based on external forces around us, like downturns in the 2016 timeframe. And COVID obviously hit us hard,” Cheatham says.

But if change is constant, for the Cheatham’s, it’s also a guiding principle. “Through all that time, we've endured. And we've endured because one of my dad's main premises that he taught me since I was a little kid, was that if you don’t change, you die,” J.B. says. “The thing is, we all know that's true, but it's not easy to do. And so we have a really, really good change mindset here because of him. Everybody here knows we just have to change — or we don't make it.”

As a result, Cheatham keeps tabs on a shifting industrial profile in south Texas that’s presenting new opportunities — and risk — as contract manufacturers like Minco diversify into new industry supply chains.

“Texas is changing,” Cheatham says. “Oil and gas is always going to have the biggest flag planted in the ground around here, no question. But with the advent of AI, AI plants coming in, SpaceX and the massive amount of work they're pumping into this market — even companies like Apple are coming back here in a way that impacts us. One of our programmers left us for Apple. He works in Austin at a job shop that's owned by Apple; he's a programmer there and runs machines!” That was also news to me.   

Like so many companies I’ve encountered over the years, Minco is focused on execution over externalities to tackle a shifting marketplace. Or as Cheatham tells me, “We don’t have an aggressive marketing plan here. More an emphasis on quality, (on-time) delivery, and safety, to attract new business.”

For J.B., looking inward has also involved a personal “lean” journey — with Paul Aker’s 2 Second Lean — that’s transformed the company. “I was going through all these books, and I came across 2 Second Lean, a really simple book. I read it and thought, ‘you know what? I can teach this in the shop. I can implement what he's talking about in this shop.’ This is not (as complicated as) the Toyota Way.

“I just poured myself into it because I knew that that's what we had to do to get out of COVID. I knew we had to make really quick changes really fast and get lean and get really strong with our elimination of waste,” he explains — including stuff that was just taken for granted. “We probably had three trash bins of things that we threw away over two years, that we walked by a million times and didn't notice. It's all out of here now. The only things in this shop are the things that we use to make parts. We created probably 2,000 to 3,000 square feet of floor space, just eliminating waste, which allowed us to bring in two more machines.”

With Minco’s internal ops more efficient than ever, I asked Cheatham what his biggest challenges were in pursuing new opportunities. Workforce? Expertise?

“Yes, a little bit of that.” Cheatham says. “Our biggest challenge would be capacity. We have a finite amount of capacity. To build another building in Conroe would be a major deal because Conroe is not even allowing building permits right now because of a water shortage. 

“But we have amazing expertise here. We don't have a lot of employees. We have a lot of really good employees,” he says. “That’s our mentality: we ask our people not only to do 3S and 5S (lean concepts – 5S is sort, straighten, sweep, standardize, sustain), but we ask them to learn how to program and learn how to deburr their own work. We teach them how to multitask to get things through with a lesser amount of people,” he explains.

Cheatham thinks the current shop set-up could handle more, as opportunities materialize. “The way we're set up with our tooling and our equipment, we could do a lot of different things on all of our machines. We're doing a lot of high mix, low volume manufacturing — able to do a lot with the machines that we have.” he says. “The biggest question for me would be, ‘can we deliver what a customer needs and be able to meet their standards, in a reasonable time, with the people we have?”” he asks. 

I asked Cheatham to answer his question and speculate on growth over the next 18 to 24 months. “We have a growth plan in place, and it extends out about that amount of time. And that's to increase our revenue by 25% — to add three shop floor employees, machinists and welders. As far as the fastest opportunity for growth here, it's in our welding and fabrication area. We are doing very well in that area,” Cheatham says, “and I'd like to see that area of our company at least double. We have the equipment. We just need a couple more people.”

It seems well within Minco’s reach. It’s also clear that collectively, Cheatham, Minco and other fabricators, finishers, molders, and assemblers in greater Houston (including GHMA’s growing fabrication-to-finish membership) can manage a growing workload today. It’s a reality that runs counter to a national narrative that America’s industrial base is seized-up by a lack of employees. 

Manufacturers need talent. But in Houston, OEMs and brands can likely get anything made, now. It’s why the national buzz around Houston manufacturing is real.

Bart Taylor is executive director of GHMA. Reach him at [email protected]