Blog Credit: Ian McCue, February 24, 2022 (8 Strategies for Manufacturers to Tackle the Talent Shortage Now — and in the Future | NetSuite)
- The labor shortage that’s hit many industries is especially acute in manufacturing, where an existing skills gap was exacerbated by the pandemic.
- There are a number of immediate and long-term fixes to deal with a problem that could get worse before it gets better.
- Investing in workers, establishing creative partnerships and adopting technology can all help offset a lack of qualified labor.
Achieve Better Business Results with NetSuite & CE
Grow and scale your business while gaining a competitive advantage with NetSuite’s best-in-class integrated cloud business software and CE’s expertise in NetSuite implementation, advisory, managed services and direct staffing. Let us show you how to leverage our direct staff pool of resources to realize better insights, organizational efficiency, increased profitability and improved relationships with your suppliers and customers – and ultimately take your business to the next level.
Contact CE today to learn more about our NetSuite consulting services.
Much like supply chain problems in 2020, the labor shortage became the defining story of the second half of 2021. It’s gaining so much attention that every executive must have a plan, because board members and investors are looking for reassurance that a lack of skills won’t translate to lost business.
While an overall worker shortfall is a widespread problem, our Brainyard Fall/Winter survey revealed there is more specifically a shortage of people with the particular skills that businesses need. While almost equal numbers of executives and managers said it was somewhat easier and somewhat more difficult to hire now compared with 2019, that doesn’t tell the full story.
More than half of executives and managers said their staffing needs were for workers with specific expertise, while only about half as many reported openings for unskilled or low-skilled employees. And 60% of managers said they’re spending more time on hiring than they were in 2019.
Manufacturing is an industry that requires a high percentage of workers with specialized skills. Over the past couple decades, roles that high-school graduates can step into without any type of training or previous experience have become increasingly rare, according to Julie Davis, senior director of workforce and industry initiatives at the Association of Equipment Manufacturers (AEM). That helps explain why these businesses were struggling with a skills gap long before the pandemic: In 2015, manufacturers reported 35% of their positions were challenging to fill, a number that climbed to 46% last year, per Deloitte.
There is no singular or simple solution for a shortage that’s been brewing for decades. But there are immediate steps and long-term strategies manufacturers can take to mitigate this problem, and we’ll cover some of those here.
What’s Causing the Labor Shortage?
How manufacturing found itself in a spot where Deloitte predicts it will be short 2.1 million workers by 2030 is a story that begins half a century ago. The U.S. birth rate has been on a steady decline since the 1970s, and the labor participation rate has been falling since the 1980s, according to the BLS.
In other words, the pool of potential workers is shrinking.
Then there are individuals who would have been factory workers in a different era but are instead being pulled into technology or service industry jobs. These positions might offer less physically demanding work, better pay or simply benefit from the perception of offering stronger career prospects. Increased opportunity elsewhere has come at the expense of what’s seen as an old-school industry.
The nature of the work itself can also put manufacturers at a disadvantage.
“We want to be challenged, and if I’m sitting in front of a box machine pressing a button every four hours, that’s not a challenging role,” said Matthew Miller, director of technology at Sun Automation, a provider of machines and other technology that help manufacturers turn corrugated paperboard into boxes.
AEM’s Davis notes the sector has not made the same inroads into middle and high schools and other settings where it might be able to showcase that manufacturing can offer a steady, well-paying career. She sums this up as manufacturing not doing a great job “telling our story.”
Then COVID came and made a bad problem worse. When we surveyed manufacturers in late 2020, staffing was the second most commonly cited issue stemming from the pandemic, behind only cash flow. Deloitte estimates the coronavirus knocked out 1.4 million U.S. manufacturing jobs, and even as the economy has roared back, only 60% of those had been restored by the end of 2020, leaving half a million unfilled roles. There were many earlier-than-expected retirements for older employees, and nearly 2 million women left the workforce between February 2020 and October 2021, for a variety of reasons.
Why Are Manufacturers First to Increase Pay?
It may come as a surprise that increasing pay for existing workers and offers to potential employees was not among the most common steps companies are taking in response to an ultra-tight labor market. The one exception to that was manufacturers, who were more likely than those in other industries to boost pay. Zonkd, a textiles manufacturer and distributor, has had to increase pay by more than 20% over the last few months for employees at its North Carolina warehouse.
Miller speculates that’s because manufacturing jobs are harder to differentiate. Most cannot offer remote work or flexible schedules, leaving pay as one of the few levers to pull. It’s also one of the easier steps to take relative to the work required to implement some other recommendations, Davis said.
Additionally, as noted earlier, a lot of these openings require particular skills that companies may not currently be able to provide themselves in-house, though that’s a problem that must be addressed, as we’ll discuss. That means companies have to pay up for people that already have the relevant experience.
Finally, employees may be more critical to generating revenue in a factory than in other workplaces.
“In manufacturing, the difference between having people available and not can be significant in terms of being able to meet production needs and safety requirements,” said Simon Geale, a VP with procurement and supply chain consultancy Proxima. “The bottom-line pain of a payroll increase can be dwarfed by that of the top-line implications.”
However, it’s important to note that higher pay is not an effective long-term solution, because money alone often doesn’t keep employees around.
“Every single person that works in workforce development will tell you that if a person is willing to come for pay, they will be willing to leave for pay,” Davis said.
So what’s a manufacturer to do?
8 Strategies for Manufacturers to Mitigate the Talent Shortage
The struggle to find qualified workers is one that requires both quick fixes and major investments that will prevent the talent shortage from being such a pain point down the road. With that in mind, we’ve broken this list into short-term and long-term solutions.
1. Build a talent pipeline with upskilling
Current employees are some of the best candidates to fill future gaps in your workforce, which is why in-house training programs can be a keen investment. Businesses need to think about how they can identify talent early and design career paths for different roles.
When promising employees clearly see their way forward in your organization, they’re far less likely to leave.
A complete upskilling program might include role-based trainings that offer hands-on experience led by a dedicated instructor. But any investment in your existing workers is valuable, so it could be more informal. For example, junior employees could shadow colleagues in more senior roles they would like to learn more about, with the latter becoming a mentor.
Zonkd highlights opportunities for advancement from the start and outlines the necessary training and skills required for more senior roles as a strategy to both attract and retain employees.
“The more we can offer them those opportunities, we are finding those are actually pretty deep hooks to retaining the talented people,” Sanghi said. “If you don’t challenge your people or you don’t have clarity about what they should do to accomplish certain results, and you don’t provide them training or don’t provide them growth opportunities, they’re going to leave.”
Workers often leave for modest raises or increases in responsibility that you could match. In that sense, investing in upskilling can save organizations a lot of money, as it often costs 50% to 200% of an employee’s annual pay to hire a replacement. In that sense, you might also consider this a long-term strategy: Put an upskilling program in place in the short-term, and maintain it for the long haul.
2. Rethink your job descriptions
How a job description is written can have a big impact on who applies. Manufacturing leaders should work closely with HR and, if necessary, external experts to carefully evaluate job descriptions for any language that could be discouraging applicants. Candidates who have no manufacturing experience could still have plenty of related skills, even if they don’t realize it.
Framing open positions the right way can help you break into adjacent labor pools that manufacturing needs to pull from. This change can be particularly impactful now as more people in food service, hospitality and retail are considering their options.
“Job requirements where it’s asking for a degree or certain job experiences where it’s not really necessary prevents people from changing career lanes,” Sanghi said. “And right now, we want all avenues open to us, so we want to drop that exclusionary language.”
An oft-cited study says men are more likely than women to apply for a job where they don’t meet all of the listed requirements. Even certain language can indicate a more masculine culture or one that isn’t as inviting to underrepresented groups, Davis said. Avoid gendered titles and terms like “foreman,” “businessman” or “manhours.” Experts say more aggressive language like “outspoken” or “enforce” and superlatives like “world-class” and “superior” can all turn away female candidates.
Highlighting why your company embraces and values diversity and any family-focused benefits offered can also convince underrepresented groups to apply. Not sure your descriptions work for all potential applicants? Try this handy “gender decoder” tool.
3. Modernize your work policies
Many manufacturing environments are what Miller describes as “very rigid.” Workers may be monitored closely, with few breaks and minimal access to personal devices, and not have the flexibility to step out if something comes up.
“Sometimes there’s even an us-versus-them type of thing, [where workers] don’t trust the mid or senior leaders, and they behave that way,” he said. “So policies are put into place by leadership that communicate that sense of distrust.”
While manufacturers need to maintain a structured environment, managers should give employees as much freedom as they can and trust they will get the work done until proven otherwise. Many will appreciate the confidence expressed in them and excel with that hands-off approach.
Something as simple as free food at work can also go a long way. That’s a perk often thought of as associated with tech firms that Zonkd recently added for its warehouse employees. The same goes for increasing vacation time. Employees may hesitate to leave for another role if it doesn’t offer the same amount of paid time off as their current role, according to Davis. Businesses that pair competitive pay with generous vacation will see less turnover, and numerous studies show these breaks increase employee productivity and engagement to boot.
4. Improve onboarding
The employee experience starts with onboarding, and a positive onboarding experience extends beyond filling out paperwork and some informal job training. Leaders must think about what’s truly required to excel in a job and tailor the training to individuals based on their previous experience.
This is especially important when hiring people from other sectors or who are just starting their professional careers. A factory buzzing with heavy machinery can be especially intimidating to someone who has not worked in that sort of environment before, so it’s important to not leave them feeling lost by dropping them into the job.
Designing the onboarding process should be a collaborative effort that includes input from people who actually have that job. Once it’s set, the process should be documented for consistency and frequently reviewed to identify opportunities for improvement.
5. Partner with local education institutions
Although manufacturers cannot establish meaningful relationships with local institutions overnight, it should be a central piece of their workforce strategy. This could include nearby high schools, technical colleges, community colleges and four-year universities. Businesses have to put significant effort and resources toward this effort — an annual check-in won’t cut it, says Davis.
Explore opportunities to partner with these education networks on apprenticeships, internships, job shadows and the like. Apprenticeships in particular are often the most successful in helping pull people into the industry, he said.
Sanghi notes it’s important to generate interest in manufacturing at a young age as the sector increasingly competes with other “sexier” industries. That’s why Zonkd is considering offering internships or similar opportunities for high-school-age kids. It’s also starting to think about how it could partner with N.C. State, a local university that has one of the nation’s top textiles programs.
These initiatives can take a lot of time and effort to set up initially, but the investment will pay off. That, along with the allure of making more of a direct impact at a smaller organization, can help manufacturers compete.
“When it comes to the talent and labor market, we’re in competition with Epic Games, which is a big company in the Raleigh area,” Sanghi said. “We’re in competition with Apple and Amazon and all these other big tech companies that are sucking in all the talent.”
6. Strengthen the connection between executives and HR
Traditionally, executives set the business strategy and goals, then leave it to other departments to determine how they can help the company meet those objectives. That means HR receives a list of open positions that must be filled and is asked to figure out where it can find qualified candidates. Recruiters and HR generalists often work in isolation, trying to solve the problems of the day without the opportunity to collaborate with leaders and devise big-picture improvements.
But business strategies should be developed alongside talent strategies so the company has a plan for how it can support its workforce needs, according to Davis.
“What that looks like in play is, we now have members whose board of directors, if they are presented with a growth business strategy — so I’m going to add a new production line or we’re going to increase production in this way — they will require that president to bring them a talent strategy that aligns with that growth strategy,” she said.
Given the scale of the problem and the need for long-term solutions, there must be more executive involvement and a tighter link between HR and the C-suite. That could include putting more resources toward workforce development and reviewing any policies that might be shrinking the candidate pool.
7. Look for automation opportunities
In our survey, automation was the third most common step executives plan to take in response to the labor shortage. Automation is a critical tool in any manufacturer’s toolbox, as eliminating some headcount seems like a necessity.
“Automation is going to be part of the answer for many, and first time ‘automators’ might be looking through the lens of automation as a means of driving reliability and productivity at a low-cost point,” Geale said. “However, the benefits of automation are likely to extend into giving businesses better data and more transparency over their operations.”
There are countless tasks and processes manufacturers can automate, but it often makes sense to start with the basics, like data collection and reporting. Your back-end systems should be tightly integrated to eliminate the need to manually enter or transfer data. That will increase the accuracy of information and, in turn, reduce time spent addressing the issues that follow.
It allows employees to focus on the things that truly need their attention.
From there, you may be able to automate many components of AP, AR, demand planning and even purchasing. For example, Zonkd is currently configuring its MRP system to compare anticipated demand and supply of each component it uses to make goods so it can easily spot issues with upcoming purchase or work orders. The system will then be able to categorize these flagged items based on the source of the problem. Was it due to forecasting issues, transportation issues, late supplier shipments or something else?
With that information, Zonkd’s operations team can dedicate its attention to mitigating those issues causing the most problems. Automation allows it to make meaningful improvements without looking through these plans line-by-line.
8. Explore new types of hardware
Machinery that can increase productivity and reduce costs while reducing dependency on human labor is nothing new in manufacturing. Zonkd added a shrink wrap machine to save employees the time and hassle of circling pallets of goods with a large roll of shrink wrap. It’s also considering purchasing electric pallet jacks users ride on, called “walkie riders.”
Other not-so-new technologies, like barcode scanners — whether standalone devices or attached to mobile devices that assist with other tasks — can also provide a boost by precisely tracking inventory levels and location. Of course, you need to have a standardized barcoding system in place for this to work.
Then there are more cutting-edge technologies like Internet of Things (IoT) devices. Sun Automation has brand-agnostic devices that plug into corrugated machines and use anomaly detectors to alert users when the equipment is showing signs of problems and should be proactively shut down. This technology can decrease the need for hard-to-find employees with specialized knowledge of these machines.
“Picture a manufacturing plant with any machine … and you’ve got the maintenance mechanic that’s been there for 30, 35 years,” Miller said. “He walks by the machine and hears this ticking, he’s like, ‘That sound tells me that this transmission’s going to fail in the next two weeks.’ Now a younger guy that replaces him, he’s not going to have that experience.”
IoT technology might be more affordable than you think. Sun’s system is offered at a subscription — the best option for most midsize manufacturers — and costs about $20,000 annually per machine, with initial setup running a few thousand dollars. Downtime can cost a company $1,000 or more per hour, Miller said, and Sun estimates the information these devices provide should prevent 20% of downtime. Based on its studies, companies can save more than $100,000 per year per machine.
Reason for Optimism
To stress the urgency of taking action to address the labor shortage is to point out the obvious, especially for those living through it. Even so, Davis said the level of commitment business leaders show to making real changes varies, even as more have no choice but to change their approaches as they feel the effects firsthand.
One reason for optimism: A new generation of people rising into leadership positions and entering the workforce. As more millennials move into the C-suite, they bring a fresh mindset and often an understanding of the importance of attracting more women and other underrepresented groups to manufacturing. Members of Gen Z are also showing an inclination to consider post-high-school educational opportunities besides college, which could make them strong fits for manufacturing.
But the talent shortage could get worse before it gets better, presenting all the more reason to enact deeper changes that will put your business in a better position in the future. This is a complex dilemma, and manufacturers will need to employ a combination of the strategies we’ve suggested to prevent a lack of human resources from holding back growth.
“I think manufacturing has a fantastic future,” Davis said. “It is only going to be limited by how fast we can convince people to come in and join us.”