Manufacturers Move to Market

Improving the competitive advantage of manufacturing firms in North Dakota is the goal of the second in a series of North Dakota Biennial Strategic Analysis Programs (2001-2003). The project will develop a strategic freight analysis focused on the role of transportation and logistics in North Dakota's manufacturing industry. Grain and oilseeds was the focus of the first analysis done in 1999-2001.

This project, when completed, will add value to North Dakota and the surrounding region by providing information and knowledge allowing private and public sectors to make better decisions regarding investment and operations.

It will provide agriculture producers, manufacturers and agricultural processors with the insight to change operating procedure. It will allow processing interests to more confidently develop new products and expand existing product lines.

The state will be better able to develop and maintain the transportation infrastructure so vital to industries' logistical requirements. The end result will be a better managed and more efficient and effective transportation and logistical system for North Dakota products.

Associate research fellow Mark Berwick and advanced research fellow John Bitzan of the Upper Great Plains Transportation Institute at North Dakota State University are conducting applied economic and business analysis to specific industrial sectors. Along with key personnel to the project, Gene Griffin, UGPTI director; Julie Rodriguez, UGPTI associate research fellow; and Rodney Traub, NDSU marketing and finance professor, they will disseminate the results of analyses, provide training for management and other employees, and develop intern programs for students interested in business logistics.

The project aims to do three things:

• Strengthen the North Dakota manufacturing sector by advancing a competitive advantage through the application of supply chain management and business logistics;
• Provide the information and analysis necessary to establish a viable intermodal container freight facility to serve all North Dakota businesses;
• Improve public policy by providing industry leaders and public policy makers with a better understanding of industry transportation and logistical needs.

Study Reflects Efforts to Diversify Economy

Since North Dakota was first settled in the 1800s, natural resources were the state's recognized products. Small grain and animal agriculture, and coal and oil were the top sellers.

This worked for the state in its early history. The last 50 years have seen significant change in the socioeconomic environment however, and three reasons strongly suggest change is needed to see positive growth:

• Efficient global transportation has cut North Dakota's competitive advantage in marketing its natural resources. This created slower growth in the state's overall economic growth;
• The cyclical nature of natural resource based economies is volatile. This resulted in wide swings in state and local tax revenues, limiting state and local government ability to provide necessary infrastructure and services, and;
• The heavy reliance on natural resource industries created an out-migration of the state's most valuable resource - its young people.

Economic events in the last half century resulted in renewed efforts to diversify North Dakota's economy, while maintaining a strong production agriculture sector.

The state's manufacturing sector experienced significant growth during the past 20 years. In 1999, that growth showed 9 percent of the state's gross product was valued at $1.5 billion. This was twice as high as the agriculture contribution of $701 million.

Right Place, Right Time, Right Price

While North Dakota's manufacturing industry is multi-faceted, the biggest challenge is still how to move goods to distant markets.

Top quality durable and perishable goods must be delivered at competitive prices for manufacturers to survive in a challenging economy. Producers and suppliers must transport products long distances and most have few options.

Economic development in rural communities faces special challenges. While value-added agricultural processing has been an economic development tool, most communities have limited transportation. Local trucking companies and rail are the primary movers. Trucking is costly because of North Dakota's long distances, even though it is door-to-door and timely. Rail transportation is low cost but is not timely or convenient, and does not offer the security demanded by manufactured products shippers and receivers.

The strategic freight analysis study adds another research component to the distant market scenario. Some evidence suggests smaller North Dakota firms do not have the resources necessary to manage logistics strategies effectively.

North Dakota companies face two extra challenges. They must overcome remote location and lack of transportation options while overcoming the obstacle of implementing logistics strategies with fewer resources than their larger competitors. This study will provide assistance to firms to improve their competitive edge.

North Dakota firms must have the necessary information and analysis to participate in the process of a changing business logistic and transportation environment that the UGPTI study will provide.

Information for Future Growth

This examination of North Dakota strategic freight analysis has significant goals and objectives.

An initial economic analysis of the manufacturing sector and specialized marketing provides important background information to determine forward-focus concepts.

Case studies of several representative North Dakota manufacturing firms will focus on ways these companies can become more competitive through applying logistics as a management tool. One of the ways this will help state firms is being able to share insights with other manufacturers in North Dakota.

A customized logistics-training program will jumpstart an improved use of logistics as a competitive tool for manufacturers, specialized agricultural producers and the carriers who serve them.

UGPTI's partnership with NDSU means a student intern program will be developed to provide manufacturers with students who are interested in business logistics. This will serve the dual role of providing industry with student help and serve as a recruitment tool.

An extensive market analysis, in combination with an operational analysis of specific sites, will look at the role and feasibility of intermodal facilities. Two or more sites will be considered.

Strategies to improve the competitive position of manufacturers, agricultural processors and specialized agriculture sectors will be developed on a statewide and local basis based on the results of the study. This will include issues such as state support for facilities, development of shipping associations, and infrastructure planning and investment.

UGPTI's combination of data will give North Dakotans what they need to move forward with information critical to transportation and logistics in North Dakota.