The Equity Factor

Manufacturing Is Alive and Well in Greater Chicago

Talk all you want about the slow death of the Rust Belt and the globalization of the economy, but manufacturing is still thriving in the greater Chicago area. And the Windy City’s freight advantages make the region’s industry tick.

A new study from the Chicago Metropolitan Agency for Planning looks at the three pillar industries of what it calls the freight-manufacturing nexus: Manufacturing firms, freight carriers and the logistics providers that process and distribute all the production.

The large concentration of freight carriers and logistic firms in the Chicago metro area (also called Chicagoland) allow regional manufacturers to develop intraregional supply chains. The average American who didn’t study packaging in college doesn’t spend much time thinking about supply chains, but the tighter the supply chain — which is to say, when you’re not dealing with a supplier in Bulgaria — the less headache there is. Companies can act faster. Local manufacturers can produce quicker. The theory is that these small manufacturers can do more and better business and, hopefully, employ more skilled workers.

The clustering of both freight and manufacturing fosters specialization and the growth of smaller companies. We’re not talking about a young Henry Ford along the shores of Lake Michigan. Roughly 84 percent of the manufacturing cluster firms in Chicagoland employ 50 workers or fewer. And though the three core industries only account for about 10 percent of the region’s employment, they’re responsible for more than 20 percent of all jobs created between 2010 and 2012. In the wake of the recession, it’s a growing industry.

It’s easy to think of the global economy as an extension of The Jetsons: Everything just ends up on your doorstep. My limited edition pizza stone is already here! I just ordered it yesterday. But companies still use rail and they still use freighters. A friend of mine works on a freighter in the Great Lakes. They deliver coal and grains and gravel everywhere from Thunder Bay to Cleveland. Key components of manufacturing can’t all go by plane.

Electronics can go anywhere. But the metal fabrication in Chicago shows how regional-based supply chains make for better regional industrial output. It’s metal to machinery: The raw materials are turned into fabricated metals or materials (oftentimes “semi-finished goods and discrete parts”) and then eventually assembled into machinery. This all may sound very Econ. 101, but it’s indigenous to Chicagoland. The area has its own ecosystem. It’s not farming out the metal fabrication to, say, Eastern Europe. Or even Pittsburgh.

This offers manufacturers, again many of which are small companies, an economic advantage — they don’t have to shoulder the costs of transporting all those materials. The regional cluster doesn’t just speed up the time-to-market. It makes things cheaper. Everyone might think the Midwest is a flyover state, but the Chicago area is served by seven major interstates, six of the country’s seven Class I railroads, O’Hare airport, the Great Lakes and the Mississippi River. The region isn’t tethered to one or two forms of moving goods.

It’s not all rosy in Chicagoland, though. The region, like the rest of the country, is facing issues with financing infrastructure improvements, which could have a significant effect on all the aforementioned modes of transporting goods. The report’s authors also make a passing mention that it is one of the nation’s most congested areas, a problem that extends to both travel time and productivity.

The recognition of Chicago’s so-called freight-manufacturing nexus is a nice reminder that not all “makers” are milling organic soap or fabricating bespoke copper bathtubs. In a recent speech at the former Pfizer pharmaceutical factory in Brooklyn, New York Mayor Michael Bloomberg celebrated the ascendance of the latter category of makers, remarking that the city’s manufacturing class had shifted into an artisan class.

“This is once again a manufacturing hub,” Bloomberg, owner of one $13,000 hand-made copper tub, told a crowd gathered at the former factory. “Only now it’s an incubator for a new generation of craftsmen and women, who are making everything from furniture and fashion designs to kimchi and cookies, to software and 3-D printers.” (For the record, Bloomberg’s bathtub was imported from Normandy, France.)

There are plenty of artisans in Wicker Park and pioneering young chefs in Logan Square. But as this report shows, manufacturing — and more importantly, regional manufacturing — is alive and well in Chicago, up and down the supply chain.

The Equity Factor is made possible with the support of the Surdna Foundation.

Bill Bradley is based in Brooklyn. His writing has appeared in The Daily, Bloomberg Businessweek, GQ.com and Vanity Fair, among others. Follow him on Twitter @billbradley3.

Tags: economic developmentequity factorchicagomanufacturing