The challenges that many industries have been experiencing since 2020 are nothing new to the manufacturing industry. With baby boomers exiting the industry and Generation Z and Millennials not considering skilled manufacturing jobs, the industry has been and will continue to face labor shortages. Management must start thinking differently to mitigate this looming threat to their companies. We will provide some ideas and solutions below to consider when addressing these issues in your company.

The fact is that 22% of existing skilled manufacturing workers will be retiring by the end of 2025. This could result in as many as 2 million to 3.5 million unfilled manufacturing jobs by 2025. Competition for skilled workers is fierce and the skills gap is growing bigger each year. More than half of manufacturers say they are experiencing obstacles in finding qualified candidates. The greatest impediments to recruiting young people are negative industry perceptions, such as, dirty, hot and grueling working conditions. Also, the general thinking among young people is that manufacturing jobs are low skilled and do not pay well. The reality is many of today’s manufacturing jobs are high tech, robotic driven and are performed in clean environments while providing highly competitive pay and benefits.

So, what can human resources do to attract and retain qualified skilled employees?

The following are some recommendations we suggest to our manufacturing clients:

• Determine minimum qualifications and communicate them in job postings along with creating job descriptions that clearly explain the qualifications needed. This will assist candidates in understanding the job expectations and will allow you to screen candidates quickly and efficiently.
• Expand your search to include more than just manufacturing graduates from technical and vocational schools. Look for trainable candidates who can learn complex processes and equipment.
• More people want to work into their retirement years. Think about attracting and retaining Baby Boomers. These individuals have decades of experience needed by your company. They can also assist in training your young workforce.
• Think strategically by helping to change perceptions about the industry. Fewer than 30% of Americans would encourage their children to look at a career in manufacturing even though they believe manufacturing is vital to the economy. Studies are starting to indicate that public awareness of the industry is growing by potential candidates. The more your company can change the perception of the industry the better. Your human resource recruiters should visit local high schools, community colleges and technical schools to speak to the skilled job opportunities and competitive pay and benefits. Invite students, parents and educators to visit your manufacturing facilities to show firsthand the changes occurring in the industry and the skilled jobs available with achievable competitive income potential.
• Create a realistic job preview video showing actual work being performed by your employees and include positive and realistic testimonials by your people. You can include these videos on your website and post to the company and employee social media sites.
• Invest in training to help retain your skilled work force. Help your employees understand the benefits of training and cross training available to them. Consider upskilling existing lower skilled employees.
• Provide competitive salaries and benefits are a given when talking about attracting and retaining a talented skilled labor force. But 67% of most your employees, if surveyed, would tell you that incentives that recognize good work, volunteering opportunities, leadership training and social events can give your workplace a sense of community. Most Generation X and Millennials will ask and expect today’s employers to give back to the community by being a good corporate citizen and providing a friendly and learning culture.
• Offer a clean, state of the art working environment with climate control, nice aesthetics, comfortable break rooms and plant features that reduce physical strain. Also, incorporate robotics and automation where possible.

We believe the above will provide solutions to attracting and retaining the workforce needed to meet your current production schedules and help you achieve your future growth plans.

As COVID-19 cases decline in many areas of the country, manufacturers are turning their focus from recovery to growth. Challenges remain; labor shortages, supply chain issues, and rising costs threaten manufacturers’ abilities to capitalize on growth opportunities. However, with the right actions, many manufacturers are positioned for a strong year.

Consider six questions that manufacturers should ask they focus on growth:

1. Does your lender provide solutions that help you grow?

Having a strong lender relationship can provide manufacturers with benefits, including flexibility and increased borrowing power. This is especially crucial in times of growth as manufacturers may require capital to invest in improvements to their capabilities. Lenders offer a variety of solutions, including traditional loans, asset based lending arrangements, SBA loan access, and revolving credit lines. No matter the solution that works best for your operations, having a lender that understands your business – including its plans, seasonality, risks, and opportunities – is critical.

2. How will your business attract and retain workers?

Manufacturers are competing with all industries for new employees. There is no easy solution to finding available workers, especially those for skilled positions, so manufacturers must think creatively about their recruiting and retention strategy. While increasingly popular flexible working arrangements may be difficult to offer shop floor employees, competitive pay, incentives, training opportunities, and a culture with clear expectations, collaboration, and accomplishment recognition are some ways that manufacturers have grown or maintained their workforce.

Further, manufacturers may consider their long-term labor needs. According to The Ohio Manufacturers’ Association, “earn-and-learn solutions, like apprenticeships, have delivered measurable results for manufacturers, including accelerated learning and improved retention.” These programs, along with cross training, online training programs, and incentives to obtain external education can help employees develop skills and help the company continue critical operations in the case of employee turnover.

3. Will Biden Administration policies impact your business?

The Biden Administration, through its American Jobs Plan, introduced several proposals that could benefit manufacturers who produce goods for infrastructure, construction, and electric vehicles. These manufacturers may find growth opportunities if the plan is enacted.

However, manufacturers could also see their tax deduction opportunities reduced if Congress allows bonus depreciation to begin phasing out in 2023. In addition, the Biden Administration is proposing higher tax rates for certain corporations and high earning individuals, which may impact these businesses’ profitability and cash flow. As a result, it is important that owners and top management stay abreast of governmental proposals and legislative change.

4. What have you learned during the pandemic that can strengthen your operation long term?

During challenging times, businesses often look for opportunities to reduce costs. Many took these steps during the pandemic. Now, as many manufacturers pivot their focus from survival or recovery to growth, they can revisit these reductions.

Some reductions may reduce or eliminate certain internal controls, limit cross-training opportunities, or create other limitations for the operations environment. These reductions should be revisited; the cost reduction may not be a good one to make permanent. However, other reductions may have created inspiration to create a leaner, more productive, or more efficient environment. These reductions may be able to be made permanent. For each reduction implemented, analyze its pros and cons to determine which should be made permanent.

5. How do changing consumer demands affect your operations?

During the pandemic, some manufacturers pivoted capacity to support illness mitigating products, such as face shields, face masks, or workspace partitions. These manufacturers may consider reevaluating demand to determine whether to continue manufacturing these products. Manufacturers may also consider other consumer demand changes, even for those selling B2B. For instance:

• Contactless (or less contact) interactions may replace some face to face sales calls.
• Some administrative personnel could transition to a remote work environment, increasing the importance for electronic invoices or payments.
• Health conscious products and materials like antimicrobial additives could replace more traditional products.
• Robotics and automation may become more widely adopted, leading to the need for tighter, more consistent tolerances.
• The importance of rapid prototyping has been magnified by the pandemic, which could encourage adoption of technologies such as additive manufacturing.

6. Is your supply chain strengthening or threatening your business?

Suppliers should be partners to your business, offering goods and services that help you effectively service your customers. Recent supply chain disruptions due to pandemic related shutdowns and weather events have caused long lead times and rapidly rising costs. Further, as we approach hurricane season, the possibility of weather events further disrupting the availability of certain materials (especially plastics) , interrupting transportation, and increasing oil and gas prices is rising.

Secondary sources and alternative products can provide options that give manufacturers flexibility. Strong vendor relationships can help you identify these options as well as potential market turmoil that could threaten your ability to grow. In addition, as you adopt new materials or products, think about those products’ availability. If the material or product is subject to volatility, exploring other options during the R&D phase may provide a better solution long-term.

To discuss your company’s growth strategy, contact a member of HBK Manufacturing Solutions at manufacturing@hbkcpa.com or 330-758-8613.