Small Manufacturers Needed to Support Local Economies

Until about a hundred years ago, most of the products we used on a daily basis were manufactured close to our homes, including personal care, food, and machines. Jobs and money flowed out of local communities as manufacturing and sourcing moved further towards an industrial global system in the mid twentieth century. Small manufacturers were pushed out of business, destroying communities that depended on these factories. These businesses must be rebuilt for local economies to grow and flourish.

Local Economies in the Age of Globalization

Local economies are a cornerstone of environmental, economic, and personal sustainability. Energy usage for transportation and mass production decreases if we purchase goods produced close to our homes. Knowing the provenance of what we eat and use everyday helps to ensure that our bodies are healthy. Forming personal connections strengthens the community. Local businesses invest in employment and infrastructure, creating a sustainable financial cycle.

The Problem

Many service businesses are by nature local. You must be physically present in a salon to get your haircut, making it difficult to send those dollars out of the community. But re-localizing goods like food, apparel, home goods, furniture, and personal care is more difficult. For small manufacturers to be successful, knowledge, raw materials production, tools, and other infrastructure must be re-introduced into our communities.

Some Solutions

Incubator programs provide small manufacturers with the tools they need to start and grow their businesses. La Cocina, a non-profit incubator program in San Francisco, helps lower income women to start food businesses with business advice, access to a commercial kitchen, and personalized programs.

New financing models can also provide much needed financial support. Most of the businesses at La Cocina cost less then $2,000 to start. Non-profits like Kickstart and Kiva provide small local manufacturers a way to connect with micro investors who can contribute as little as $25. Other businesses, including Gather restaurant, used a more traditional shareholder model but accepted investments of about $5,000.

Governmental incentives could also be put in place for small manufacturing businesses that both use materials produced and sell within the region. This might include sales tax reduction or even low interest loans from local governments.

What other innovative models and processes promote small manufacturing?

Shivani is Principal at Friday Consulting, where she works with food and technology startups on strategy, finance, and business planning. She is also a founding consultant at AchieveMission. Shivani holds a BA from Stanford University, and an MBA from Presidio Graduate School. Follow her on twitter @shivaniganguly.

2 responses

  1. Excellent article, Shivani. Thanks for drawing attention to this important issue. The well being of local manufacturing businesses is of particular concern for Northeast Ohio, as manufacturing has long been a cornerstone of our economy. It has suffered for several decades, though we have lost a particularly large number of manufacturing jobs over the last decade.

    It is essential to stabilize the manufacturing infrastructure in the US and to help it to mobilize and modernize to meet the needs of a clean energy economy. We already have several businesses in the area that have begun to manufacture renewable energy technologies, and given the right system, Northeast Ohio area is poised to become a leader in this field. At COSE and the Greater Cleveland Partnership, we are committed to helping our manufacturing businesses become more energy efficient and sustainable, as well as helping to link them to entrepreneurs that can harness their skills and knowhow to build the materials we need to wean ourselves off of fossil fuels.

    This is also an important effort being undertaken by our partner organization, MAGNET, which is specifically structured to assist manufacturers in the region. Hopefully projects like the planned offshore wind farm in Lake Erie will help the region to build upon its manufacturing history, but leverage that into the future.

    – Tim Kovach,
    Product Coordinator for Energy at COSE

  2. Andy Grove of Intel fame wrote a provocative essay for BusinessWeek a couple weeks ago on why America needs to regain its competence in manufacturing, instead of continuing to outsource industrial production under the pretense that America is a “knowledge economy.”

    Grove's essay and this article both suggest that manufacturing has simply gone out of vogue. I often encounter that bias when I talk to media outlets about FutureMark Paper Company (, the only North American producer of recycled paper for magazines and catalogs. FutureMark's industry is not exciting like clean tech, glamorous like architecture and design, or lucrative like finance. Nevertheless, some of the biggest gains in environmental sustainability occur within manufacturing companies — particularly within paper companies, which have historically consumed enormous amounts of energy and water. It seems media outlets would rather write about a Fortune 500 company building a LEED-certified corporate headquarters than about manufacturing innovations that dwarf that in terms of environmental impact. It's not sour grapes; it's just my observation that the bar for achievement is set higher for manufacturing companies, because they're seen as old-fashioned and boring. As Shivani points out, however, manufacturing is a cornerstone of sustainable economic development and creating jobs, as well as a bridge to technological innovation. It merits more respect and attention.

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