AnchoringOurLocalEconomy:

DevelopingaLocalProcurementStrategyfor
PhiladelphiasHigherEducationand
HealthcareInstitutions

April2015

Contents

ExecutiveSummary.......................................................................................................................................3
WhytheControllerundertookthisstudy.....................................................................................................4
Findings.........................................................................................................................................................4
Recommendations........................................................................................................................................5
SECTION1

Background..........................................................................................................................7

SECTION2

SpendingbyPhiladelphiasEdsandMedsInstitutions.......................................................9

SECTION3

TheSupplySide:WhatPhiladelphiaMakes.......................................................................13

SECTION4

BridgingSupplyandDemand.............................................................................................17

SECTION5

AccessingInstitutionalSupplyChains................................................................................22

Conclusion...................................................................................................................................................30
AppendixA..................................................................................................................................................32
AppendixB..................................................................................................................................................33
Acknowledgments.......................................................................................................................................35

ExecutiveSummary
ControllerAlanL.ButkovitzlaunchedtheAnchorProcurementInitiativeinJanuary2014with
thereleaseofSurveyoftheCurrentandPotentialImpactofLocalProcurementbyPhiladelphiaAnchor
Institutions.The2014reportdrewuponpubliclyavailabledatasupplementedbysurveysof
procurementofficersattheCitysmajorhighereducationandhealthcareinstitutions(EdsandMeds
anchors).Itidentified$5.3billioninnonpayrollspending,inverygeneralcategories.A$14billion
sectorsupportingover100,000employeesandover100,000studentsandvisitors,PhiladelphiasEds
andMedsanchorsprocureawidevarietyofgoodsandservices.Whilemanyifnotmostservicesare
procuredfromlocalvendors,theJanuary2014reportestimatedthatabout$1.14billionincommodities
areprocuredfromsourcesoutsidetheCity.Thismeansthattheanchorsareexportingasubstantial
proportionoftheirprocurementdollars,andthusareprobablynotmaximizingtheireconomicimpact
onPhiladelphia.Thecurrentreportdrillsdownintoactualpurchasingdatatoidentifypromising
opportunitiesforprocurementfromlocalmanufacturers.
SincethereleaseoftheJanuary2014report,theControllersOfficehasdeepenedits
engagementwiththeCityslargestEdsandMedsanchorinstitutions.Thankstoexcellentcooperation
fromthemajorinstitutions,whichprovidednearly$3billioninfinegrainedprocurementdata,the
ControllersOfficeisnowpreparedtoofferamuchmoredetailedandspecificanalysisoftheanchors
supplychainswhatsortsofthingsarepurchasedinlargequantitiesacrossinstitutionsandwherethey
arebought.Usingthisdemanddatainconjunctionwiththesupplydataproducedin2013bythe
MayorsManufacturingTaskForce,thecurrentreportprovidesananalysisofthegapbetweenwhatthe
anchorsdemandandwhatthelocaleconomycurrentlysupplies.TheControllersofficehasidentified
overhalfabilliondollarsinpromisinggrowthopportunitiesin13manufacturingsubsectors.Those
withthemostpotentialaresurgicalappliances,medicalsupplies,HVACequipment,andofficesupplies,
representing$531millioninannualspending;currentlyonly$102million(19%)islocal.
Thepresentreportcaninformaroadmaptodevelopingclustersofeconomicactivitydrivenby
demandfromtheCityslargestinstitutions.Byleveragingexistinglocaldemand,theControllerbelieves
thatPhiladelphiabasedmanufacturerscangrowtoserveregionalandevennationalsupplychains.
Wheremanufacturingcapacityislacking,thisreportpointstothetypesofenterprisesthatPhiladelphia
mightattempttoattractandnurtureusingitseconomicdevelopmentpolicytools.Thisreportalso
breaksnewgroundinprobingthefunctionofintegratorslikeOfficeDepotandOwens&Minorinthe
supplychainoflargeinstitutions,andproposesanimportantroleforthemindevelopingalocal
procurementprogram.Inthefinalanalysis,theControllerunderstandsthatthisapproachmustmake
businesssenseforallinvolved:itmustnotbecharitableimpulsesthatdrivethisprogram,butwhat
renownedHarvardBusinessSchoolprofessorMichaelPortercallssharedvalue.
Finally,thisreportmakesconcreterecommendationstowardfollowingtheleadofcitieslike
Cleveland,Baltimore,Detroit,Newark,andChicagoindevisingaplantoimplementananchorled
procurementstrategy.TheControllersOfficehashadnumerousconversationswithpartnersintheEds
andMedsanchorworld,aswellaswithnumerousotherinstitutionsandorganizationsthatwouldform
thenucleusofasupportcoalition,andallseemwillingtogetbehindthisagenda.

WhytheControllerundertookthisstudy

Sincetakingofficein2005astheCitysfiscalwatchdog,ControllerButkovitzhasfocusedon
waystoraiserevenuesandotherwiseimprovetheCitysfiscalhealthwithoutraisingtaxes.Helaunched
theAnchorProcurementInitiativein2014toexplorewhetherPhiladelphiaslargesttaxexempt
institutionsweremaximizingtheirimpactonthelocaleconomy.TheControllersinitialreport
estimatedthatPhiladelphiaslargestEdsandMedsinstitutions,criticalanchorsofthelocaleconomy,
spendover$5billionongoodsandservicesonanannualbasis.Thecurrentreportbuildsuponand
refinestheinitialanalysis.Utilizingactualprocurementdatasuppliedbythelargestanchorinstitutions,
TheControllersofficehasidentifiedhundredsofmillionsofdollarsinpotentialopportunitiestoexpand
localproductionanddistributiontomeetdemandfromtheseinstitutions.Thisreportisenvisionedasa
touchstoneforacitywidestrategythatwillbringtogetherthemajorinstitutionsandothersinashared
commitmenttoorganizethedemandsidewithaneyetowardlocalization.Whilepotential
opportunitiesexistinmanysectorsofthelocaleconomy,thisreportfocusesprimarilyonmanufacturing
opportunities.
SeveralindividualPhiladelphiainstitutionshavealreadydemonstratedcommitmenttolocal
purchasing,andhavedevelopedbasicstructuresforgrouppurchasing.IncitieslikeCleveland,Detroit,
Baltimore,Newark,andChicago,however,theanchorsareworkingtogethertoleveragetheircombined
purchasingpowertocreatenewbusinessesandexpandexistingones.Thisreportrecommendsthe
creationofanewentityinPhiladelphia,alongthelinesofChicagoAnchorsforaStrongEconomy(CASE)
orEvergreeninCleveland,thatwillfacilitatecoordinationandlinkexistingbusinessestoapurchasing
program;further,thisentityshouldbechargedwithhelpingdevelopandgrowlocalbusinessesthatcan
meetdemand.Thereismuchupsideandvirtuallynodownsidetothisinitiative.

Findings

TheControllersOfficeanalyzed$3billionofprocurementdatafromfiveofPhiladelphias
largestanchorinstitutionsanddeterminedthatapproximately$800million(27%)isspent
annuallywithPhiladelphiabasedvendors.
Theinstitutionsboughtabout$860millioninmanufacturedgoods,ofwhich$136million
(15.8%)wasprocuredlocally.
Theanalysissuggestsmorethan$530millionintotalpromisingopportunityforincreasing
manufacturingoutput.Thetopsectorsaresummarizedinthechartbelow:

CommodityCategory
SurgicalAppliancesandSupplies
MedicalEquipmentandSupplies
HVAC&CommercialRefrigeration
Manuf&ReproofMagneticMedia
OfficeSuppliesExclPaperProducts
Sporting&AthleticGoods
ScalesandBalances
Printing
TOTALPROMISINGOPPORTUNITY

Annual
Spend
(mil$)
$300
$146
$34
$18
$13
$7
$8
$5
$531

Local
Spend

Local
Spend%

$27
$69
$2
$0
$3
$1
$0
$1
$102

9%
47%
6%
2%
20%
9%
1%
15%
19%

Growth
potential
(+25%)
$68
$19
$8
$4
$3
$2
$2
$1
$107

Total
impact*
$186
$53
$21
$12
$7
$4
$5
$3
$292

*SeeAppendixB2formultipliers

Iftheanchorinstitutionsincreasedlocalprocurementinthesetargetedsectorsby25%ofwhat
theyarecurrentlyimporting,itwouldgenerateanadditional$107millionindirecteconomic
impactand$292millionintotalimpact.Suchashiftwouldcreate1,250directmanufacturing
jobsandanadditional4,000indirectjobs.
TheControllersanalysissuggeststhatmanylocalmanufacturersalreadyhavethecapacityto
supplyanchordemandorwouldneedminimalassistancetobecompetitive;thesectorsin
whichtheyoperatearealreadyeithergrowingfasterorhavealargercomparativeworkforce
relativetothenation.

Recommendations
TheAnchorProcurementInitiativeaimstoencouragePhiladelphiaslarge,private,notforprofit
healthcareandhighereducationinstitutionstovoluntarilyspendmoreoftheirprocurementdollars
locally.Itaimstodosobyfacilitatingthecoordinationofdemandamongtheanchorinstitutions,as
wellasbycoordinatingsupplyamongvendorsandmanufacturersintargetedsectors;italsoidentifies
animportantroleforsupplychainintegrators.Theparticipatinginstitutionshavealreadydemonstrated
greatcommitmenttolocalprocurement,aswellasawillingnesstodomore,aspossibleandwhereit
makesbusinesssensetodoso.Butitisoutsidethegeneralpurviewofanyparticularinstitutiontohelp
organizethedemandside,andevenlesssotoorganizethesupplyside.TheControllerbelievesthat
localgovernmentcanandshouldplayaroleinfacilitatinganeconomicdevelopmentstrategythat
leveragesanchorinstitutiondemand.TheControlleralsobelievesthatsuchastrategyrepresents
perhapsthebestopportunityfortheanchorinstitutionstomaximizetheirlocaleconomicimpact
throughsustainable,deep,marketdrivenengagement.Assuch,theControllerrecommends:

Conveneallconcernedparties.BringtogetherUniversityleadersandprocurementdirectors
withworkforcedevelopers,financialinstitutions,civicleaders,businessgroups,and
manufacturers.Holdaonedayconferencetosharetheresultsofthecurrentstudyand
produceacommitmenttofurtherengagement.

Formabroadcoalitiontobuildsupportandcapacity.Thecoalitionshouldincludetheanchor
institutions,workforcedevelopers,communitydevelopmentfinancialinstitutions,business
groups,andCityofficials.
Buildapermanentorganizationtodrivethework.FollowinginthefootstepsofChicago
AnchorsforaStrongEconomyandClevelandsEvergreenCooperatives,eachmajoranchor
institutionmightmakearelativelymodestfinancialcommitmentthatcouldleverage
philanthropicsupportforthecreationofPhiladelphiaAnchorsforaStrongEconomy(PHASE).
Facilitatetheorganizationofthedemandside.Workingwithprocurementdirectorsatthe
anchors,PHASEwouldhelptocreateaninterinstitutioncollaborativepurchasingstructure.
Facilitatetheorganizationofthesupplyside.Workingwithmanufacturersorganizationssuch
astheDelawareValleyIndustrialResourceCenter,theManufacturersAllianceofPhiladelphia,
theChamberofCommerce,andtheSustainableBusinessNetwork,aswellastheMayorsOffice
ofManufacturing,PHASEshouldperformadeepcensusofwhatisproducedlocally,toserveas
abaselinefordevelopment.Thiscouldincludecreatingadatabaseandaportalthatwould
allowprocurementofficerstoreadilylocatelocalsuppliers.
Invitesupplychainintegratorstoplayanactiverole.PHASEwouldworkwithmajorwholesale
supplierssuchasOfficeDepot,Owens&Minor,Aramark,Sodexo,Grainger,andCardinalto
createopportunitiesforlocalbusinessestogainaccesstoregionalandnationalsupplychains.
Createabusinessdevelopmentprogram.FollowinginthefootstepsofCASE,PHASEshould
createaprogramthatconnectslocalbusinessestoopportunitiesintheanchorsector,and
providestechnicalandcapitalassistancetoenablethemtoscaleuptoearnanchorbusiness.
SuchaprogramcouldberunbyacombinationofPhiladelphiasexcellentlocalbusinessschools
inpartnershipwithexperienceddeveloperslikeDVIRC,Interise,andNextStreet.
Coordinatebusinessdevelopmentwithworkforcedevelopment.Acommoncomplaintamong
localbusinessesisalackofqualifiedworkers.PHASEwouldworktoaligntheCitysmajor
workforcedevelopmentproviderswiththetrainingneedsoflocalmanufacturersastheyexpand
tomeetnewdemand.
Determineareasonablebenchmarkandtimeframeforincreasinglocalprocurement.Itis
importanttosetaninitialgoalandhowthisgoalcangrowinthefuture
UsetheCityspolicytoolstocreatetargetedincentivesforinvestmentinproductionfor
manufacturers.Amongtheobstaclestosignificantlyincreasedlocalizationistheabilityoflocal
manufacturerstocompeteonpriceandqualitywithexistingsuppliers.Whileguaranteed
demandwillhelp,theCityshouldprovideperformancebasedfinancialincentives.These
incentivesneedtobeflexible,growandadapttothedifferentstagesafirmwillgothrough.The
incentivesneedtodriveinvestmentratherthanreducecosts.Theymustbetiedtojobcreation.
Trackinputcommoditiessosecondtiercommoditymanufacturerscangrowinthefuture.Itis
importanttodevelopthesupplychainbothverticallyaswellashorizontally.

SECTION1

Background

Philadelphiaisblessedwithaveryhighconcentrationofmajorhighereducationandhealthcare
institutions.Morethan30universities,colleges,andacademicmedicalcenterscalltheCityhome.They
employmorethan150,000peopleandeducateover100,000students,mostofwhomresideintheCity;
thehealthcentersserveover170,000patientsannually.Intotal,theEdsandMedsanchor
institutionsrepresentabout30%oftheCity'seconomy.Bydefinition,anchorinstitutionsarerootedin
Philadelphia.Eachhasmajorphysicalinfrastructurebuiltoverdecades;eachconsidersitselftohavea
missiontoimproveitscommunity,andtheirlargelytaxexemptstatusderivesfromtheirpublic
purpose.Inshort,theyallhavebothamoralandaneconomicstakeinthevitalityoftheirlocal
communities.
TheUniversityofPennsylvaniaandDrexelUniversityhavelongbeenconsiderednationalleaders
ininvestingintheirWestPhiladelphiacommunities.Formanyyears,PennandDrexelhavedevoted
substantialresourcestorealestatedevelopment,cleaning,greeningandpublicsafety,supporting
neighborhoodbasedpubliceducation,andcreatingdirectemploymentopportunitiesforWest
Philadelphiaresidents.Morerecently,DrexelhasbeenthedrivingforceinattainingPromiseZone
designationforthechallengedMantuaneighborhoodinWestPhiladelphiaandhasembarkedonadeep
processofengagementaroundcommunityeconomicdevelopment.Templehasmadehugestridesin
increasinglocalanddiversehiringonitsmajorconstructionprojects,andispartneringwithorganized
labortoincreaseemploymentopportunitiesforNorthPhiladelphiaresidents.Jeffersonisrecognizedin
theareaoflocalfoodprocurementandmeasuresitsannuallocalimpactat$130million.TheChildrens
HospitalofPhiladelphiahasprioritizedlocalprocurementinitsneighborhoodbasedprojects.Insum,
theseeffortsadduptoamajoreconomicimpactontheCity,directlyandindirectly.1
Despitethislaudablework,theeconomichealthoftheneighborhoodssurroundingmanyof
theseinstitutionslagstheCity.EveninstitutionsaslargeasPenn,Drexel,Temple,CHOP,andJefferson
havelimiteddirectemploymentopportunitiesforPhiladelphians,especiallythosewholackcollege
degrees.Thelongtermsolutionis,ofcourse,toincreasetheproportionofPhiladelphiansinthese
neighborhoodswithcollegedegrees;intheshortandmediumterm,though,itmakessensetoconsider
otherwaystheeconomicvitalityoftheanchorscancreatejobs.TheControllersOfficehasfoundthata
focusedprogramoflocalizingprocurementcanformthecoreofafeasiblecitywidedevelopment
strategythatleveragesalreadyexistingcircumstancesthefactthattheanchorinstitutionspurchase
largeamountsofgoodsandservices.Manyservicesarealreadyprocuredlocally,howeveronlyafew
manufacturedgoodsare.
Afewinstitutionsalreadyprivilegelocalpurchasing,albeitmostlyindividuallyandwithout
challengingfundamentalsupplychainrelationships.Pennhaslongprioritizedlocalspending:about
$100millionofits$1billionprocurementbudgetisspentinWestPhiladelphia,andPennPurchasing

PhiladelphiaCityController,SurveyoftheCurrentandPotentialImpactofLocalProcurementbyPhiladelphiaAnchor
Institutions,January2014(http://www.philadelphiacontroller.org/publications/AnchorInstitutions_January2014.pdf).For
impactofhigherEdinstitutions,seePhiladelphiaHigherEducationGovernmentRelationsOfficersGroup,TheCityof
PhiladelphiaanditsHigherEds:SharedGoals,SharedMissions,SharedResults,October2013
(http://www.econsultsolutions.com/?wpdmdl=35740).WhatDoestheWestPhiladelphiaPromiseZoneMeanforDrexel?
DrexelNow,May7,2014(http://www.drexel.edu/now/archive/2014/May/Promise%20Zone%20QandA/)

Servicesprovidesincentivestoitspurchasingagentstofindandutilizelocalsuppliers.2Therehavebeen
afewattemptstocreatenewsupplychainrelationshipsthathelpdeveloplocalsuppliers.Inawell
publicizedcase,PennandDrexeltogetheractivelyhelpeddevelopalocalofficesupplyvendorfroma
TierTwodiversesubcontractorintoaTierOnesupplier.3Thiscasedemonstratesanappetiteforthe
approachadvocatedinthisreport.Reachingthenextlevelrequirescooperationandcoordinationacross
multipleinstitutions.Itrequiressophisticatedanalysisanditrequiresleadership.
TheControllersJanuary2014SurveyofthePotentialofAnchorProcurementrevealedmuch
abouttheeconomicpotentialoftheanchorsectorandhowleveraginganincreasedproportionofits$5
billionprocurementspendingcouldbenefitPhiladelphiaseconomy.Thankstograciouscooperationon
thepartofPhiladelphiaslargestanchorinstitutions,inthepastyeartheControllersofficehascollected
andanalyzednearly$3billioninactualprocurementdata.Thedatasuggestthatapproximately25%of
goodsandservicesaresuppliedbylocalvendors.TheControllersanalysisdemonstratesthatintermsof
manufacturedcommodities,localsupplierscomprisebetween9.4%and15.8%oftotalprocurement.
Sincesuppliersaremorelikelytobedistributersthanactualproducers,thisnumberoverstatesthe
proportionofgoodsthataremanufacturedlocally.Inshort,about5%ofthegoodstheanchors
purchasearemanufacturedinsidetheCityofPhiladelphia.Todeterminewhetheritisplausibleto
increasetheproportionoflocallymanufacturedproductsintheanchorssupplychains,thisreporthas
takenasectoralapproachtothedata,using4,5,and6digitNAICScodestoattempttomatchanchor
demandwithlocalmanufacturingoutput,bothactualandpotential.
Thustheanalysisinthisreportbeginsbycompilingtheanchorprocurementdataand
categorizingitbymanufacturingsector.Thereportidentifiesthespecificcommoditiesthataremost
commonlypurchasedbyPhiladelphiasanchorinstitutions,andmatchthisinformationwiththecurrent
outputofthelocalmanufacturingsector.Mappingsupplyanddemandinthismannergeneratesa
marketanalysisthatelucidatestheexistinggapswhichmightbefilledwithanintentionalcombination
ofrelativelyminorchangesintheanchorinstitutionssupplychainsandtheapplicationofpolicytools.
Inshort,thereporthasidentifiedpotentialities:Specificsectorsinwhichitseemsplausiblethat
existinglocalmanufacturingcapacitycouldbedevelopedtomeetexistinganchordemand,andwhere
anchordemandcouldinturn,helptogrowparticularmanufacturingsectorssothattheymightbecome
exporterstobroadermarkets.Someeconomistshavecalledthisapproachalocalversionofimport
substitutionindustrialization(ISI)usinglocaldemandtospurdeepereconomicdevelopmentby
increasingtheexportoftradablecommodities.4
Therearenumerousreasonswhytherearecurrentlygapsbetweenanchordemandandthe
localeconomysabilitytoprovidesupply.Theseincludeinformationasymmetry,wheresupplierand
purchaserareunawareofeachothersneedsandcapacities,marginsthataretoosmallorneedfor
capitalinvestmenttoolargethataparticularcommodityisnotmanufacturedintheCity,lackofan
appropriatelyskilledworkforce,wellwornsupplychainsthatarentorientedtowardlocalprocurement,
andsoon.Thusthereisawidespectrumofopportunityfordevelopment,fromconnectingexisting
supplyanddemandontheonehandtothecreationofentirelynewlocalindustriesontheother.This

RitaAxelrothandSteveDubb,TheRoadHalfTraveled,UniversityEngagementataCrossroads,2010.
AthenaMerritt,BigDeal,SmallFirm,PhiladelphiaBusinessJournal,Apr21,2008;interviewwithToddRose,Sept23,2014
4
SeeJosephPersky,DavidRanneyandWimWiewel,ImportSubstitutionandLocalEconomicDevelopment,
EconomicDevelopmentQuarterly,1993,vol.7,issue1,pp.1829.
3

reportwillalsofocusontheroleofaheretoforeunderstudiedaspectofinstitutionalprocurement,
namelythatofthelargesupplychainintegratorslikeOfficeDepotandOwens&Minor.

SECTION2

SpendingbyPhiladelphiasAnchorInstitutions

TheControllersOfficeaskedeachofPhiladelphiaslargestanchorinstitutionstoprovidea
recentandtypicalyearsworthofprocurementdataenumeratingtheirmostfrequentlypurchased
commoditiesandthebillingzipcodeforthesupplierofeachcommodity.Philadelphias5largest
institutionscomprising4highereducationinstitutionsand4healthsystemssuppliedusabledata.5It
becameclearratherquicklythatdespitedifferencesindatasystems,themajorinstitutionsoperate
moresimilarlythandifferently.Thedataprovidedbytheseinstitutionsamountsjustover$3billionin
procurementspending,ofwhich$798.1million(27%)wasidentifiedaslocal.6
Forpurposesofanalysis,thedatahasbeendividedinto3generalcategories:Construction
relatedexpenditures,Healthcarerelatedexpenditures,andOtherexpenditures.Asummaryofthedata
isfoundbelow.
ConstructionRelatedExpenditureSummary
ThelargestcategoryofanchorspendingisinConstructionandConstructionrelated
expenditures.Itaccountedfor$1.13billionofthe$3billion,andthedataindicatethat$420.8million
(37.3%)wasspentlocally.
Drillingdownfurther,constructionrelatedcategorieswiththehighestproportionoflocal
spendingareelectricalequipment,furniture,andgeneralconstruction.Localspendinginthese
categoriesrangesfrom35%to50%.Includedundergeneralconstructionarematerialssuchaswood,
steel,cement,finishing,andpaint.Becauseoftheirsize,theanchorsaccountforasizeablepercentage
ofthePhiladelphiamarketsoveralldemandforthesecommodities.In2011,theentirePhiladelphia
marketwas$4.3billioninelectriccommoditiesand$588millioninfurniture;inbothcategories,
spendingbytheanchorsisequaltoapproximately5%ofaggregateCitydemand.7
Amongconstructionrelatedexpenses,thesubcategorydemonstratingthesmallestproportion
oflocalspendingisHeatingVentilationAirConditioning(HVAC)equipment:with$58.7millionintotal
spending,just$3.6million(6.1%)wasprocuredlocally.ThereisasubstantiallocalmarketforHVAC
equipment:overalldemandintheCityforHeating,AirConditioning,RefrigerationandVentilation

DatawasreceivedfromTheChildrensHospitalofPhiladelphia,DrexelUniversity,TempleUniversityandTempleHospital,
ThomasJeffersonUniversityandHealthSystems,UniversityofPennsylvaniaandPennHealthSystems.
6
TheJanuary2014reportexamined34PhiladelphiaEdsandMedsanchorinstitutions.Thesampleusedinthisreport,
comprisedofthe5largestanchorinstitutions,isbothrepresentativeandconstitutesthevastmajorityofprocurementinthe
EdsandMedsspaceintheCity.Allclaimsarebasedonlyuponthecommoditydataprovidedbyoursampleinstitutions.Itis
possiblethatprocurementpatternsamongthesmallerinstitutionsaresignificantlydifferent.Becausesomeinstitutions
providemorecompletedatathanothers,someextrapolationwasnecessarytoderivecomparabledata.SeetheAppendixfor
detailsregardingtheprojectionmethod.
7
Intermsofprocurement,thelocalspendnumberislikelylowerbecausethemajorityofreportedconstructionspendingis
accountedforbycontract,notspecificitems.

equaled$645millionin2011.8Thus,demandfromthesampleanchorsconstituted9.1%oftheCitys
overallmarketinthissubcategory.

Table1AnchorConstructionSpending
EstimatedTotalSpend

EstimatedLocalSpend LocalSpend%

Furniture

$22,023,540

$10,649,163

48.4%

HVAC

$58,658,804

$3,561,664

6.1%

GeneralConstruction

$573,256,494

$238,619,410

41.6%

MiscFacilityProducts

$327,068,008

$110,488,587

36.5%

Electrical

$108,050,924

$38,324,062

35.4%

$37,525,391

$10,197,772

27.2%

$1,126,583,162

$420,840,658

37.4%

Telecommunications
Total

HealthcareExpenditureSummary
Healthcarecommoditiescomprisethenextlargestcategoryofanchorspending.Thedatabroke
downintofourprimaryhealthcareprocurementsubcategories:pharmaceuticals,medicalequipment,
laboratoryequipmentandchemicalsubjects.Acrosstheseveninstitutionsexamined,healthcare
commoditiesaccountfor$950.5millioninoverallspending,$154.9million(16.3%)ofwhichisprocured
locally.
Medicalequipmentisthelargestsubcategorywithinhealthcareaccountingfor$552.1millionof
thereportedinstitutionalspending,$133.8million(24.2%)ofwhichwaslocal.Thissubcategory
includessuchpatientcaresuppliesasadhesivesandbandaging,aswellasspecificmedicalmachinery
andinstruments.Sincemedicalequipmentprocurementisoftenlefttoindividualdoctors,thereisa
widearrayofbrandsthatthesuppliersoffer.
Laboratorysuppliesarethenextlargestcommoditywithinthehealthcarecategory,accounting
for$144.1millionoftheoverallspend,with$8.7million(6.0%)localspend.Laboratorysuppliesinclude
glassproducts,observatoryinstruments,andrelatedequipment.Thechemicalsubjectsandgases
subcategoryincludesbiochemicalcompounds,reagents,oxygen,specialtygases,andtheassociated
researchcosts.Thissubcategoryamountsto$56.7millionwith$4.5million(8.0%)spentlocally.

Table2AnchorHealthcareCommoditySpending
EstimatedTotalSpend

EstimatedLocalSpend

LocalSpend%

Laboratory

$144,137,918

$8,662,298

6.0%

Medical

$552,115,778

$133,815,331

24.2%

Pharmaceuticals

$197,489,368

$7,832,914

4.0%

$56,733,702

$4,543,109

8.0%

$950,476,767

$154,853,652

16.3%

ChemicalsandGases
Total

ManufacturingTaskForceManufacturingGrowthStrategyforPhiladelphia,December2013
(http://www.manufacturingonline.org/resources/FULL%20REPORT%20Manufacturing%20Growth%20Strategy%20FINAL.pdf)

10

OtherExpenditureSummaries
OfficeSupplies
Spendinginthegeneralofficesubcategoryis$82.4millionwith$19.8million(24%)spent
locally.Itshouldbenotedthatcommoditiesthatwouldgenerallybelongunderthissubcategory
(writingutensils,storagesupplies,tapes&adhesives,etc)areregularlyaccountedforunderother
subcategoriesbecausethepurchasesarenotcarriedoutbyacentralizedprocurementdepartment
theyarepurchasedseparatelybyspecificdepartments.Thatbeingnoted,itislikelythatthedata
underestimatesthedemandforthesecommodities.
PaperProductsandPrinting
Acrosstheinstitutionsstudiedherein,spendingforpaperproductsamountsto$5.2million,
witha$1.6million(31.1%)localspend.Paperproductsarepervasiveinnearlyeveryindustryandarein
heavydemand.In2011,thePhiladelphiamarketforpaperproductswas$3.9billion.Thatamountsto
0.13%ofthetotalPhiladelphiamarket.Thesefiguresprobablyunderestimateactualspending,since
paperproductcostsarealsolikelytofallundermoregeneralpurchasingcategoriessuchas
administrativeservicesorgeneralsupplies.Therobustcitywidedemandforpaperproductsspeaksto
themanufacturingopportunity.
Paperproductionhasastrongrelationtotheprintingindustry.In2011,thePhiladelphiamarket
forprintingrelatedserviceswasover$1.5billion.Theinstitutionsspent$21.2millionwith
approximately$5.1million(23.2%)spentlocally.Totalspendingacrossthesampleinstitutionsrepresent
1.4%ofaggregatedemand.
CleaningProductsandSupplies
AnchorspendingonCleaning,Housekeeping,andCustodialServiceswas$14.1million,$1.7
million(12%)ofwhichwasprocuredfromlocalvendors.Approximately40%ofthetotalamountis
likelymanufacturedgoodstherestofthespendingwasreportedunderageneralhousekeeping
costslabel.Likemanyothercommoditiesmentionedinthisreport,thereisbroaddemandforcleaning
productsbeyondtheanchorinstitutions.
Citycontractspendingdisplayedsignificantspendinginsnowremovalproducts.Althoughthere
arenosnowremovalcostsspecifiedbytheinstitutions,itscertainlyacommoditythattheUniversities
havetopurchaseandmaybebeneficialtolookintofurther.
FoodRelated
TheAnchorInstitutionsspent$32.5milliononfoodrelatedprocurement,$18.7millionofwhich
wasspentlocally.However,morethanhalfofthisamountisattributedtocateringservices,implying
aservicecontract.LargefoodservicecompaniessuchasSodexhoandAramark,andregionalfirmslike
BonApptithaveexplicitcommitmentstobuyinglocal;thebuylocalfoodmovementisbroadand
growing,andobviously,demandforfoodproductsishugebeyondtheanchorsector,suggestingthat
largerscaleurbanagriculturespurredbyanchordemandcouldbeapromisingmanufacturing
opportunity.Theinstitutionalfoodservicesupplychainisalsoreasonablyconsolidated,andthus
conducivetoscaling.Inadditiontofood,foodservicecontractorsandinstitutionsalsopurchasekitchen
11

productsandvendingmachines;togetherthesecompriseapproximately$3millioninspendingacross
institutions.
ComputerTechnology
TheoverallannualInformationTechnologyhardware,software,etcspendamountsto$182.6
millionwith$9.9millionspentlocally.Institutionalhardwareandsoftwarepurchasesmakeupthebulk
ofthisspending,andtheyaregenerallyboundincontractagreements,butthereispotential
opportunityregardingthemanufacturingofsuchcommodities,specificallymagneticsoftwareproducts,
andbasichardwaresuchaskeyboardsorspeakers.
SportsRecreation
AnchorInstitutionsspent$16.8milliononSportsRecreationequipmentin2011,ofwhich$1.5
million(9.1%)waslocallyprocured.Potentialcommoditiesofinterestincludeathleticappareland
workoutequipment.ThecitywidemarketforSportsandAthleticproductswas$409millionin2011.
Oursamplewouldthusconstituteabout4.1%oftotalcitydemand.9
MiscellaneousResidualCommodities
Unfortunately,asubstantialproportionofthedata,roughly23%,didnotfitneatlyintooneof
the17commoditycategories.Oftheresidual$630.6millioninspending,$169.1million(26.8%)is
procuredlocally.Themajorityoftheresidualisdenotedaspurchasedservices,generalexpenses,or
subcontractservices.TheControllersOfficeishopingtoworkwiththeinstitutionstodrilldowninto
thesegenericcategoriesinthefuture.

Table3OtherAnchorSpending
TotalSpend

LocalSpend LocalSpend%

$5,182,143

$1,612,952

31.1%

$113,564,122

$19,834,664

24.1%

$14,067,191

$1,691,769

12%

Foodrelated

$32,461,823

$18,703,889

57.6%

Technology

$182,560,176

$9,960,878

5.4%

Sports&Rec

$16,807,372

$1,533,606

9.1%

Uncategorized

$630,645,952 $169,105,360

26.8%

Total

$964,155,703 $224,443,117

23.1%

Paper
GeneralOffice
CleaningSupplies

Insum,thecategoriesthataccountforthemostspendingbyanchorinstitutionsare
constructionservices($573million),medicalsupplies($552million),facilityrelatedspending($327
million),pharmaceuticals($197million),technology($183million),laboratoryspending($114million),
generalofficespending($114million)andelectricalservices($108million).Inthreecategories,anchors
spendmorethan40%locallyFoodrelated,FurnitureandConstructionServices.Insixcategories,

Onlytwoinstitutionsreportedsportsrecreationspending.Anestimatewasmadebasedonaveragesandextrapolatedfrom
thatpoint

12

anchorsspendlessthan10%locallyHVAC,Laboratory,Pharmaceuticals,Chemicals,Sports&
RecreationEquipment,andComputerTechnology.Thesenumberscancutbothways:theremaybe
roomforgrowthinthosecategoriesthatarealreadywellrepresentedlocally,andinsomecases,less
roominthosecategoriesthatarepoorlyrepresentedinthelocaleconomy.Understandingmore
preciselythegrowthopportunitiesrequiresananalysisofthecitysmanufacturingandsupplysector.
Thesenumberspaintaroughpictureofthedemandsideofanchorprocurement.Thenext
sectionwillexaminethemanufacturingsectorsinPhiladelphiathatarebestsuitedtofillanchor
institutionsdemand.Alargeinstitutionrarelybuysacommoditydirectlyfromamanufacturer.The
institutionalsupplychainiscomplex,controlledbyarelativelysmallnumberoflargeintegrators.
Understandinghowalocalmanufacturerentersthesupplychainiscritical,thusthiswillcomprisethe
finalsectionofthereport.

SECTION3

TheSupplySide:WhatPhiladelphiaMakes

Philadelphiahashistoricallyhadandcontinuestohaveadiversemanufacturingbase.It
producesbothsecondarycommodities,soldtodistributorsortothefinaluser,aswellasprimary
commodities,soldtoothermanufacturers.Thesecommoditiesincludepetrochemicals,freighters,
confectionariesandfurniture.Thesemanufacturessellproductsallovertheworld.
InDecember2013,theMayorsManufacturingTaskForce(MTF)issuedManufacturingGrowth
StrategiesforPhiladelphia,areportaimedatunderstandingthenatureofmanufacturingin
contemporaryPhiladelphia.TheMTFreportprovidesaninvaluablesetoffoundationalknowledge
aboutwhatiscurrentlymanufacturedinPhiladelphia.Thereportproducedfourstatisticsthatare
usefulforthegapanalysisandmarketmapping:SDR,RPC,growthsectors,andsectorsthathavea
locationquotientlargerthan1.0.10TheSupplyDemandRatio(SDR)measurestheproportionofwhatis
producedintheCityforlocalconsumption;itisthetotalsupplyavailableintheregioninagivensector
dividedbythetotaldemandintheregionforthatsectorsoutput.AlowSDRindicatesthereismore
localdemandthanlocalsupply.TheRegionalPurchaseCoefficient(RPC)measurestheshareofdemand
foraninputbyallusersinaregionthatispurchasedfromproducersintheregion.AnRPCof10%
meanscompaniesintheregionrequiringitasaninputpurchaseonly10%oftheirdemandfrom
producersintheregion.TheMTFlookedatasectorsgrowthrelativetothenationaleconomy,aswell
astherelativesizeoftheworkforceinthatsector,capturedbytheLocationQuotient(LQ);anLQ
greaterthan1.0meansthereisalargerpercentageofpeopleworkinginasectorinPhiladelphiarelative
totherestofthecountry.
Thesestatisticsfacilitatethegroupingofsectorsintoclustersandpermitanalysisofwhich
sectorsaregrowing,andwhichareuniquetothecity,aswellaswherethegreatestopportunityexists
forwellestablishedsectorstopotentiallycompeteonanationallevel.TheMTFreportalsoprovidesan
approachtocalculatingtheemploymentimpactof100newjobsinasectoronthelocaleconomy,as
wellasthemultipliereffectofhowmuchnewsalesincreasetotaloutput.TheMTFreportenumerated
thetoptensectorsthathaveanLQabove1.0andaregrowingfasterlocallythannationally.

10

ALocationQuotientlargerthan1.0meansthereisalargerpercentageofpeopleworkinginaparticularsectorinPhiladelphia
relativetothecountry.

13

Inthissectioneightofthecommoditycategoriesdescribedabovewillbeinvestigated:HVAC
products,ElectricalEquipment,Furniture,FacilityCommodities,MedicalEquipment,Laboratory
Equipment,PaperProducts,andOfficeSupplies.11Thesebroadcommoditycategoriesarerepresented
bythirteen4digitNAICScodes.These13sectorsarestillrelativelygeneralandincludesomesub
sectorsthatdonotderivemuchdemandfromEdsandMedsanchorinstitutions;howeverthevast
majorityofthesesectorsmanufacturecommoditiesthatallanchorinstitutionspurchase.These13
sectorsalsoconstitutealargeproportionofthetotalmanufacturingsectorinPhiladelphia,with250
firmsemploying4,636people,withanaverageyearlywageofnearly$55,000.WithintheCitylimits
thereareroughly750manufacturingfirmswith23,000employees,atanaveragewageofnearly
$59,000;the13sectorsdiscussedrepresentonethirdofallfirmsand20%ofallmanufacturing
employees.12
Withinthese13sectorsthereare51subsectors,ofwhich41containfirmsthatmanufacture
commoditiesthatarepurchasedbyanchorinstitutions.13These41subsectorsrepresent15%ofallthe
manufacturingsubsectorsdefinedbyNAICS.Thesubsectorsvarygreatlyintermsofscale,capacityof
firms,andproportionofbusinessdonelocally.In28ofthesesubsectors,morethan50%oflocalsupply
isconsumedbylocaldemand;ofthese,11subsectorshaveaSDRover100%.Thisimpliesthereismore
supplyintheregionthandemand.However,thereareonlytwosubsectorswithaRegionalPurchase
Coefficientgreaterthan50%.Thisimpliesamajorityofwhatisbeingpurchasedinthecityisnotbeing
madehereinthecity.Putanotherway,therecouldbelargepotentialforexpandingcapacitytofulfill
largeamountsoflocaldemandwithhighqualitylocalsupply.

11

ThesesectorsareidentifiedbycodesassignedbytheNorthAmericanIndustryClassificationSystem,thestandardusedby
Federalstatisticalagenciesinclassifyingbusinessestablishmentsforthepurposeofcollecting,analyzing,andpublishing
statisticaldatarelatedtotheU.S.businesseconomy.TheNAICScodesinquestionare:3221Pulp,Paper,PaperMills;3222
ConvertedPaperProduct;3231PrintingandRelatedSupport;3256SoapandCleaningSupplies;3272Glass&GlassProducts;
3333CommercialandServiceIndustryMachinery;3334HVACandCommercialRefrigerationEquipment;3345Electronic
Instruments;3351ElectricLightingEquipment;3371HouseholdandInstitutionalFurniture;3372OfficeFurniture&Fixtures;
3391MedicalEquipment&Supplies;3399OtherMiscellaneousManufacturing.
12
ManufacturingGrowthStrategyforPhiladelphia.
13
Thereare515and6digitNAICScodeswithinthese13sectors

14

Table4CommoditySubSectorswithSupply/DemandRatio>50%

NAICS
32223
322291
32312
32562
327215
333311
333313
333319
334514
334611
334612
32221
327213
339114
32311
339116
33512
32561
333411
333412
327211
339112
334513
322299
334516
32212
334515
333415
339113
334517
339115

30.7%
33.3%
21.7%
19.3%
19.2%

Net
Commodity
Supply
(InMillions)
$155.3
$495.7
$207.9
$1,460.3
$97.6

$113

100.0% 14.8%

$134.5

$552.1

$475

100.0% 17.1%

$572.3

$110.4

$72

100.0% 13.5%

$114.5

$313.3

$124

100.0% 21.3%

$311.3

$1,112.0
$173.0
$174.6
$1,861.1
$77.0
$292.5
$1,088.6

$952
$92
$144
$1,406
$88
$299
$1,243

100.0%
100.0%
99.3%
88.2%
86.1%
85.9%
85.4%

59.9%
50.6%
13.7%
16.9%
15.8%
14.0%
17.2%

$1,069.6
$165.0
$143.1
$1,240.2
$75.8
$257.3
$1,060.8

Airpurificationandventilationequipment

$159.5

$162

78.6%

9.0%

$127.7

Flatglass
Surgicalandmedicalinstrument
Industrialprocessvariableinstruments
Allotherconvertedpaperproduct
Analyticallaboratoryinstrument
Papermills
Electricityandsignaltestinginstruments
Airconditioning,refrigeration,andwarmair
heatingequipment
Surgicalapplianceandsupplies
Irradiationapparatus
Ophthalmicgoods

$71.7
$836.0
$640.1
$69.4
$581.8
$756.0
$304.7

$41
$811
$537
$82
$365
$1,478
$272

77.7%
75.1%
75.1%
71.4%
69.0%
68.1%
66.8%

20.2%
6.8%
10.7%
26.0%
8.8%
19.8%
6.9%

$31.6
$609.8
$403.4
$58.8
$251.4
$1,005.9
$181.8

$314.5

$386

66.2% 11.0%

$255.4

$644.5
$527.3
$192.5

$920
$502
$313

60.3% 10.0%
51.8% 9.3%
51.4% 4.6%

$554.7
$260.0
$160.9

CommodityDescription
Stationeryproduct
Sanitarypaperproduct
Supportactivitiesforprinting
Toiletpreparation
Glassproductmadeofpurchasedglass
Vending,commercial,industrial,andoffice
machinery
Othercommercialandserviceindustry
machinery
Totalizingfluidmetersandcountingdevices
Software,audio,andvideomediareproducing
Paperboardcontainer
Glasscontainer
Dentalequipmentandsupplies
Printing
Dentallaboratories
Lightingfixture
Soapandcleaningcompound

$152.8
$906.7
$190.4
$1,894.3
$228.3

Gross
commodity
Demanded
(InMillions)
$147
$389
$140
$771
$55

$160.3

Commodity
Output
(InMillions)

SDR
100.0%
100.0%
100.0%
100.0%
100.0%

RPC

BesidesthosesubsectorswithSDRsabove50%,thereare13whicharebelow50%.Howeverall
butthreeofthesesubsectorshaveanSDRgreaterthan10%,whichmeanstheiroutputisatleast10%
oflocaldemand.NoneofthesesubsectorshaveanRPCgreaterthan19%andalmostallareunder
10%.Thismeansthereisahighlocaldemandforwhatthesesubsectorsproduce;butitalsomeans
thatitisnotbeingproducedatalargeenoughscaletofulfilltheexistingdemand.

15

Table5CommoditySubSectorswithSupply/DemandRatio<50%

NAICS
334518
334519
33994
334510
333414
334512
32213
333314
333315
33992
337124
337125
337127
33511
334613

CommodityDescription

Commodity
Output
(InMillions)

Gross
commodity
demand
(InMillions)

$243.9

Net
Commodity
Supply
(InMillions)

SDR

RPC

$247

49.5%

6.4%

$122.1

$46.9
$195.3
$35.5
$31.3
$207.3
$111.6
$0.9
$80.6

$115
$341
$97
$63
$438
$108
$39
$409

44.5% 6.6%
43.7% 18.7%
38.2% 10.1%
37.9% 3.6%
34.9% 13.8%
22.8% 1.6%
22.4% 0.4%
19.4% 2.8%

$51.0
$149.1
$36.9
$23.8
$153.1
$24.6
$8.7
$79.3

Metalandotherhouseholdfurniture(excwood)

$27.9

$145

12.0%

3.1%

$17.5

Institutionalfurniture
Electriclampbulbandpart
Magneticandopticalrecordingmedia

$21.2
$2.3
$

$217
$84
$51

8.0%
2.2%
0.0%

0.9%
2.2%
0.0%

$17.4
$1.9
$

Watch,clock,andothermeasuringandcontrolling
device
Officesupplies(exceptpaper)
Electromedicalandelectrotherapeuticapparatus
Heatingequipment(exceptwarmairfurnaces)
Automaticenvironmentalcontrol
PaperboardMills
Opticalinstrumentandlens
Photographicandphotocopyingequipment
Sportingandathleticgoods

MostofthesectorsinPhiladelphiathatsupplythecommoditiesdemandedbyanchor
institutionsareeithergrowingfasterorhavealargercomparativeworkforcethantherestofthenation.
Household&Furniture(NAICS3372)andMedicalEquipment&Supplies(3391)arebothgrowingfaster
andhavelargercomparativeemploymentnumbersthantherestofthenation.Glass&GlassProducts
(3272)andCommercial&ServiceIndustryMachinery(3333)aregrowingfasterthanthenational
average,buthaveasmallercomparativeworkforceinPhiladelphia.Foursubsectorsdisplaytheconverse
characteristics:notgrowingasfastasthenationalaverage,butwithalargercomparativelocal
workforce;thesearePrinting&RelatedSupport(3231),Soap,CleaningCompound&Toiletry(3256),
ElectronicLighting(3351)andOtherMiscellaneous(3399).Threesubsectorslagbehindthenationin
termsofbothgrowthrateandsizeofworkforceHVAC&CommercialRefrigeration(3334),Electronic
Instruments(3345),andHousehold&InstitutionalFurniture(3371).
Inshort,Philadelphiasmanufacturingeconomyalreadycomprisesmostofthesectorsandsub
sectorsthatproducemuchofwhattheanchorinstitutionspurchase;further,thesesubsectorsprobably
havethecapacitytosupplyorwouldneedminimalexpansiontobecompetitive,andtheyareeither
growingfasterorhavealargercomparativeworkforcerelativetothenation.Thesesectorsareprimed
forgrowth,andneedonlyanincreaseinbusinessandinvestment.Theyarealreadyaprominentforce
intheninealreadyexistingmanufacturingclustersinPhiladelphia.Ofthese,manufacturersthatcould
potentiallybedrivenbyanchordemandcompriseasizableportionofthefollowing:Pharmaceuticals&
Chemicals,Electronics,Machinery&MetalProducts,TextilesClothing&PaperandNonMetallic
Minerals.Theseclustersaccountfor57.4%oftheemploymentand30%oftherealoutputinthe
manufacturingsector.Inotherwords,investmentinthesesectorswouldlikelyspilloverintosupporting
industriesandstrengthentheclusterasawhole.
Theindustriesinthesesectorshavetremendousimpactwithinandoutsideoftheircluster.
Theyareinterrelatedandhavelargeemploymentandoutputmultipliers.Every100newjobsin
16

manufacturingproduces322newjobsinothersectors,andoveralloutputincreasesby1.64timesfor
eachadditional$1millioninsales.14Thereareninemanufacturingsectorsofatotalof15thatstrong
directsupporttotheAnchorInstitutions.TheseNinesectorsareabovethemedianintheoutputper
salesmultiplierandallninesectorshaveahigheroutputmultiplierthantheCitywidemanufacturing
average.15

SECTION4

BridgingSupplyandDemand

FollowingtheleadoftheManufacturingTaskForce,theControllersanalysissuggeststhat
developingamechanismtobringingtheCitysanchorinstitutionstogethercollaborativelywiththe
manufacturingsectorcouldcreateanopportunityformajorleveragethatcould,inturn,createagreat
dealofeconomicgrowth.Fordecades,localandstateeconomicdevelopmentpolicyhasfocused
primarilyonbusinessattractionorthedevelopmentofstartups;whiletheseareimportantelementsof
agrowthstrategy,Philadelphiahaslargelymissedtheopportunityrightunderourproverbialnoses:the
existingdemandofourlegacyinstitutions.AstheControllersOfficedemonstratedinitsworkonthe
KeystoneOpportunityZoneProgram,untargetedbusinessattractionandretentionprogramproduce
smallmultipliereffectsandgenerallyfailtoproducesustainedgrowth.16Theapproachadvocatedin
thisreporthasbecomecommoninmanysocalledlegacycities,fromDetroitandClevelandonthe
mostdistressedend,toBaltimore,Pittsburgh,andChicagoonthemoredevelopedend.Itisimportant
tonotethatfewcitiespossessthenumber,comparativequality,orscaleofanchorinstitutionsas
Philadelphia.Utilizingtheirdemandtobolsterandgrowthemanufacturingsectorcanhelpshapethe
localeconomybycreatingclusters,whichinturnhavelargespilloveragglomerationeffects.Moreover,
byworkingwithnationalsupplychainintegrators,localfirmsthathaveheretoforebeenfocusedona
verysmallmarketcanbeinducedtoscaleuptobuildexportcapacityandtherebygrowexponentially.
Extractedfromtheinstitutionalprocurementdata,approximately$860millionworthof
commoditypurchaseswerematcheddirectlywithmanufacturingNAICScodes.17Ofthis$860million,
just$136millionor16%wasprocuredlocally.18GroupingthecommoditiesintocategoriesbyNAICS
codeshelptoelucidatethosesectorsuponwhichlocalanchorinstitutiondemandmighthavethe
greatestimpact.Italsoallowsforadirectcomparisontowhatisactuallybeingmanufacturedinthe
city.
Atpresent,thedatasuggestthatPhiladelphiasanchorinstitutionsalreadyprocureamajorityof
commoditieslocallyinthreecategoriesFood,ElectricalEquipment,andFurniture.Therehasbeen
considerableresearchandinvestmentonhowtoexpandlocalfoodprocurementfromanchor
institutionsandthisisapromisingareaforinvestment.19Therearelocalmanufacturersofboth
electricalequipmentandfurniturewithinPhiladelphia.Anotherpossibilityforgrowthismiscellaneous

14

ManufacturingGrowthStrategyforPhiladelphia.
SeeAppendixforChartofmanufacturingsectormultipliers
16
PhiladelphiaCityControllerAnAnalysisoftheKeystoneOpportunityZoneProgram,19992012,March2014
(www.philadelphiacontroller.org/publications/KOZReport_March2014.pdf).
17
SeeAppendixA2formoreinformation
18
Thesenumbersarenotprojected,andonlyreflecttheinstitutionsthatsupplieddata.
19
E.g.,InitiativeforaCompetitiveInnerCity(ICIC),AnchorInstitutionsandFoodSystems,April2014
(http://www.icic.org/ee_uploads/publications/ICIC_whatworks_anchors_food.pdf).
15

17

manufacturing,asTable6belowshows,NAICScode339(MiscellaneousManufacturing)accountsfor
$479million,whichis56%ofthetotalspending.Thisisbecausethemedicalequipmentmanufacturing
sector,whichaccountsfor$458million,iscapturedunderNAICSCode339.Thiscategoryalsoincludes
SportsRecreationEquipmentandOfficeSupplies,whichaccountfor$6.7millionand$13millionin
spending,respectively.ThemanufacturingsubsectorsofMachinery,ComputerElectronics,and
Chemicalsalsofeatureasignificantamountofreportedspending.

Thedurablemanufacturedgoodswiththemostpotentialforlocalprocurementappeartobe
FabricatedMetal,ElectricalEquipment,andFurniture;asshownintheTablebelow,theserangefrom
38%to48%local.Thesesectors,alongwithPaperProductsandMiscellaneousManufacturing,already
haveastrongbaseinPhiladelphia.AsindicatedbythelowRegionalPurchaseCoefficientsforthese
sectorsshowninTable5above,mostofthedemandforthesecommoditiesiscomingfromoutsideof
theregion;atthesametimetheSupply/DemandRatioforthesecommoditiesiscloseto100.This
suggestssufficientlocalcapacitytosupplythesecommoditiestolocalinstitutions,aswellassufficient
sizetocompeteonaregionalnationalorglobalscale.

Table6:SpendLocationby3DigitNAICSCode
Code
311
313
314
322
323
324
325
332
333
334
335
336
337
339
3133

NAICSDescriptor
Food
TextileMills
TextileProductMills
Paper
SupportPrinting
PetroleumCoal
Chemicals
FabricatedMetal
Machinery
ComputerElectronics
ElectricalEquipment
TransportationEquipment
FurnitureRelated
MiscManufacturing
TotalManufacturing

Total
$4,505,150
$353,382
$4,484,318
$5,401,168
$6,706,481
$33,418
$232,981,586
$3,786,368
$60,076,664
$52,838,972
$1,639,986
$369,787
$7,789,427
$479,233,950
$860,200,657

Local
$3,114,880
$9,562
$344,790
$695,230
$1,137,387
$17,522
$13,858,797
$1,455,084
$3,812,810
$4,529,460
$632,716
$26,264
$3,692,295
$104,093,385
$136,160,292

Local%
69.1%
2.7%
7.7%
12.9%
17.0%
52.4%
5.4%
38.4%
6.3%
8.6%
38.6%
7.1%
47.4%
21.7%
15.8%

Chart1:ProcurementSpending,LocalvsNonLocal,TopCategories

Chemicals
Nonlocal
MiscManufacturing

Local
$0

$200,000,000 $400,000,000 $600,000,000

18

Chart2:ProcurementSpending,LocalvsNonLocal,by3DigitNAICSCategories
Food
TextileMills
TextileProductMills
Paper
SupportPrinting
PetroleumCoal
FabricatedMetal

Nonlocal
Local

Machinery
ComputerElectronics
ElectricalEquipment
TransportationEquipment
FurnitureRelated
$0

$20,000,000 $40,000,000 $60,000,000 $80,000,000

Insum,assumingthatlocalmanufacturersareabletocompeteonpriceandquality,ashiftby
theanchorinstitutionsofsomeoftheirspendingcouldhaveasubstantialimpactonthelocaleconomy.
Table7belowestimatestheimpactofa10%,25%,and40%shiftineachsector.A25%increasein
spendingtowardslocalprocurementfromthesampleinstitutionswouldresultinatleast$46.6million
inadditionaleconomicactivityfromdirectspending,andanother$76.5millionfromindirectspending.20

Table7DirectEffectofIncreasedAnchorSpendingbySector
NAICS
Code
311
313
314
322
323
324
325
332
333
334
335
336
337
339
3133

NAICSDescriptor
Food
TextileMills
TextileProductMills
Paper
Support
PetroleumCoal
Chemicals
FabricatedMetal
Machinery
ComputerElectronics
ElectricalEquipment
TransportationEquipment
FurnitureRelated
MiscManufacturing
TotalManufacturing

CurrentLocal
Procurement
$3,114,880
$9,562
$344,790
$695,230
$1,137,387
$17,522
$12,598,906
$1,455,084
$3,812,810
$4,529,460
$632,716
$26,263
$3,692,294
$104,093,385
$136,160,282

10%increase

25%increase

40%increase

$3,253,907
$43,944
$758,743
$1,165,824
$1,694,296
$19,112
$34,637,174
$1,688,212
$9,439,195
$9,360,411
$733,443
$60,616
$4,102,008
$141,607,442
$208,564,328

$3,462,448
$95,517
$1,379,672
$1,871,715
$2,529,660
$21,496
$67,694,576
$2,037,905
$17,878,774
$16,606,838
$884,534
$112,145
$4,716,578
$197,878,527
$317,170,383

$3,670,988
$147,090
$2,000,601
$2,577,605
$3,365,024
$23,880
$100,751,978
$2,387,597
$26,318,352
$23,853,265
$1,035,624
$163,673
$5,331,148
$254,149,611
$425,776,438

20

SeeAppendixBformultipliers

19

Chart3:DirectEffectofIncreasedAnchorSpendingbySector
FurnitureRelated
ElectricalEquipment
ComptuerElectronics
Local

Machinery

10%increase

FabricatedMetal

25%increase

SupportPrinting

40%increase

Paper
TextileProductMills
Food
$0

$20,000,000

$40,000,000

Local

MiscManufacturing

10%increase

Chemicals

25%increase

$0

$200,000,000

40%increase

$400,000,000

A25%increaseinlocalprocurementamongtheanchorinstitutionswouldgenerate$181million
additionaldollarsinmanufacturingrevenue.UtilizingthesamemetricsusedintheControllersJanuary
2014reportandtheManufacturingTaskForceReport,thisadditionalspendingwouldcreate1,250new
manufacturingjobsandanadditional4,000indirectjobs.21
Thechartsbelowsummarizetheanalysisbasedonthedataathand,omittingcategoriesthat
suggestlittleornoopportunityforimprovementregardinglocalprocurement.Thesectorsshown
belowrepresentthemostplausibleopportunitiesforleveragingalmosthalfabilliondollarsinanchor
procurementspendingtocreatelocaleconomicactivity.22

21

IntheJanuary2014report,EconsultSolutionsmodelassumesthatforevery$145,000inredirectedanchorprocurement,1
newdirectlocaljobiscreated.IndirectjobfiguresarecalculatedusingthesamemultiplierutilizedbytheManufacturingTask
Force:forevery100manufacturingjobscreated322otherjobsarecreated;SeeTableB2intheappendixformoredetailed
informationonmultipliers.
22
Themostnotablecategoryomittedispharmaceuticalspending,whichaccountsfor$197milliondollars.Despitethefactthat
somanypharmaceuticalcompaniesareheadquarteredintheGreaterPhiladelphiaregion,veryfewmanufacturetheirproducts
here.ThedatainTable8abovecorrelatescommoditiespurchasedbytheanchorswith5or6digitNAICSCodes,andthereby
almostassuredlyfiltersoutspendingonhumanresources.Thisreducesthelocalprocurementfigurebelow10%,suggesting
thatthereismuchroomforgrowth

20

Chart4:PromisingOpportunities>$100million 23
SurgicalAppliancesandSupplies
TotalAmount
LocalAmount

MedicalEquipmentandSupplies
$0

$100,000,000 $200,000,000 $300,000,000

Chart5:PromisingOpportunities<$100million
HVACandCommercialRefrigerationEquipment
ManufacturingandReproducingMagneticandOpticalMedia
ElectronicComputer
ConstructionMachinery
OfficeSupplies(exceptPaper)
SurgicalandMedicalInstrument
ComputerTerminalandOtherComputerPeripheralEquipment
ScalesandBalances
SportingandAthleticGoods
Paper(exceptNewsprint)Mills
CurtainandLinenMills
CommercialScreenPrinting
Soap,CleaningCompound,andToiletPreparation
AudioandVideoEquipment
OtherCommercialandServiceIndustryMachinery
PaintandCoatingManufacturing
MetalKitchenCookware,Utensil,Cutlery,andFlatware(exc
OtherFabricatedWireProduct
OfficeFurniture
ElevatorandMovingStairway
OtherMetalValveandPipeFitting
SawBladeandHandtool
BroadwovenFabricMills
PhotographicFilm,Paper,Plate,andChemical
BooksPrinting
TextileandFabricFinishingMills
ResidentialElectricLightingFixture

TotalAmount

LocalAmount

Wherepossible,thedatawasparsedbyfiveandsixdigitNAICScodes,whichprovidesgreater
certaintythatthecategorycontainsprimarilyspendingongoodsandnotonhumanresources.Looking

23

SeeappendixfortableB1

21

atonlythosecategoriesinwhichthedatacouldbebrokendownthisway,thelocalspendingproportion
dropsbelow10%.Thissuggeststhatthereismuchroomforgrowth.
Table9belowpresentsselecteddatabySupplyDemandRatios,toillustratepossible
opportunitiesforsectoralexpansion.AlargerSDRindicatesthereismorelocalsupplythanlocal
demand.ParticularlypromisingopportunitiesarefoundinPrinting(32311),LightingFixtures(33512)
andSurgicalAppliancesandSupplies(339113).Thelatter,accountingfor$300millioninannualanchor
spending,representsfarandawaythelargestopportunity.Additionally,thedatasuggestthatitmakes
sensetoexplorefurtherthepotentialforlocalizingprocurementofMedicalEquipment&Supplies
(3391)aswellasHVAC&CommercialRefrigeration(33341).
Additionally,therearealsosectorswithlowerSDRsthatmaybeworthexploring;theseare
sectorsinwhichlocaldemandoutstripslocalsupply.TheseincludeManufacturing&Reproducingof
MagneticMedia(33461),Sporting&AthleticGoods(339920),andOfficeSuppliesExcludingPaper
Products(33394).Thefirstcategory,MagneticMedia,isassociatedwiththemanufacturingofcompact
discsforcomputersoftware,accountingfor$18millioninanchorspending,only1.9%ofwhichislocal.

Table9PromisingOpportunitieswithComplementarySDR&RPC
Code

Commodity

SDR TotalSpent

Locallyspent

Local%

33913 SurgicalAppliancesandSupplies

60.3%

$300,026,086

$28,265,607

9.4%

3391 MedicalEquipmentandSupplies

>50%

$145,638,328

$68,598,395

47.1%

33341 HVAC&CommercialRefrigeration

>50%

$34,640,412

$1,991,485

5.7%

100.0%

$18,886,964

$360,602

1.9%

44.5%

$12,981,707

$2,572,735

19.8%

33461 Manufacturing&ReproducingofMagneticMedia
33394 OfficeSuppliesExcludingPaperProducts
339920 Sporting&AthleticGoods

19.4%

$6,722,949

$613,442

9.1%

32311 Printing

88.2%

$4,573,571

$705,320

15.4%

33512 Lightingfixtures

85.9%

$55,822

$0

0.0%

$523,525,839

$103,107,586

TOTAL

AllofthecommoditiesinTable9alsohaveaRegionalPurchaseCoefficient(RPC)oflessthan
20%,andmostareunder10%.Inotherwords,despiteextantlocaldemandfromtheanchors,lessthan
20%ofthesecommoditiesarebeingpurchasedlocally.Thereareanumberofpossiblereasonsforthis,
ofcourseinformationasymmetry,inabilitytocompeteonpriceorquality,barrierstoentryinto
institutionalsupplychains,lackofaccesstocapital,amongothers.Insum,thischartrepresentsan
outlineofperhapsthefirstcutofopportunity.

SECTION5

AccessingInstitutionalSupplyChains

Itisrareforalargemedicaloreducationalinstitutiontopurchasecommoditiesdirectlyfroma
manufacturer;alargeproportionofanchorprocurementhappensthroughlargeregional,national,and
internationalsuppliers,calledintegratorsoraggregatorsinindustryparlance.Integratorsreduce
procurementcostsbyincreasingefficiencythroughprovidingonestopshopping,verifyingthequalityof
amanufacturersgoods,ensuringthereliabilityofdistribution,andminimizingpriceasymmetries,
22

amongotherfactors.Thereporthasheretoforefocusedonidentifyingdatadrivenopportunitiesto
growanddeveloplocalmanufacturingfirmsdrivenbyanchordemand,growthbothwithinandbeyond
thelocalmarketisdependentupongainingaccesstothesesupplierscatalogs.Liketheircounterparts
elsewhere,Philadelphiasanchorinstitutionsrelyonavarietyofwholesalesuppliersbothdiverseand
commodityspecific;however,thedatashowsthatmostanchorsutilizeasmallnumberofmajor
suppliers,includingOfficeDepot,Grainger,Premier,Owens&Minor,Cardinal,Aramark,Sodexo,anda
fewothers.Whilethereisconsiderablegrowthpotentialsimplysupplyingtheneedsoflocalanchor
institutions,theeconomicimpactwouldbemuchgreateriflocaldemandservedasacatalystorgateway
toprovideaccessforlocalfirmstoregionalandnationaldistributionnetworks.
ManyofPhiladelphiasinstitutionshavedevelopedwhatMichaelPorterwouldcallshared
valuepartnershipsdirectlywithlocalbusinessesorprogramsdesignedtofosterthem.Drexel
UniversitypartnerswithTheEnterpriseCenter(TEC)inWestPhiladelphiatoprovidementoringservices
tohelplocalsupplierscompeteforuniversityprocurementdollars;therecentestablishmentofthe
DornsifeCenterwillgreatlyexpandDrexelseffortsalongtheselines.TemplesFoxSchoolofBusiness
hassmallconsultancythatfocusesondevelopingthecapacityofminorityandwomenowned
businesses.PerhapsthemostwelldevelopedoftheselocalanchoreffortsisattheUniversityof
Pennsylvania,wherethecombinedworkoftheNetterCenter,WhartonsSmallBusinessDevelopment
Centeranditseffortstodevelopasmallminorityownedofficesupplyfirm,TelroseCorporation,intoa
TierOnesupplier,hasgarnerednationalattention.Pennsfoodserviceprovider,BonApptit,buys
bakedgoodsfromlocalentrepreneursoperatingoutofthecommercialkitchensatTECsCulinary
EnterpriseInitiative.Additionally,areauniversitiesorganizedthemselvesintothePhiladelphiaArea
CollegiateCooperative(PACC),throughwhichtheybulkprocurealimitedbasketofgoodsatlowercost,
withaneyetowardlocalanddiversepurchasing.In2013,PACCinstitutionscollectivelyprocured$23
millionfromtheirsuppliers.
Anumberofmodelshaveemergedasanchorinstitutionsacrossthecountryincreasinglydecide
topursuelocalizationstrategies.Insomecases,asingleinstitutionhastakenuponitselftodevelop
programstoexpandlocalpurchasing;oneofthemoresuccessfuloftheseinitiativesistheStreetwise
MBAprogramrunbyInteriseatColumbiaUniversityinNewYorkCity.Smallbusinessesreceivedirect
guidancefromtheexpertsatInterise,whoalsoworkcloselywithuniversityprocurementofficialsto
ensurethatthebusinessesareproducingwhatColumbianeeds.24Asecondmodel,adoptedin
Cleveland,startedwithaninitiativebytheClevelandFoundationtoincreaselocalemployment;the
DemocracyCollaborativeworkedwithanchorsandtheFoundationtocreatetheEvergreenCooperatives,
whichhasinturnedspawnedseveralworkerownedfirmsdrivenprimarilybydemandfrominstitutions
liketheClevelandClinic,UniversityHospital,andCaseWesternReserveUniversity.TheGreater
ClevelandUniversityCircleInitiativehascreatedoverahundrednewjobsandgenerated$14.3millionin
annualeconomicimpact.25ChicagoAnchorsforaStrongEconomy(CASE)providesathirdmodel,in
somewaysahybridoftheColumbiaandtheClevelandapproaches.MorethanadozenChicago
institutionshavecometogethertointentionallycreatenewopportunitiesforlocalsuppliersbyanalyzing

24

InterviewwithInterisestaff,January6,2015.
ClevelandFoundation,ClevelandsGreaterUniversityCircleInitiative,2013Report
(http://www.clevelandfoundation.org/wpcontent/uploads/2014/01/ClevelandFoundationGreaterUniversityCircleInitiative
CaseStudy2014.pdf)

25

23

theirspendingandidentifyingthepotentialforlocalization.ThemostinnovativeaspectoftheCASE
approachisanacceleratorprogramrunbyNextStreet,aBostonbasedmerchantbankforurban
enterprisethatprovidesguidancetobusinessesaswellasaccesstocapital.Theprogramisfundedby
contributionsfromeachanchorinstitution,whichhavebeensupplementedbylocalfoundations.26
Despiteallofthisgreatwork,theControllerknowsofnoconcertedattempttouseorganized
demandonthepartofanchorinstitutionstofacilitatepartnershipsbetweenlocalmanufacturersand
majornationalintegrators.27Thissortofcollaborationwouldprovideavehicleforlocalmanufacturers
toenternationalsupplychains,theattendantscaleupgreatlyincreasingthemultipliereffectonthe
localeconomy.Thusthisreportproposesthecreationofamodelthatsynthesizesthebestoftheothers
targetedlocalbusinessdevelopmentstrategiesalongthelinesofwhatDrexelandPennarealready
doing,scalingupandcollaboratinginthespiritofCASE,themarketwideapproachandworkforce
developmentemphasisofClevelandbutwiththeaddedelementofworkinginpartnershipwith
integratorstocreatepathwaystoexportoftradeablegoods.
Integrators:TheKeytoScalingUp
WhilethelocaleconomiesinPhiladelphia,Cleveland,NewYork,Detroit,andChicagogeta
measurableboostfromincreasedlocalspendingbyindividualinstitutions,andstillmoreofaboostfrom
coordinatedspending,theimpactisobviouslylimitedbythelocalinstitutionsaggregatedemandforany
particularcommodity.Ineconomicterms,theimportsubstitutioneffectongrowthislimitedbythesize
ofthedomesticmarket.Theultimategoaloftheimportsubstitutionstrategy,however,isleveraging
domesticdemandtogrowanindustrysuchthatitbecomesanexporterofgoods.Fromthe
HomespunmovementduringtheAmericanRevolution,whichspurredthedevelopmentofthe
Americantextileindustry,totheemergenceoftheAsianTigersinthelate20thCentury,theimport
substitutionmodelofdevelopmenthasavenerablehistory.Theimpactonbusinessgrowthandthe
localeconomywouldbeincreasedexponentiallyifalocalbusinessisabletogainaccesstoanational
marketbyenteringthesupplychainofamajorintegrator.Assumingacollaborativepurchasing
organizationcouldbecreatedamongPhiladelphiasanchorinstitutions,developingapartnership
betweenthisorganizationandmajorintegratorswouldallowlocalfirmstolearntonavigateinstitutional
purchaserssupplychains,whileexpandedbusinessopportunitieswouldpermitthemtoscaleupatthe
appropriatepace.Conversationswithseveralofthemajorintegratorssuggeststhattheyareconstantly
insearchofinnovativeproductsfromsmallandmediumsizedbusinesses,theydesiresupplierdiversity,
andmanyofthememploymoreorlessdevelopedmentorprotgprogramsandotherformsof
technicalandfinancialassistancetofacilitatepartnershipswithsmallandmediumsizedmanufacturers.
MajornationalintegratorslikeOfficeDepotandOwens&Minor,aswellaslargecorporations
likeComcastandAramarkhaveatrackrecordofdiversifyingtheirsupplychainstoincludewomenand
minorityownedfirmsaswellassmallandmediumsizedlocalbusinesses.Overthepastdecade,most
majorintegrators,corporations,largenonprofits,andgovernmentsalikehavedevotedincreasing

26

WorldBusinessChicago:CASE.http://www.worldbusinesschicago.com/case;http://www.nextstreet.com/about_us.
Asmentioned,PennandDrexelcollaboratedwithOfficeDepottohelpdeveloptheTelroseCorporationintoaTierOne
distributor,allowingTelrosetoachieveastoundinggrowth.Assuchitisanimportantinitiativethatdemonstratestheappetite
forandpotentialofthisapproach.Merritt,BigDeal,SmallFirm.

27

24

resourcesandattentiontosupplierdiversityandlocalsourcing.Whetherdrivenbygovernment
incentives,specificgoalsenshrinedinEconomicOpportunityPlans,orleadershiplevelcommitmentsto
corporatesocialresponsibility,integratorsareconstantlyseekingopportunitiesforhistorically
underutilizedbusinessestobreakintothesupplychainandcompeteonthenationalmarket.The
AnchorProcurementInitiativecouldplugintomanycompaniesalreadyexistingprograms.Wheresuch
programsdonotformallyexist,Citygovernmentcouldworkwithintegratorsandpartnersamong
communitydevelopmentfinancialinstitutionssuchasthePhiladelphiaIndustrialDevelopment
Corporation(PIDC),TheReinvestmentFund(TRF),LocalInitiativesSupportCorporation(LISC),and
Finanta,businessgroupssuchastheGreaterPhiladelphiaChamberofCommerce(GPCC),theDelaware
ValleyIndustrialResourceCenter(DVIRC),andtheSustainableBusinessNetwork(SBN),andbusiness
developmentcentersatPhiladelphiasacademicbusinessschoolstocreatethem.
Researchsuggeststhatthereisnosimpleformulaforabusinesstosuccessfullyenterandthrive
inalargesupplychain,butthatthecommondenominatorsforsuccessincludecommitmentonthepart
ofbothintegratorandinstitutionalcustomer,aswellastheavailabilityoffinancialandtechnical
assistancetofirms.AsamajorstudyofattemptsbysmallbusinessesinNewYorkCitytoachievescale
found,purchasingdecisionsinmodernsupplychainsareincreasinglycustomized,makingitdifficultfor
smallsupplierstoaccesstheprimarydecisionmakerattheendconsumerdirectly.28Thefirstpointof
entryisalmostalwaysthroughtheouteredgesofthesupplychain,viaaTierOneorTierTwopartner.
Withtherightmixofleadership,innovation,persistence,andassistance,somebusinessesattainthe
breakthroughcontractthatallowsthemtoachieveenoughscaletomovebeyondtheirdomesticmarket.
ThestrategybeingproposedforPhiladelphiaaimstomoreintentionallycreateapipelineintothemajor
integratorssupplychains.Thiswillrequireworkatthreelevelscollaborationamongtheinstitutional
purchasers,arelationshipbetweenalocalpurchaserscollaborativeandtheintegrators,andaprogram
torecruitanddevelopbusinessestoscale.ThisispreciselytheuniquerolethatPhiladelphiaAnchorsfor
aStrongEconomy(PHASE)wouldplay.
Mostintegratorstouttheircommitmenttodiversityandinclusion,andmosthaveamoreorless
welldevelopedprogramtoattractcertifiedHistoricallyUnderutilizedBusinesses(HUBs)orWomen,
MinorityorotherwiseDisadvantagedBusinessEnterprises(W/M/DBEs).Existingsuppliersandprime
contractorscanserveasmentorstosmallbusinessesseekingentryintolargesupplychains.Existing
suppliershaveexperiencedealingwiththelargerentity,andunderstanditsexpectationsandits
corporateculture;sharingthisknowledgecanprovetremendouslyhelpfultoaprospectivesupplier.29
Thoughnetworkingandcultivatinglongtermrelationshipsaretimeintensive,thepotentialpayoffcan
betremendousforasmallupstartbusiness.Recommendationsandintroductionsfromanalready
establishedsuppliercarryagreaterweightwithalargepurchaserthantacticslikesendingproduct
samplesblindly.Subcontractingisalowriskwayforprimecontractorsinasupplychaintoinvestina
newbusinessseekingaccesstoamajordealer,inadditiontoelevatingitsbusinessstatuswithinthat
organizationandthepotentialbenefitsthatstemfromincreasingitsconsumerbase.30

28

CenteroranUrbanFuture,SmallBusinessSuccess,2014(https://nycfuture.org/pdf/SmallBusinessSuccess.pdf).
CenterforanUrbanFuture,BreakingintotheCorporateSupplyChain,2010
(https://nycfuture.org/pdf/Breaking_into_the_Corporate_Supply_Chain.pdf)
30
ICIC,UsingProcurementToGrowInnerCityBusinesses,2009(http://www.icic.org/ee_uploads/publications/USING
PROCUREMENTTOGROW.PDF)
29

25

Fosteringarelationshipwiththeintegratorsanddevelopinganimmersionstrategytobreakinto
thesupplychainfirstentailsarealisticevaluationofacompanysownmanufacturingandeconomic
capacity.Theavenueintoanationaldistributionnetworkcanbeoverwhelmingandbroad.Ultimately
businessgrowthdependsonamultitudeoffactorseachsmallbusinessandmajordealerrelationship
isuniqueandtherearecontrollablefactorstoattractamajordealer.Conversationswithsmall
businessesthathaveestablishedrelationshipswithmajorintegratorsmakeitclearthatfacilitywith
contemporarytechnologyisexpectedlaggingbehindtechnicallyimmediatelydiminishesabusinesss
viability.Technologydrivesdowncostandincreasesefficiency.Intodaysmarketplace,abusinessmust
becapableofseamlesslyintegratingintoawholesalersinternetmarketingprogram;oneseniorofficial
atamajorintegratortoldusthatecommercehasdemocratizedentrytosupplychains,butmany
vendorsstillfocusonoldretaillikehowtogettheproductontheshelves.Ifavendorwithatruly
innovativeproductcannothandletherequirementsofecommerceinternally,theintegratormay
connectthecompanytoamoreexperiencedpartnerthatpossessestheappropriatetechnological
resources.Intodaysmarketcustomershaveaccesstoproductsinatleastthreedistinctways:retail,
virtual,andecommercesales.Preparingstrategiesthatacknowledgethisvarietyisessential.Itisalso
criticalthatabusinesssetattainableandrealisticgoalsforgrowth,toavoidthecommonproblemof
overextensioninanunfamiliarmarketspace.Majornationaldistributorsdonothavethebandwidthto
financiallyoreventechnicallyassistallTierTwosuppliers,oneofmanyreasonsthatmentorprotg
programsarecritical.CentraltotheroleofPHASEwillbedevelopingmentorprotgrelationshipsfor
localbusinessesthatseektogainaccesstointegratorssupplychainsandprovidingthenecessary
technicalandfinancialassistance.
CaseStudiesOfficeSupply
Intheofficesupplysector,OfficeDepotboastsanextensivediversesuppliernetwork.Every
yearsince2008,thecompanyhasproduceditsHistoricallyUnderutilizedBusiness(HUB)catalog,
featuringhundredsofcommoditiessuppliedbycompaniesownedbywomenandpeopleofcolor;the
2014editionfeatures1,800productssuppliedby34companies,14ofwhicharecertifiedminority
ownedand15ofwhicharewomenowned.Thecompanyhasspentover$5billionwithdiverse
supplierssince1999.31RelationshipswithHUBcompaniesaccountedfor$600millionofOfficeDepots
$3.7billioningrossincomeforFiscalYear2014.32Consistentwithanysuccessfulbusiness,OfficeDepot
seeksbusinessandeconomicsustainability;thegoalofitsSupplierDiversitymodelistosustaingrowth
withcurrentvendorswhileprospectingadditionalbusinesses,forconstantconsumerexpansionand
diversity.AsurveyoftheHUBcatalogrevealsacomplexsupplychaininwhichsomeproductsare
manufactureddomesticallywhilemanyareprocuredbyTierTwowholesalersfrommanufacturers
abroad.OfficeDepotsSupplyDiversityChainmodelhasthreedimensions;VendorDiversity,Supplier
Diversity,andTierOne.OfficeDepotpridesitsoverallSupplierDiversityprogramtheexposureand
partnershipsbusinessesgainthroughintegration.Insteadofdirectfinancialassistance,OfficeDepots
partnershipphilosophycultivatesfinancialsustainability.Viaamultitudeofconnectionsandresources,
OfficeDepotoffersHUBbusinessesthecapacitytodevelopcapabilitiestobecomeselfreliant.Other

31
32

OfficeDepotHistoricallyUnderutilizedBusinesses2013
InterviewwithOfficeDepotstaff;

26

integratorsalsoprovidetheirdiversepartnerswithamentorprotgprogram,differinginapproachfor
eachbusiness,butwiththeultimategoalofestablishingadurablerelationship.RFPcontract
requirementsarecustomizedforeveryproductdependentonsupplyaccessandinnovation.Theeffort
toexpandacompanystoolboxareprovidedthroughtrainingsessionswithorganizations,forinstance,
theSmallBusinessAdministration(SBA),anddeveloprelationshipswithexistingpartnersandother
partnernetworksaskeyvaluesintheSupplierDiversityprogram.
AnotherexamplefromOfficeDepotsHUBcatalogisstoragepalletsupplierAddendia,afemale
ownedandoperatedcompanythatmanufacturesitsproductinMassachusetts.AcertifiedWBE,
Addendiautilizedcertificationasaprimarypathwaytoreachdistributors.Withoutalargeemployment
orbroadnetworkingfoundation,theoutreachopportunitiesaffordedbytheWomen'sBusiness
EnterpriseNationalCouncil(WBENC)providedthegreatestopportunitytoreachdealers.Successwith
OfficeDepotallowedAddendiatoexpanditscustomerbaseandexpanditsmarkettoincludeother
integrators,suchasGrainger.
TheAllianceRubberCompanyofHotSprings,Arkansasalsodemonstratestheimportanceof
relationshipswithintegratorslikeOfficeDepot.AllianceisacertifiedWBE,ledbyCEOBonnieSwayze
since1981;itspartnershipwithOfficeDepotbeganin1987,wellbeforetheexistenceoftheHUB
catalog.AlliancehasleverageditsrelationshipwithODtoformpartnershipswithothermajor
wholesalerslikeSPRichardsandUnitedStationers.Foundedin1923,Alliancehasmaintainedsteady
growthinpartbecauseofthemarketsharetheyhavegrownthroughOfficeDepotssupplychainand
exposure.Today,OfficeDepotaccountsfor$3.7millionofAllianceRubberstotalannualrevenuesof
about$35million;accordingtoSwayze,revenueshaveincreasedby35%inthelastdecadeandare
growingabout5%annually.In2014,Allianceinvested$600,000intheexpansionoftheirHotSprings
headquarters,whichallowedthecompanytoadd15workersforatotalof165employees.The
relationshipwithOfficeDepotandotherwholesalersallowsacompanylikeAlliancetoplanforsecure
andsteadygrowth.33
Finally,althoughitisnotamanufacturingfirm,thestoryoftheTelroseCorporationisinstructive.
AXeroxbusinessproductspecialistservicingtheUniversityofPennsylvaniaintheearly1990s,ToddRose
developedastrongworkingrelationshipwithkeybusinessadministratorsatPenn,whocametorelyon
him.HebecameadiversitycontractorforXerox,butXeroxlostitsPenncontract;atPennssuggestion,
OfficeDepotaskedToddtobecomeadiverseTierTwosupplier,andin1995theTelroseCorporationwas
born.Forthreeyears,Roserecounts,thecompanymadeontimedeliveriestoPennyetownednota
singletruck.DrexelandPenncollaboratedwiththeCitysMinorityBusinessEnterpriseCentertocreate
theDiversitySupplierDevelopmentProgram,whichidentifiedminorityfirmsforcontractswiththe
universities,andTelrosesportfolioofuniversitybusinessgrewtremendously.TheDSDPexplicitlyaimed
tohelpbuildcapacityamongdiversefirms.BecauseOfficeDepotalsohasitsownprogramtodevelop
andmentordiversepartners,whenitscontractwithPennwasupforrenewal,OfficeDepotagreedto
flipthecontractandallowTelroseassumetheprimarycontractorrole.ThuswasTelrosecatapulted
fromtheranksofaTierTwodeliverycompanytoafullserviceTierOnesupplier.TodayTelrosehas22
employees,10trucks,andcountsascustomersnotonlyPennandDrexelbutmajorengineeringand

33

InterviewwithBonnieSwayze,March18,2015;JamesHaggerty,U.S.RubberBandMakerSurvivesbyStretchingItsPortfolio
ofProducts,WallStreetJournal,June1,2014(http://www.wsj.com/articles/usrubberbandmakersurvivesbystretchingits
portfolioofproducts1401382522);GlassCeiling.com,PassionDrivenCareers:BonnieSwayze,(www.glassceiling.com).

27

constructionfirmDay&Zimmerman,IndependenceBlueCross,andComcast,amongothers.According
toRose,Telrosenowfills1,100ordersaday,afarcryfromthe3personbootstrapoperationof20years
ago.Asthisexampleshows,intentionaleffortonthepartofbothamajorclientsuchasPennorDrexel
inpartnershipwithamajorintegratorlikeOfficeDepot,whichrecognizesthediversityspaceasa
growthengine,inRoseswords,canleadtoimpressivegrowth.34
CaseStudiesHealthcare
Inthehealthcarefield,majorsupplierssuchasAmerinet,Owens&Minor,andPremierbanded
togetherin2003toformtheHealthcareSupplierDiversityAlliance(HSDA).MostHSDAmembers
producespecialdiversesuppliercatalogstomakeiteasierforprocurementofficialstomeetdiversity
goals.ThecaseofKermaMedicalManufacturingisinstructiveofthepotentialofanintegratorcentered
growthstrategy.FoundedbyEarlReubel,anAfricanAmericanveteranoftheVietnamWar,Kerma
beganasasmall,directsuppliertotheVeteransAdministrationinthelate1980s,doingabout$1million
inannualbusiness.Whenthefederalgovernmentchangeditsprocurementpracticesinthe1990stoa
primecontractormodel,Kermalostitsbiggestcontractalmostovernightandwasforcedtoquickly
regroup.InthewordsofReubelsnephewJoe,EarlssuccessorasKermasCEO,EarlthrewaHailMary
passandcoldcalledattheRichmondheadquartersof[majorhospitalintegrator]Owens&Minor.
FortuitouslyforReubel,federalprocurementpolicyincentivizedO&Mtoseekdiversesuppliersonits
federalcontracts;O&MsponsoredKermasentryintoamentorprotgprogramundertheauspicesof
theDepartmentofDefense.O&MalsoprovidedtechnicalandfinancialsupporttoKerma,enablingthe
$1millioncompanytoscaleupoverthecourseofadecadeandahalftobecomea$90million
enterpriseemployingabout100peopleinitsSuffolk,VAmanufacturingplant.Initiallydrivenalmost
exclusivelybyOwens&Minorsbusiness,todayKermahasabroadlydiverseportfolioofcustomers:itis
aprivatelabelmanufacturerforO&M,sellsdirectlytoGroupPurchasingOrganizationsasaTierOne
supplier,andhasarelationshipwithOwens&Minorsmajorcompetitor,Cardinal.Withthenew
structureofincentivesundertheAffordableCareActregardingdemonstrationofcommunityimpact,
M/W/DBEfirmsinthehealthcareindustrywilllikelyseegreateropportunitiestotreadthepathblazed
byKermaandothers.AsrenownedhealthcareconsultantandformerDirectorofExternalAffairsatthe
U.S.DepartmentofHealth&HumanServicesAntonGunnputsit,healthcareisa$3trillionindustrythat
isnevergoingaway.35
CenturyHosiery,amedicalsupplymanufacturingcompanyoutofNorthCarolina,built
partnershipswithexistingsupplierstoachieveitsrelationshipwithOwens&Minor,achievingthe
MediChoiceSupplieroftheYearawardin2009,afterjustsixyearsofcollaboration.InitiallyCentury
Hosieryconcentratedeffortsonsendingsamplestotheretailsector,whichdeemedinefficient.After
reworkingtheirmodel,theysoughtexperiencedsupplierswhowereabletodirectlydeliversamplesand
showcasetheproducttothepurchasingandsalesteamofmajordealers.Sincethestartofits
relationshipwithOwens&Minor,CenturyHosieryhasexperiencedgreaterthan130%employment
growthandanearcompleteshifttoproductionforthehealthcaresector,whichtodayaccountsfor95%

34
35

Merritt,BigDeal,SmallFirm;interviewwithToddRose,Sept23,2014.
InterviewwithJoeReubel,January22,2015;interviewwithhealthcareconsultantAntonGunn,January23,2015.

28

ofthefirmsrevenues.AsaresultofCenturyssuccesswithOwens&Minor,likeKermaithasbeenable
todeveloprelationshipswithothermajorintegratorssuchasCardinalHealthandMedline.
Similarly,MACMedical,awomanownedmedicalsupplymanufactureranddistributorinthe
Chicagoarea,startedwithasmallcontractwithOwens&Minorandleveragedittogrow.Asnoted,
healthcareprocurementrulesarelargelystructuredbyfederalmandatesforinclusionofhistorically
disadvantagedandunderutilizedbusinesses.MACsMillieMaddocksseizedontheopportunityto
partnerwithOwens&Minor,findingatremendousmentorinAngelaWilkes,thelongtimedirectorof
supplierdiversityandsustainabilityforO&MandfounderandchairofHSDA.MAChasposted30%
annualgrowthinthepastseveralyears.36
CaseStudy:FoodServices
Thetrendtowardlocalizationisperhapsmostpronouncedandadvancedinthefoodservices
industry,wheremajorglobalcompaniesseektocapitalizeonthelocavoreandsustainability
movementsbyincreasingprocurementfromlocalfarmersandentrepreneurs.In2001,thehugeFrance
basedmultinationalSodexoimplementedacommitmenttosupplierdiversity,focusedonpursuing
opportunitiestobuilddiversegrowthanddevelopmentinthecommunity.Sodexoslocalfoodservice
providersaccountfor45%oftotalmarketshare,organizedthroughlocaldistributionnetworks.In2014
SodexosSupplierDiversityprogramconsistedof1,298diversevendors,totaling$773million,or18.7%
ofthecompanystotalspend.Sodexoslocaldistributionnetworksrelyuponthirdpartygatekeepersto
ensurequalitycontrol.IntheMidAtlanticregion,J.AmbrogiFoodDistributionservesasSodexosmain
producesupplygatekeeper,aggregatingtheoutputof3dozenfamilyfarmersinNewJersey,
Pennsylvania,andDelaware.JerryAmbrogi,theCEOofthe$100millionSouthJerseybasedproduce
distributioncompanysaysthatSodexosemphasisonlocalproducehasdefinitelyhelpedusandthese
farmersthrivebynotonlyprovidingaccesstoalargermarketfortheirproducts,butalsobyvisiting
farmsandinspectingprocessestoensurethattheirproduceisgrowninthebestconditionsandtotheir
highstandards.IntheMidwest,diverseTierOnesupplierMidwestFoodsworkswithmorethan90
Sodexoaccountstosourcespecialtyproduceandsupportregionalfarmsandcommunitiesthrough
numerousmechanisms,suchastrainingandeducation,freshfarmersmarkets,seasonalitycharts,and
storagetips.37SupplierschanneltheproductsfromlocalfarmersintoSodexossupplychaincreatinga
weboflocalbusinessnetworksdrivenbySodexosdemand.Othermajorfoodintegratorssuchas
Aramarkoperateinmuchthesamemanner.ConversationswithSodexosupplychainofficialsindicatea
strongdesiretocontinuallydeveloplocalsources.

Acriticalelementinastrategyofprocurementlocalization,then,shouldincludeunderstanding
thepathwaystoentryintomajorintegratorscatalogs,andatwhatpointinthesupplychainitmakesthe
mostsensetofocusondistributionoronmanufacturing,forexample.Onitsface,theremightappear

36

InterviewwithAngelaWilkes,January21,2015;MarkTaylor,Capitalizingonanopportunity:MACMedicalSupply
Company,YahooSmallBusiness(https://smallbusiness.yahoo.com/advisor/capitalizingonanopportunitymacmedical
supplycompany233555301.html)
37
SodexoSupplierDiversityWhyisitimportant?2014(http://californiadiversitycouncil.org/wp
content/uploads/2014/11/Supplier_Diversity.pdf);Fiscal2013:InsideSodexo(http://fiscal2013.sodexo.com/boost
communityeconomies/);RegistrationDocumentFiscal2013(http://exercice20122013.sodexo.com/wp
content/uploads/2013/09/SodexoRegistrationDocumentFiscal2013_interactif1.pdf)

29

tobeapotentialmisalignmentofinterests,oratleastpriorities,amongmajorTierOneintegratorsand
anchorinstitutions:theformertypicallyoperateinglobal,national,orregionalmarketsandplace
primaryemphasisonsupplierdiversity,whilethelatter,asplaceboundinstitutionsbydefinition,
operateinparticularlocalcontextsandthusplaceatleastanequalemphasisonsupplierlocation.
Fortunately,incitieslikePhiladelphia,localanddiverseareoftencoincident;additionally,theother
powerfulmarkettrendtowardsustainabilityworksinfavoroflocalization.Further,inaCitywithso
manylargeanchorinstitutions,itseemsplausiblethatconcertedandcollaborativeeffortontheirpart
couldinfluencewholesalerbehaviortoalesserorgreaterdegree.38Butsucharrangementswillnot
emergeorganically;theywillrequiretheworkofanintermediaryorganizationlikePHASE.

Conclusion
Overthepasttwodecades,Philadelphiasanchorinstitutionshaveshowntremendousnational
leadershipintermsofcommunitybaseddevelopmentstrategies.Themajorinstitutionshave,tolesser
orgreaterdegrees,playedsubstantialrolesasrealestatedevelopers,employers,andconsumers.
NumerouseconomicimpactstudieshaveshownthatPhiladelphiasanchorsmakeenormous
contributionstothelocaleconomy.OtherthanthroughthePhiladelphiaAreaCollegiateCooperative
(PACC),theyhavedonesoindividually.Fromconversationswithanchorinstitutionleaders,the
ControllersOfficeconcludesthereistremendouswilltopursueacoordinatedprogramoflocal
procurement.Researchsuggeststhatthereareample,tangibleopportunitiesforthemtodoso,
particularlyinmanufacturing.
Astrategyoflocalizationsucceedsorfailsbasedonwhetherthelocaleconomyproduceswhat
theinstitutionsneed,andatcomparablepriceandqualitytoothersuppliers.Researchsuggeststhat
Philadelphiaseconomyproducesmuchofwhattheanchorsneed,oratleastcloselyrelated
commodities.Withcoordinationamongthebuyersorganizationonthedemandside,sotospeakas
wellascollaborationonthesupplyside,itmaybepossibletosignificantlyincreasetheproportionof
anchordollarsspentlocally.Everydollarspentlocallynotonlyincreasesdirectandindirect
employment,butalsoproducestaxrevenuesanddecreasesexpendituresonsocialservices.
Whilemanyotherstudiesinothercitieshavecometosimilarconclusions,andhavebeenthe
springboardforinitiativestouseprocurementtogrowlocalbusiness,byfocusingontheroleof
integratorsthisreporthasaddedanewfacettothestrategy.Alocalversionofimportsubstitution
wouldorganizedemandfromanchorinstitutionssothatitbuildslocalmanufacturingcapacity;inthe
shortandmediumtermthiswillcreatemorelocaleconomicactivity.Inthelongterm,bypartnering
withintegratorslikeOfficeDepot,Owens&Minor,andSodexo,thisinitiativecanhelpfirmsentermuch
largersupplychainsandproducemuchlargermultipliereffects.Becausethereareasmallnumberof
largeintegratorssupplyingtheanchorinstitutions,thismayposebothchallengesandopportunitiesfor
smallfirms;growthstartswithsupplyingsomeoftheneedsofoneormorelocalanchors,butthepath
toexponentialgrowthrequiresenteringthesupplychainofalargenationalintegrator.39Thiswill
requireaconcertedbusinessdevelopmentstrategythatshouldincludementorprotgrelationships

38

Infact,preliminaryconversationswithseveralintegratorssuggestanopennesstoanapproachthatcombineslocalization
anddiversity.
39
CenterforanUrbanFuture,BreakingintotheCorporateSupplyChain.

30

andaccesstotechnicalassistanceandcapital.CASEhasdevelopedsuchaprograminChicago,and
conversationswithawidevarietyofbusinessdevelopmentgroupsindicategreatinterestincreatinga
similarprograminPhiladelphia.Withcommitmentandsupportfrommajoranchorinstitutions,this
strategyseemswellwithinreach.

31

AppendixA
1.RegardingDataClassificationMethods
Thedataprovidedwasofageneralnature,includedamixofspecificcommoditiesandbasiccategorical
spending.Contractedservicecostspermeatethedata.Thisdatawascompiledthisdatainto17
categoriestobegintoidentifythemanufacturingsectorsfromwhichthesecommoditiescame,aswell
asdefininghowmuchwaslocalspending.Themostbasicapproachtodefininglocalspendingwastaken
aspurchasesfromamanufacturerorsupplierlocatedwithinoneofPhiladelphias39191xxZIP
codes.Thesecategorieswerethenfurthersortedunderthreeumbrellas:

constructionrelatedincludesthecategoriesofgeneralconstruction,HVAC,
Telecommunications,furniture,electrical,andmiscellaneousfacilities.
healthcarerelatedIncludesthecategoriesofmedicalequipment,pharmaceuticals,
laboratoryequipment,andchemicalresearch.
otherprocurementIncludesthecategoriesofpaperproducts,officesupplies,cleaning
supplies,foodproducts,technology,sports&recreation,andmiscellaneous.

Itshouldbenotedthatthisreportusesaggregatedataandisnotmeanttoreflectanysingleinstitutions
purchasingpatterns.ThisreportexaminesonlythemanufacturedcommoditiesthatthelargestAnchor
InstitutionsinPhiladelphiaconsume.Thoughnotalltheanchorinstitutionsreportedthesame
categoriesofspending,thegeneralnatureofthecategoriesallowsforassumptionstobemadebased
onaveragesofthereporteddata.Itisdifficulttoprojecthowmuchmorethesetotalswouldgrowwhen
theother30AnchorInstitutionsprocurementisadded.
2.RegardingNAICSCodes
Definition
TheNorthAmericanIndustryClassificationSystem(NAICS)classifiesbusinessestablishmentsofCanada,
MexicoandtheUnitedStatesaccordingtothetypeofeconomicprocessorproductivitytheyare
involvedin.Itisfrequentlyusedinbusinessandgovernment.NAICScodesareanywherebetween2and
6digits.Thelongerthecodeis,themorespecifictheindustry.Thefirsttwodigitsdesignatethelargest
businesssector.Thisreportfocusesonthemanufacturingsector,NAICScodes3133.
IntheManufacturingSection
Proceedingisalistofthecommoditiesusedtorepresenttheanchorinstitutioninthemanufacturing
sectionofthisreport.Commoditiesarerepresentedby4digitNAICcodes:3221Pulp,Paper,Paper
Mills;3222ConvertedPaperProduct;3231PrintingandRelatedSupport;3256SoapandCleaning
Supplies;3272Glass&GlassProducts;3333CommercialandServiceIndustryMachinery;3334HVAC
andCommercialRefrigerationEquipment;3345ElectronicInstruments;3351ElectricLighting
Equipment;3371HouseholdandInstitutionalFurniture;3372OfficeFurniture&Fixtures;3391Medical
Equipment&Supplies;3399OtherMiscellaneousManufacturing.
InTheMergingSupplyandDemandSection
Thisreportanalyzesonly$860millioninspendingratherthantheentire$2.7billionreportedbecause
notallspendingcouldbedirectlyassociatedwithNAICScodesmainlyduetoalackofsymmetry
betweenthewaypurchaseswerereportedandthewaythatNAICSdividesthemanufacturingsector.If
areasonableassumptioncouldbemadethatrolledupcontractspendingcouldmakeupanypartofa
32

reportedcost,itcouldnotcorrelatedwithaNAICScode.Byeliminatingthepossibilityofhuman
resourcecosts,abetterideaofwhatpercentageofcommoditiesarebeingpurchasedlocallyis
represented.Inpracticalreality,thismeansthatprojectionsareconservative,thatactualspendingis
underestimated.

AppendixB
TableB1PromisingOpportunitiesforProcurementLocalization

NAICSCode
335121
313310
323117
325992
313210
332216
332919
333921
33721
332618
332215
325510
333318
334310
3256
323113
314120
322121
339920
333997
334118
339112
339940
333120
334111
33461
33341
3391
339113

Description
ResidentialElectricLightingFixture
TextileandFabricFinishingMills
BooksPrinting
PhotographicFilm,Paper,Plate,andChemical
BroadwovenFabricMills
SawBladeandHandtool
OtherMetalValveandPipeFitting
ElevatorandMovingStairway
OfficeFurniture
OtherFabricatedWireProduct
MetalKitchenCookware,Utensil,Cutlery,andFlatware
PaintandCoatingManufacturing
OtherCommercialandServiceIndustryMachinery
AudioandVideoEquipment
Soap,CleaningCompound,andToiletPreparation
CommercialScreenPrinting
CurtainandLinenMills
Paper(exceptNewsprint)Mills
SportingandAthleticGoods
ScalesandBalances
ComputerTerminalandOtherComputerPeripheralEquipment
SurgicalandMedicalInstrument
OfficeSupplies(exceptPaper)
ConstructionMachinery
ElectronicComputer
ManufacturingandReproducingMagneticandOpticalMedia
HVACandCommercialRefrigerationEquipment
MedicalEquipmentandSupplies
SurgicalAppliancesandSupplies
Total

TotalAmount LocalAmount Local%

$55,822
0
0.00%
$101,975
$9,562
9.40%
$162,507
$50,935.53 31.30%
$186,578
$92,736 49.70%
$251,408
$0.00
0.00%
$573,557
$273,355 47.70%
$666,851
$145,513 21.80%
$922,126
$363,715 39.40%
$1,057,777
$605,158 57.20%
$1,408,909
$452,579 32.10%
$1,498,040
$583,637 39.00%
$1,996,821
$59,361
3.00%
$3,081,645
$1,362,519 44.20%
$3,104,992
$21,887
0.70%
$3,529,333
$1,085,431 30.80%
$4,411,064
$654,384 14.80%
$4,484,318
$344,790
7.70%
$4,528,417
$54,063
1.20%
$6,722,949
$613,442
9.10%
$7,748,046
$83,848
1.10%
$12,424,588
385,324
3.10%
$12,797,658
$3,654,844 28.60%
$12,981,707
$2,572,735 19.80%
$13,968,193
$330,601
2.40%
$14,636,085
$57,100
0.40%
$18,886,964
$360,602
1.90%
$34,640,412
$1,991,485
5.70%
$145,638,328 $68,598,395 47.10%
$300,026,086 $28,265,607
9.40%
$612,493,156 $113,073,609 18.46%

33

TableB2EconomicMultipliersfor3digitManufacturingSector 40
NAICCode&Description

Employment
Increaseper100
NewJobs

OutputIncreaseper
$1MillioninNewSales

311Food
312Beverage&Tobacco
313TextileMills
314TextileProductMills
316Leather&Allied
321WoodProducts
322Paper
323SupportPrinting
324Petroleum&Coal
325Chemical
326Plastics&Rubber
327NonmetallicMinerals
331PrimaryMetal
332FabricatedMetal
333Machinery
334Computer&Electronics
335ElectricalEquipment&Appliances
336TransportationEquipment
337Furniture&Related
339Miscellaneousmfg
TotalManufacturing

277
391
179
195
178
173
321
193
987
584
208
241
463
223
256
307
263
275
206
233
322

1.66
1.49
1.63
1.88
1.78
1.7
1.78
1.89
1.34
1.76
1.64
1.87
1.79
1.77
1.69
1.71
1.67
1.54
1.75
1.73
1.64

40

HighlightedAreashowsectorswithsignificantanchorthatsupportanchorprocurement.

34

Acknowledgments
CityControllers
OfficeContact

BillRubin,FirstDeputyCityController
Tel:(215)6866696
Email:bill.rubin@phila.gov

Staff
Acknowledgements

JeffHornstein,Ph.D.,DirectorofFinancialandPolicyAnalysiswastheproject
managerforthisreport.PolicyAnalystLiefEricksonandInternTimCullendid
thedataanalysisandPolicyAnalystEmilyMaherdidthecasestudies.

Additional
Acknowledgements

TheControllersOfficewishestothankourpartnersatTheChildrensHospital
ofPhiladelphia,DrexelUniversity,TempleUniversity,ThomasJefferson
UniversityHospital,andtheUniversityofPennsylvaniafortheircourteous
cooperationduringthisproject.SpecialthanksalsotoJohnGradyandSam
RhoadsatPIDC,AndyFrishkoffatLISC,AndyRachlinatTRF,SteveJurashatthe
ManufacturersAllianceofPhiladelphia,TonyGirafalcoandJoeHouldinat
DVIRC,MikeCooperattheOfficeofManufacturing,AngelaWilkesatOwens&
Minor,JoeReubelatKermaMedical,IrisRubinfieldatMasterManufacturing,
BonnieSwayzeatAllianceRubber,ToddRoseatTelrose,JoeGraceandLisa
CrutchfieldatGPCC,JamieGauthieratSBN,JeanHorstmanandTanyaPopeat
InteriseandShariFrancisandChristineMaguireatOfficeDepotfortheirtime
andinsights.

CityControllers
OfficeMission
Statement

TheCityControllersOfficeistheindependentwatchdogagencyoftheCityof
Philadelphiathatstrivestopromotehonest,efficient,effective,andfully
accountablecitygovernment.Weaddressthismissionby:providingtimely
andobjectiveanalysisontheavailabilityoffundsforallcitycontracts;
preventinginappropriatespendingofpublicfunds;andprovidingobjective,
timely,andrelevantinformationtocityofficials,thepublic,andother
interestedpartiesaboutfinancialoperationsofthecity,andonwaysto
improvecityoperationsandtheuseofpublicresources.

ObtainingCopiesof
CityControllers
OfficeReports

ThefastestandeasiestwaytoobtaincopiesoftheCityController'sOffice
reportsisthroughtheCityController'sWebsiteat
(www.philadelphiacontroller.org).

ToReportFraud,
Waste,and
Mismanagementof
YourCityTax
Dollars

Contactinformation
Website:
http://www.philadelphiacontroller.org/reportcityfraudwastecorruption.asp
Telephone:(215)6868888or(215)6863804(automatedline)
DownloadtheFreeFraudReportingappforiPhone,iPad,iPodTouchand
Androiddevices

35