June, 2016

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AbelConn LLC
American Custom Rotomolding
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Control Assemblies 
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Lifeworks Services 
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Article Index

HR Insights - Amy Karrow, Engineered Products Company
Article by: Amy Karrow

Amy Karrow is HR Manager at Engineered Products Company in Minnetonka, MN and has been with the company since December 2005.


The 3 Components of Successful Continuous Improvement
Article by: Dave Deal

Continuous improvement is often described as a journey. We often do not know exactly where we are going or how exactly we will get there.


MA Advisory Board - Tim Keran, Altus Business Advisors
Article by: Tim Keran

Tim Keran is Owner of Altus Business Advisors. You may remember him as the owner for 29 years of Western Graphics in St. Paul.


Ask the IP Attorney
Article by: Patterson Thuente IP

If you have a burning intellectual property questions, you can ask it by visiting the Q&A web page or emailing Tye Biasco at biasco@ptslaw.com.


IC-DISC: The U.S. Exporter's Dream
Article by: Don Keysser

One of the best kept secrets in the U.S. exporter world is the IC-DISC – Interest-Charge Domestic International Sales Corporation.


Commercial and Industrial Degreasing
Article by: MnTAP

Most businesses perform some kind of degreasing or industrial maintenance. Solvent degreasers and some cleaning products contain volatile organic compounds (VOCs) that produce smog in our atmosphere and contribute to respiratory distress in sensitive populations.


Is the Industrial Real Estate Market Primed for a Slowdown?
Article by: Mike Bowen

Commercial real estate professionals often talk about the market in terms of how they "feel." Metrics and statistics are crucial; however it is our job to advise clients not on what has happened in the past but what is going to happen.


MN Economic Outlook
Article by: Dr. Ernest Goss

The May Minnesota Business Conditions Index climbed to a solid 54.3 from 49.8 in April.


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HR Insights - Amy Karrow, Engineered Products Company

Amy Karrow is HR Manager at Engineered Products Company in Minnetonka, MN and has been with the company since December 2005.

Engineered Products Company produces specialty lighting and electrical products and has a division called PDU Cables that sells power distribution unit cables (PDU's).

Where did you receive your HR training/experience?
I started in social services working with organizations that focused on community based training of individuals with varying degrees of abilities. We had enclaves in the hospitality industry. I was primarily engaged with community-based training of individuals that were dually diagnosed with both mental health and developmental issues (e.g. someone diagnosed as bi-polar and developmentally challenged, etc.). I switched gears working on a degree in social services to focusing Human Resources management back in 1995. I worked as an HR Manager, HR Director, Corporate HR in the hospitality industry until I switched gears in 2005 when I decided to work for EPCO, that was a smaller growing company that offered a different experience in manufacturing. Since then I’ve learned the in’s and out’s of manufacturing and everything that surrounds getting product out the door including Lean Manufacturing processes, etc. I’ve just started the process of acquiring my Green Belt certification as well – I find the details of process improvement absolutely fascinating!

How and when were you introduced to HR and what fuels your passion for the profession?
As noted above, I started in social services so it was a natural segue working with people, being able to help individuals in a work related manner, all the while being engaged in the element of business, business management, leadership, etc. 

What are your company’s current HR-oriented activities?
We are focused on all of the above with our big pushes right now being safety development, HRIS augmentation to ensure compliance with ACA and working on ease of use of our systems for employees, talent management items include the complete redevelopment of our employee review process from the antiquated module we have now to something that will engage everyone, ensure the tool of reviewing performance continues to add value and suits the purpose intended. I’ve just started the process of acquiring a group of volunteers to act as a strategy team for this project. We are assessing the movement some larger companies (like Deloitte, Accenture) have gone through and want to redefine performance evaluation so that it works for our employee culture now and in the future. It can become a time monster and a task burden vs a way to really develop your human capital and work as a tool that channels feedback, ideas, is a foundation for development, etc. In the end we hope to tame the performance evaluation beast and assess what performance management is to our company and what are the tools we will use that best suits our employees and company. It is going to be a fun group project! 

What was one major lesson learned in the past year that you feel others could benefit from reading?
Clear, concise communication is the key and really ensuring you listen to your employees and their feedback. The best ideas come from the field. 

What are the next steps planned for improving your company HR processes?  
Outside of what is noted above we are working on some very organic internal initiatives at developing ways to develop talent internally or via internships. As a mid-size company, we don’t have the resources of a larger company, but we have similar talent needs at a smaller scale. Hiring is a challenge now and will continue to be an even greater challenge in the future so we are looking for creative ways to build talent pools that meet our organization’s needs. We were fortunate enough to acquire a $100,000 training grant that has opened up doors for us and allowed us to work with great organizations like Century College with the creation of training initiatives for our employees – we are continuing to build on that.

How would you describe peer-to-peer education to a colleague in manufacturing?
I would say peer-to-peer education is a way for colleagues in the manufacturing industry to come together and knowledge share on topics that impact the group. It’s a support group, a learning environment, a training opportunity, a way to share information and an opportunity to network and build relationships. 

Amy is HR Manager at Engineered Products Company in Minnetonka, MN. She can be reached at akarrow@engproducts.com.

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The 3 Components of Successful Continuous Improvement

Continuous improvement is often described as a journey. We often do not know exactly where we are going or how exactly we will get there.

It has an end goal to establish, and due to various business circumstances it may change, but it is still rooted in the company’s long-term strategy for success. The path taken will have obstacles to overcome and will therefore, not be a straight line from start to finish.

This excerpt is from the Manufacturers Alliance's new educational blog. This new member benefit follows suit with our mission by focusing on sharing the best practices and lessons learned from experienced manufacturing peers to help members continuously improve. Thus, we are featuring peer-authors sharing their first-hand experiences.

Click here to read more of our latest blog posting about the 3 Components of Successful Continuous Improvement by Dave Deal.

Dave is an operations general manager who leads business transformations and is an expert in applying Lean methodology to create a successful culture. Dave can be reached at davedeal@icloud.com.

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MA Advisory Board - Tim Keran, Altus Business Advisors

Tim Keran is Owner of Altus Business Advisors. You may remember him as the owner for 29 years of Western Graphics in St. Paul.

Altus Business Advisors is a business improvement company. I’d like to be known as the first “Turn Up” guy in business consulting. Turnaround specialists usually are too late and leave lots of carnage behind them. I serve business owners and leaders who are interested in improving their people, processes and profitability. The companies I work with can be from any industry and generally have 10-200 employees.

How, when, and why did you get introduced to the Manufacturers Alliance? What was your main reason for joining?
We started our Lean journey at Western in 2007 and the Manufacturers Alliance was a great resource to help take the lean principles we were reading about and put them into action.

How would you describe peer-to-peer sharing best practices to a colleague in manufacturing?
Paraphrasing Helmuth Von Moltke the Elder (1800-1891) who said, “No battle plan ever survives first contact with the enemy.” This “enemy” in our business is our normal resistance to change. To me peer-to-peer sharing’s value is hearing from others what works and doesn’t work from their own experience on the actual continuous improvement battlefield.

Have you used the members of a peer group to help to help solve an issue? How?
I’ve been involved in various peer groups now for twenty years and I am a big believer in the power of hearing from people in the same position as me. The extra set of eyes and ears on many tough issues has saved me time, money and sleep through the years. 

What was one major lesson learned in the past year that you feel others could benefit from reading?
Renowned golf instructor Harvey Penick — Ben Crenshaw’s coach — gave tremendous advice with respect to making changes in a person’s golf swing. Penick said “When I ask you to take an aspirin, please don’t take the whole bottle. In the golf swing, a tiny change can make a large difference. The natural inclination is to begin to overdo the tiny change that has brought success.”

My experience has been that continuous improvement works best when the emphasis is on small, daily improvements that build up over time to create a successful culture. At Western, our 50 person team completed over 4,000 improvements in 8 years.

What is the biggest challenge Minnesota manufacturing faces today? What do you think it will be in five years?
Believing that the global, national, regional or state level competitive forces determine our results. This limits our internal growth which determines our external growth. In the words of Walt Kelly from the Pogo comic strip, “We have met the enemy and he is us.”

What qualities do you feel make someone an effective leader?
As a leader, we need to manage processes and lead people. We should be easy on people and hard on results. A leader is someone who puts people first and process second.

Tim is the Owner of Altus Business Advisors, a business improvement company. He can be reached at tim@altusba.com.

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Ask the IP Attorney

If you have a burning intellectual property questions, you can ask it by visiting the Q&A web page or emailing Tye Biasco at biasco@ptslaw.com.

Answers to your questions will be posted here in the MA Insider each month. Here is the answer to our June IP law question:

Q:  We have a bunch of trademarks that we don’t use anymore. Can we sell them to someone else?
A:  This is a common question for businesses that have registered trademarks and are looking to recoup some of the costs of registration or replace lost revenue from slow sales, etc. First, trademarks rights are based on use of the trademarks as a source identifier. So, the fact that you have not been using your trademarks may have already terminated your rights in those trademarks. 

Second, trademark rights apply to use with specific goods and services. Therefore, your trademark rights can only transfer for the same goods and services. For example, you could not sell trademarks related to automotive parts to someone that intends on using the trademarks for a line of clothing. That is why trademarks are typically sold along with assets related to production or marketing of the goods to which they are associated.

Another often-overlooked aspect of trademark rights is goodwill. Goodwill is the recognition in the marketplace of the trademark associated with the quality and value of the related goods. Transfer of trademark rights requires assignment of the goodwill associated with a trademark. The naked assignment of trademarks without the goodwill invalidates rights to the trademark.

An alternative option to selling trademarks is to license them to others for use. You can collect a royalty for others’ use of the trademark as long as you ensure that the goods and services carrying the trade mark meet the quality and value standards of the original goods and services associated with the trademark. Failure to monitor and maintain the quality of goods and services of licensed trademarks can result in the trademark rights being abandoned.

While most valid trademarks have some financial value, that value can only be extracted by making sure that the goodwill associated with the trademarks is also transferred or, if licensing, properly monitoring the quality of the goods and services related to the trademark. The best practice is to consult with your trademark counsel to determine if you still have trademark rights and how best to monetize those rights.

Patterson Thuente IP is a full-service intellectual property law firm, with offices in Minneapolis and Brookings, SD. Contact them at 612.349.5740.

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IC-DISC: The U.S. Exporter's Dream

One of the best kept secrets in the U.S. exporter world is the IC-DISC – Interest-Charge Domestic International Sales Corporation.

This is a tax benefit offered by the IRS to U.S. small and medium size manufacturers. It provides those companies that establish an IC-DISC a chance to significantly reduce their taxes on exports of products outside the USA.

Yes, as crazy as it might seem the IRS is actually helping to reduce taxes paid by US corporations. How does it work?

This rule allows companies that establish an IC-DISC to pay taxes on its exports under the current U.S. capital gains rate (20%) versus the ordinary income tax rate (top rate currently 39.6% for a pass-through S-Corp or LLC, and 35% for a C-Corp). You need to set up a separate company, or possibly more than one depending upon your current company structure and if your company has several entities. The exporting company pays a “commission” to the IC-DISC which are tax deductible to the exporter and deemed as dividend payment taxed at the much lower 20% rate versus the typical corporate rate 35%.

To sum it up, an exporting company gets a 35% tax deduction on commission payments it makes to its IC-DISC, but only pays 20% on the income it can repatriate from the IC-DISC. The end result is that the exporting company gets a permanent tax savings and a 10% higher net value of its exports!

Who can do it?

The answer is just about any manufacturing, architectural, and engineer firm that either directly exports its products, provides architectural or engineering services for projects outside the US, or companies that supply components or parts that are installed on equipment that is exported by their customers.

Want to know more or have questions/comments? Please contact us at michel@mark-tech-intl.com or don@hannoverconsulting.com.

Don Keysser is the Managing Principal of Hannover Ltd., a firm that provides business financing consulting services, M&A services, and capital raising. He works primarily with small-medium size manufacturing and technology companies, and can be reached at don@hannoverconsulting.com, and 612-710-0995.

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Commercial and Industrial Degreasing

Most businesses perform some kind of degreasing or industrial maintenance. Solvent degreasers and some cleaning products contain volatile organic compounds (VOCs) that produce smog in our atmosphere and contribute to respiratory distress in sensitive populations.

Degreasing operations are the second largest source of VOC releases from commercial and industrial sources in Minnesota, based on MPCA 2008 emissions estimates. Choosing safer products is a good idea for both the user who faces direct exposure and for the sensitive populations in our communities.

The Minnesota Technical Assistance Program (MnTAP) at the University of Minnesota just completed a two year project to help businesses identify safer alternatives to degreasing and industrial maintenance products. This project proposed safer alternatives to pilot businesses, conducted field trials to ensure performance and provided a small supply of the new product to help make the transition. Current suppliers were included in the process and given an opportunity to propose safer options to try. A few businesses shared their success on MnTAP’s YouTube Channel and were featured in a webinar on "Safer Products That Work" (give us a thumbs up!).

Finding safer choices can be challenging. Product labeling can be confusing and misleading. Hazardous air pollutant (HAP) and VOC content by weight is not typically printed on the label and was not always found on the safety data sheet (SDS). Here are some of the best practices MnTAP followed for choosing safer products:

  • Browse databases of recommended products: Examples include the Toxic Use Reduction Institute (TURI) Cleaner Solutions Database and the EPA’s Safer Choice  product list.

  • Avoid Hazardous Air Pollutants (HAPs) and Chemicals of High Concern: Some of the more common HAPs include: xylene, toluene, ethyl benzene, or methanol.Low Volatile Organic Compounds (VOCs): VOCs comprise the prominent solvent odors present when spraying aerosol products. Look for: Non-Chlorinated Low VOC or 50 State/CA/CARB Compliant products.

  • Watch out for chlorinated or non-flammable brake cleaners: Their main ingredients are usually HAPs such as tetrachloroethylene (PERC) or trichloroethylene (TCE), which pose severe human health risks.

  • Avoid aerosol cans and buy in bulk: Favoring products that can be sold in spray bottles can eliminate disposable can waste and the aerosol propellants that are usually additional VOCs.

  • Consider refillable spray cans:  Refillable spray cans can save money, but have presented issues in the past for those that have tried them.

  • Consider aqueous (water based) products: These products often have the lowest VOC content and many can be purchased in bulk.    

MnTAP has compiled the data and practical experiences gained in this degreasing project and will post information on the website www.mntap.umn.edu. These are some of the low VOC, HAP free products that were successful in our pilot products. Not all processes will have a lower VOC option. The key is be aware of the products you are using, and make incremental changes.

MnTAP project staff are also available to help translate lessons learned, and to provide one-on-one technical assistance. Ask to talk with degreasing project staff at MnTAP’s main number 612-624-1300 or 800-247-0015 from Greater Minnesota to learn more.

MnTAP has a variety of technical assistance services available to help Minnesota businesses implement industry-tailored solutions that maximize resource efficiency, prevent pollution, increase energy efficiency, and reduce costs. Contact MnTAP at 612.624.1300 or mntap@umn.edu for more information.

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Is the Industrial Real Estate Market Primed for a Slowdown?

Commercial real estate professionals often talk about the market in terms of how they "feel." Metrics and statistics are crucial; however it is our job to advise clients not on what has happened in the past but what is going to happen.

We often rely more on the “eye test” rather than “what’s on tape." And after a year in 2015 where numerous metrics suggested the most impressive year in recent history within the industrial sector, it feels like the market is slowing down as we enter the 2nd half of 2016. Within this article I am going to talk about 1) 2015 as a banner year, 2) where we sit today and 3) what I anticipate for the balance of 2016 and into 2017.

2015 demonstrated that manufacturers and distributors place significant value in optimizing their floor plan and gaining efficiencies within their real estate footprint, moving from lesser-functional real estate to class-A or new construction facilities. This “flight to quality” included manufacturers such as Intereum, Nilfisk-Advance, Oldcastle Glass, Star Exhibits, Caribou Technologies, Trio Supply, Flint Ink, Sportech, Blackhawk Industrial, Varitronics, Streamworks, Milestone AV Systems, AmerisourceBergen, Wagner SprayTech and Design Ready Controls, only to name a few, totaling over 1.8 million square feet of total space absorbed in class-A industrial real estate.

Additionally, the metrics support this case. Developers build new real estate when the existing supply is at a shortage, generally when availability creeps below 10%. Total new construction deliveries were 4.8 million square feet, 60% higher than any other year in the past 10 years and total net absorption was 2.8 million square feet, nearly twice that of 2014 or any other year since the great recession. Last but certainly not least, Amazon entered the market and has moved into or will eventually occupy 4 new facilities, a 162,000 square foot distribution center in Shakopee, a 35,000 square foot space in Minneapolis, a 142,000 square foot facility in Eagan and a 2.2 million square foot build-to-suit sorting facility in Shakopee. As we move into 2016, the outlook appears positive but activity will not reach 2015 levels.

Given the Minnesota weather and the fact that most developers will not break ground later in the year, anybody who is planning on building new construction this year is a known commodity. Therefore, we know for a fact that new construction in 2016, specifically speculative new construction, will not come close to that of 2015. Of the 4.8 million square feet of new construction that was built in 2015, 900,000 square feet of deliveries were in Rogers and Dayton alone. Of that space, 225,000 square feet of it has been leased, leaving roughly 675,000 square feet of bulk/warehouse vacancy. Therefore, any user considering over 50,000 square feet in Rogers/Dayton will have the ability to establish a great amount of leverage and strike a VERY favorable deal.

While leasing activity in Rogers and Dayton has been a slow climb, the outlook is absolutely not all negative. Two highly-performing sectors of our business are 1) speculative/class-A real estate within the 494/694 loop and 2) owner-user sales. The total inventory of multi-tenant class-A office/warehouse/manufacturing facilities in the northwest quadrant of the metro is roughly 14,000,000 square feet. Of that space, we sit at a vacancy rate of 7%, a very strong number. Virtually all new construction deliveries have performed well with only a few exceptions. Additionally, if you are a manufacturing company who owns a building that is well-located and has strong building fundamentals like ceiling height over 18’, truck court depth sufficient to accommodate full-size semi-trailers and an office/warehouse ratio around 25% and you are considering selling, you will be in a position to achieve record pricing, assuming interest rates remain steady, which is obviously a big “what if” at this point in time. As we head into the balance of 2016 and 2017, the outlook remains strong; however general market activity feels to be slowing down.

According to CBRE Research, 2016 YTD availability rates are at 10.7% and positive net absorption is roughly 650,000 square feet, both strong numbers historically.

However, getting back to my initial point, clients rely on brokers for their market outlook, not for what has already transpired. Currently, CBRE is tracking 5.2 million square feet of “active users” in the market, a 1 million square foot drop from 9 months ago, certainly not a good sign. This trend, along with the general feeling that the market is slowing down, has forced landlords to approach their business with a bit more caution and an eagerness to fill vacant space now.

In conclusion, 2015 was a record year for manufacturing and distribution real estate, the current market is strong and the next 12 months give us a few reasons to believe activity may slow down. That being said, this is just how I feel.

Mike Bowen is a commercial real estate advisor with CBRE Brokerage Services–Industrial Specialty. He can help answer questions about sale/leasebacks, whether or not it may be right for your business or how you can go about exploring this investment option. Contact him at mike.bowen@cbre.com or 952-924-4885.

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MN Economic Outlook

The May Minnesota Business Conditions Index climbed to a solid 54.3 from 49.8 in April.

Components of the index from the monthly survey of supply managers were new orders at 50.5, production or sales at 52.7, delivery lead time at 54.8, inventories at 60.2, and employment at 53.2. "In 2015, Minnesota ranked fourth in the nine-state region with exports per manufacturing worker of $63,000. Additionally, a 6.6 percent decline in exports over the past two years contributed to the state’s recent slower economic growth," said Goss.

Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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