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Skilled-labor Shortage in the Manufacturing Industry

As my colleague wrote in an article last month, the skilled-labor shortage is present across many prominent industries in Central Pennsylvania and beyond. Last month’s article focused on the impact to the construction industry, and now I’d like to take a look at how the skilled-labor shortage is impacting manufacturers.

Last year at this time the skilled-labor shortage was the clear frontrunner when it came to the most pressing issue facing manufacturers. Here we are one year later and inflation, concerns around a possible recession, and supply chain disruptions have quickly risen to be top-tier issues as well. What stands out to me when looking at this top-tier of challenges facing manufacturers is that most of them are more near-term issues (I won’t use the word transitory). The skilled-labor shortage is the exception, as it is anticipated that this issue will remain unresolved for many years. According to the National Association of Manufacturers,

“Manufacturers have added 213,000 workers through the first five months of 2022 and are on track to reach pre-pandemic levels of employment in the next couple months.” “At the same time, there were nearly 1 million job openings in the sector in April, a new record, and manufacturing leaders struggle to find enough workers to meet the strong demand they face in the marketplace.”

Not only are there 1 million job openings in the industry today, there are an estimated 2.1 million jobs that will be unfilled by 2030.

What is Creating the Shortage?

There are many factors leading to this shortage:

  • Retirement of baby boomers who played a critical role in manufacturing for several decades
  • Younger generations not showing the same level of interest in a manufacturing career as previous generations did
  • Competition with other industries over the same labor pool
  • Increase in demand as companies have not only rebounded from the pandemic but many are in growth mode
  • Increase in demand for U.S. manufacturing caused by onshoring

Impact of the Shortage

Much of the fallout from the skilled-labor shortage is obvious. Lack of workers will lead to a reduction in manufacturing hours at your plant which means a drop in sales and possibly a loss of customers. Beyond that, you risk overworking your remaining employees which may exacerbate your labor shortage. Inadequate staffing levels in a manufacturing plant could also lead to inefficiencies, increased scrap, or even an increase in safety incidents.

What Can Be Done?

While fixing the skilled-labor shortage at a macro level is well beyond the scope of this article, there are several things you can be doing as a manufacturer to minimize the impact it will have on your company which I summarized in the following three points. Not only have I read and heard about these trends, but I have seen companies adopt many of these strategies successfully.

Expand the labor pool that you are recruiting from

Get involved in local high schools to inform students on what a career in manufacturing could look like. Grab their attention and make manufacturing a viable option as they consider what to do after school. Additionally, consider how your workforce demographics compare to the demographics of your community. For instance, women in manufacturing are generally underrepresented and companies are trying to find ways to fix the disparity.

GE Appliances has been in the news lately for having hired over 50 refugees for manufacturing jobs in the past few months at their Louisville, KY plant. Lancaster County is well-known for being a major hub for resettling refugees. Between 2002 and 2019, the city of Lancaster received nearly 5,000 refugees. How are you reaching that labor pool?

Understand what matters most to your expanded labor pool, and adapt the job to be more attractive to them

For many, working conditions are a major turnoff from considering a career in manufacturing. Is there anything you can do to improve the conditions at your plant? How would your current employees answer that question?

For other workers, they aren’t interested in 2nd or 3rd shift work. What would it take for your company to push more work to 1st shift and thereby expand the number of interested applicants?

Based on a 2022 survey of 501 HR professionals, 50% of their employers offer on-site childcare. Not only do employers attract more workers by offering that benefit, but it will improve employee retention as employees are hesitant to change childcare providers. The point is there are almost limitless benefits you could add. By first taking the time to know your labor pool and what matters most to them, you improve the efficacy of those added benefits to your recruiting process.

Reduce your reliance on labor by upgrading equipment and investing in technology  

As your workforce is turning over from one generation to the next, you should evaluate whether it’s time to replace outdated equipment with more modern machinery. Manufacturers who are willing to invest in upgrading equipment and a better integration in IoT and other technology are finding that their products are being made faster, at a higher quality, with less scrap, requiring less labor, and in a way that leads to greater job satisfaction for the machine operator. By training machine operators on the new equipment, they are pushed to work smarter not necessarily harder, and they take on greater levels of responsibility oftentimes even receiving a wage increase for their additional skills.

“Industry 4.0” is reducing the impact of the skilled-labor shortage through the increased use of robotics, the internet of things, 5G, edge computing, and artificial intelligence. In an April 2022 article for Manufacturing Digital Magazine, Toby Hawkins, Sales Director at mpro5, said the following:

“Businesses need to do more, with less. This is easier said than done, and there is no magic bullet, but by capitalizing on the abundance of potential data that a smart network can bring through the power of the Internet of Things, and the right software to manage it, the impact of understaffing and mass vacancies can be negated.”

Manufacturing is going to have to rely on not only attracting new talent but on investments in technology to reduce the impact of the skilled-labor shortage in the coming years. We will continue to monitor the challenges and opportunities that emerge over the coming months and discuss the industry’s responses in future posts. For more information regarding our manufacturing experience, be sure to visit our Manufacturing Services page and don’t hesitate to reach out to a member of our manufacturing team.

About the Author

Brett Bauer

Brett joined McKonly & Asbury in 2011 and is currently a Principal with the firm. As a member of the firm’s Audit & Assurance Segment, he serves clients in the manufacturing and distribution industry. At McKonly & Asbury, Bret… Read more

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