HOW CALIFORNIA IS HELPING A MAKER OF INDUSTRIAL SAFETY GEAR AND OTHER SHIPPERS

Innovation is built into the DNA of the state,” says Roy Paulson, president of Paulson Manufacturing Corp., a maker of police and industrial safety gear in Murrieta, Calif. “We have several patents associated with our business.” Owing to a network of top-notch universities and an atmosphere that encourages innovation, three out of five patents filed in the United States now originate in California.

For manufacturers seeking an environment imbued with innovation and world-class export logistics, the Golden State has plenty to offer. The state faces the Pacific Rim and some of the world’s fastest-growing economies. “The ports of Los Angeles and Long Beach are served by good rail and truck services,” says Paulson. “We also have a high concentration of expatriates from Asia, many of whom are entrepreneurs who have contacts back in their home countries. California is well positioned to take advantage of the future.”

California is not the place for manufacturers looking for the lowest costs or for an anti-union labor environment. But the Governor’s Office of Economic Development, as well as localities, provide a variety of incentives and other programs to help companies invest in California. The state government just recently introduced an income tax credit to encourage investment and job creation, particularly by small businesses. (See sidebar, “Golden State Opportunities.”) The state also runs a robust program that helps companies find new export markets.

The California State Trade and Export Promotion (STEP) program has helped nearly 300 California businesses participate in trade shows on five continents. “Many of these companies were new to exporting,” says Jeff Williamson, STEP director. “We are here to help small businesses begin to export or to enter new markets.”

Local governments also run programs to encourage manufacturing and exporting. “The City of Murrieta has a strong focus on encouraging the growth of both of these areas,” says Bruce Coleman, the city’s economic development director. “We recognize that with the growth of the global middle class, there is an excellent opportunity for our companies to grow locally by expanding their market for products overseas.”

The Riverside County city is a leader in the regional District Export Council that provides companies with information to help them find and grow export markets. The city arranges meetings with the regional representative of the Export-Import Bank of the United States to help companies with exporting financing and has hosted the Export University in conjunction with the U.S. Commercial Service (USCS).

“We are the only city in inland Southern California to have entered into a partnership agreement with the USCS to promote the growth of manufacturing and exporting,” says Coleman. “Murrieta regularly welcomes delegations from China, India, Vietnam, Singapore, Indonesia and other countries and invites regional manufacturing companies to meet with international delegations at City Hall so that we can encourage business growth here.”

The city also regularly works with manufacturers and area brokers and developers to help companies find locations for their businesses. Murrieta has created an incubator where for $1 per year a startup can find space. Coleman is personally involved in helping companies with the process of getting permits. “One call or email to me and we are on it,” he says.

Paulson Manufacturing, which has been located in Murrieta since 1947, conducts most of its engineering and all of its manufacturing at its headquarters. “We have been able to attract a good engineering team in California to bring our concepts to reality,” says Paulson. “We build all our own tooling here and also manufacture and distribute from this location.”

KPI Ultrasound of Yorba Linda also relies on a highly skilled workforce to refurbish the used ultrasound machines that make up 40 percent of the company’s business. “We have always been able to find a fair amount of skilled labor and this has allowed us to grow,” says Jonathan Ames, the company’s director of Marketing. “Our staff is small but they are all skilled at what they do.”

Fabricating products where they are designed and engineered is a recurring theme in California. “This helps reduce lag time in getting new products from development and into production,” says Margot Lederer Prado, a senior economic specialist at the City of Oakland Office of Economic and Workforce Development. “It also helps protect intellectual property and facilitates customization of products.” Oakland tends to attract value-added manufacturing companies that do not require very large footprints.

Companies throughout the San Francisco Bay Area will soon be able to take advantage of Oakland’s expanded free trade zone. “We have applied to expand FTZ 56 to include sites within 60 miles of Oakland,” says Prado. “This will be valuable for advanced and value-added manufacturing companies that will bring goods into their facilities directly from the Port of Oakland and then re-export them.”

California’s STEP program requires several qualifications of companies interested in participating. They must be in business for at least one year, be profitable, meet the U.S. Small Business Administration’s definition of a small business, and must have an export market plan in place. Companies that otherwise meet the criteria but don’t have an export plan are referred to the state’s exporting training education programs which are run through California’s community colleges.

“That is how these two programs dovetail together,” says Williamson. “There are about 70,000 direct exporters in California and about 150,000 indirect exporters. There are a very large number of companies in California that could be exporting.”

KPI Ultrasound started with STEP three years into an effort to expand its sales in China and South America. Sixty-five percent of the company’s revenues currently come from exporting, with Canada and Mexico receiving the largest chunks. With STEP’s help, China has emerged as a key market outside North America for KPI.

“STEP helps reduce the costs of participating in trade shows overseas,” says Ames. “They help us navigate the registration process and provide an understanding of the costs involved. They provide a bilingual representative who understands the process and who can answer any questions.”

Before STEP, KPI tended to send a sales rep to walk a trade show. “Now we have a booth there as part of STEP’s California pavilion,” says Ames.

Ames credits participation in STEP with as much as $1 million in export sales to China. Another STEP trade show helped generate sales in Chile.

DIH Technologies of San Diego, manufacturer of medical devices and another STEP protégé, also took advantage of the logistics and cost savings benefits of participating in a trade show with STEP. Company president Jason Chen attributes orders of nearly $1.3 million to its participation in a trade show with STEP in Xiamen, China, last year.

“Besides the tangible, there are also intangible benefits,” says Chen. “If customers feel we are being helped by the government, that adds some reputational benefit.” Chen expects 60 percent of DIH’s revenues to be derived from exporting within the next five years.

As for Paulson Manufacturing, about 15 percent of its output is exported directly. Another unknown proportion is sold to distributors and then exported. “South America, China and India are our highest growth export markets right now,” says Paulson. “We project 2014 to be our best yet and a lot of that has to do with what we have going on internationally.”