NorthBay biz takes a look at Santa Rosa MFG—an alliance of small manufacturers with plans to expand its growing North Bay support system.
On a sunny day in late February, an Italian flag snapped in the breeze outside the headquarters of Thermal Technology Inc., located in the Airport Business Park at the north end of Santa Rosa. Why the flag? An important visitor was upstairs in the conference room—an Italian inventor who figured out how to convert rice hulls into a form that can then be used to make silicon. Matt Mede, president/CEO of Thermal Technology, wants to partner with the inventor and hopes to build a prototype plant somewhere in California to produce silicon inexpensively for use in photovoltaic panels.
Mede’s game-changing idea may sound surprising to those who think the North Bay economy is based on wine and food, but he stands alongside 180 other small and midsized (non-winery) manufacturers in what’s being called the “Santa Rosa Corridor,” an innovation incubation zone that includes Marin, Sonoma and Napa counties (about the same size, by the way, as a place called Silicon Valley, that’s seen some innovation of its own).
Almost a year ago, Dick Herman, a technology and manufacturing veteran (IBM, Xerox Parc), approached the late Mike Hauser, then-president/CEO of the Santa Rosa Chamber of Commerce, with an idea for a group that would promote growth, retention and attraction of small manufacturers to the region. “Mike got it immediately,” says Herman. “I took him to lunch and told him we were going into lean times, and that the people who would lead us out of it were the midsized manufacturers who’ve dealt with economic down cycles before—and always come through them.”
According to Herman, Hauser was instrumental in garnering the Chamber’s support. With seed money from the Chamber, Herman began to contact local manufacturers, put together a board of directors, establish a nonprofit organization and start helping manufacturers connect and market themselves. The result is Santa Rosa MFG (SRMFG), a name that refers to Santa Rosa as the northern hub of the 101 corridor. “Our businesses aren’t defined by their municipalities,” says Herman. “We’re bound together by our proximity to one of the greatest economic regions in the world—the nine-county Bay Area, which has an economy the size of Saudi Arabia’s.”
The SRMFG mantra is “3-2-3,” which translates to: three years, 2,000 more jobs, $300 million of new revenue growth. Within three years, the group hopes to bring in 2,000 new manufacturing jobs to the area by attracting new companies that recognize support for small manufacturers and by helping existing companies grow. If that happens, SRMFG predicts a growth in local manufacturing revenue of $300 million.
Mede and Dean Kerstetter, vice president of operations at Thermal Technology, do more than dream of cheap solar panels. The firm makes highly specialized vacuum furnaces that produce heat up to 3,000 degrees Celsius for a wide variety of scientific and manufacturing uses. The firm sells custom furnaces all over the world; between 60 and 70 percent of orders are exported out of the country.
“My interest is innovation,” says Mede. “We specialize in know-how. We’re not just an equipment maker, we’re an enabler to a high-tech solution.” The firm has been in existence, in various forms, for more than 60 years, and Mede has owned it for two years.
Kerstetter was initially contacted by Herman and became interested in SRMFG while he was with another company; he brought his involvement with him when he joined Mede’s company. “I joined the SRMFG board last August,” says Kerstetter. “I’d been involved in another Chamber committee and saw the value in participating in a group that would promote itself. Our purpose is to connect as manufacturers and grow our businesses.”
Making connections
The Santa Rosa Chamber helped get SRMFG started because, “We felt that manufacturers would benefit from the opportunity to collaborate and work together,” says Sue Nelson, chief operating officer of the Chamber. “What we’ve witnessed is what we had hoped for: They’re sharing mutually beneficial information. If collaboration can improve conditions for manufacturers, then that will help improve the business climate for all businesses.”
SRMFG members are encouraged (but not required) to join the Chamber, in fact they weren’t even required to pay dues at first. “We wanted to focus on growing the group and identifying member priorities,” says Herman. “Those are clear now: Help members grow, reduce costs and ‘become a manufacturing center’ for the region and California.”
A membership drive that began this March will focus on paid membership. “The original 30-plus members all knew they’d be asked to start paying dues this year,” says Herman. Dues will range from $375 to $650 for six months, depending on the size of the company. Membership dues pay for meeting costs, online system expenses, and for part of Herman’s time dedicated to the group; he’s created a website (www.santarosamfg.com) to promote awareness of the organization, attract new members and “connect them together” to help them grow their businesses and develop new sales leads.
During a video press conference posted on the website, Herman says: “Today, the conventional view is that manufacturing is done offshore. Sonoma County manufacturers have a different outlook. By innovating their products and processes, focusing on higher quality, rapid turns, exceptional customer service and helping larger firms to whom they sell redesign their supply chains, Sonoma County manufacturers are reshaping the networked economy into one in which there are very good reasons to innovate and grow here in Northern California.”
One of the emerging strengths of SRMFG is its diversity. Vendor relationships are being established between large and small firms, with small companies benefiting from a new market and larger companies finding innovative small shops that can produce high quality products quickly.
Strong support
Dave Ennis is vice president of sales and contracts for Santa Rosa-based Icore International Inc. Icore has decades of experience in aerospace contracting, supplying customized conduits that protect sensitive equipment on aircraft. Icore products are in aircraft equipment built by Boeing, Bombardier, Sikorsky, Goodrich, Embraer and more. Icore products, according to Ennis, “have to be very precise and very robust, like landing gear that has to cycle tens of thousands of times.”
Ennis says he likes the idea of helping smaller firms succeed through SRMFG. To that end, he’s helping some of his suppliers get certified with companies like Boeing. Herman adds: “There are a good 10 to 12 small machine shops around here that aren’t well-known by larger defense or aerospace firms, but these shops do very high-quality, precision work. Local aerospace systems contractors, like Icore, like to groom local shops, because that, in turn, helps them stay competitive.”
On the other end of the benefit spectrum, Ennis notes that the North Bay has fewer large manufacturers and less of the infrastructure and manpower needed to support them than areas with more concentrated manufacturing activity. “Two-thirds of our top management has worked for Fortune 500 companies,” he says. “When we look for the kind of support you find in Los Angeles or other places, there’s not as much expertise here. [SRMFG] gives us the synergy to share ideas and negotiate with service providers.”
Debbie Ross, president of Clear Focus Imaging Inc., agrees: “There’s strength in numbers. I think the group can only help strengthen what we can achieve. We’re kind of a silent sector, and until Dick brought us together, we were fairly isolated.
“I have great hopes that the networking possibilities, buying power and voice that the group can offer will help all local manufacturing companies and bring new business opportunities to the area. With the trickle-down effect, this will help every aspect of the region’s economy.”
Herman and the SRMFG board are emphasizing buying power as the organization develops. “We want to help members negotiate workers’ compensation, health care and IT support on a larger scale,” he says, noting that small manufacturers can lower these overhead costs by banding together.
Pierre Miremont, founder and CEO of Architectural Plastics in Petaluma, is one of the original SRMFG members. He likes the interactions with other manufacturers. “We’re trying to help one another. We talk about common issues like workers’ comp, and we try to help each other alleviate common problems.”
“Manufacturers tend to ‘Do what we do’ and keep our noses to the grindstone,” Miremont says. “This group is trying to get people and local governments to understand that manufacturing isn’t dead. There are still plenty of us around. There are a lot of interesting businesses around here.”
One of those interesting businesses is SRC Cables. Rudy Hirschnitz founded the company in 1988 while he was working at Hewlett-Packard (now Agilent). Hirschnitz saw HP getting bogged down waiting for certain cables, so he started SRC Cables in his garage and started building the cables for HP. At its peak, SRC (it stands for Semi-Rigid Coaxial) employed 70 people, and HP was its biggest customer for his first few years. SRC took a hit during the telecom crash and went down to 12 employees, but it’s been growing steadily since and now employs 20 people.
Rudy’s son, Dan Hirschnitz, is chair of the SRMFG board. “In addition to trying to see how we smaller manufacturers can get better health care, workers’ compensation and lease rates, we have objectives relating to marketing. Dick [Herman] is spreading the word that small manufacturers are still thriving and growing in the Santa Rosa Corridor,” says Dan.
One of the reasons SRC suffered during the last downturn was that it relied too much on just three big customers. Dan and Rudy have since made a strategic decision to diversify, and now the company’s largest customer is just 8 percent of sales. They see their work with SRMFG as supporting that diversification. “Dick worked on our website, and we’re getting more hits than before,” says Dan.
According to Hirschnitz, SRMFG members will benefit from “personal development issues as well. We want to share each others’ experience—what works, what doesn’t.” He also sees a larger economic benefit. “In a three-year period, we think we can not only attract new companies to the area but encourage others to stay. We want to maintain jobs here and maintain dollars here. This area can’t survive on sales tax alone.”
Justin Davis, COO/GM for Volume Precision Glass, is also a SRMFG board member. Davis says: “Sonoma County—and Santa Rosa, specifically—has never been manufacturing-friendly; it’s been mostly geared toward the service industries.” Davis wants to help change that via SRMFG. “It doesn’t matter if you’re a 400-person company or a one-man shop, we want you on board. Remember, HP started in a garage.”
Mission and Vision
SRMFG Mission Statement: “Our mission is to enhance the competitiveness of Santa Rosa Corridor manufacturers by helping them to increase productivity, new capabilities and prospects and by improving the understanding among policymakers, the media and the general public of the vital role of small to midsized manufacturers to our local communities.”
SRMFG Vision Statement: “Within the next three years to become known as the center for manufacturing in the nine county Bay Area and to be well-known throughout California as a center of manufacturing excellence. Manufacturing talent will be drawn to the facilities, resources and job opportunities available in the Santa Rosa Corridor.”
Do the Math
According to SRMFG figures, there are more than 100 manufacturing firms in the Santa Rosa Corridor, representing about 4,000 employees. Most of these jobs pay well above minimum wage, translating into a significant multiplier effect as those employees participate in the local economy. From a global view, SRMFG says that the local average in sales is about $150,000 per employee, representing $600 million a year in combined economic output. By contrast, a recent Sonoma County Economic Development Board report states that total wine grape values for 2005 were $430.5 million. For that same year, the EDB estimated tourism earnings for Sonoma County to be $356.1 million.
