The Manufacturing ‘Skills Gap’

U.S. factory activity has grown for 115 consecutive months, according to the Manufacturing ISM^® Report On Business^®, and long-term forecasts for the sector are generally positive. However, a shortage of workers would make it much more difficult to generate the factory output necessary to fulfill those rosy growth projections.

Stretched-thin employment resources have been a concern for the manufacturing sector, according to the Report On Business^®. “Respondents continued to note labor-market issues as a constraint to their suppliers’ production capability,” says Timothy R. Fiore, CPSM, C.P.M, Chair of the Institute for Supply Management^® Manufacturing Business Survey Committee, in the November report.

That sentiment has been affirmed by the 2018 Skills Gap Study by Deloitte, the London-based professional services giant, and The Manufacturing Institute, the research arm of the Washington-based National Association of Manufacturers (NAM). The study states that evolving technologies in the manufacturing sector has led to jobs with more demanding skill sets that can take months to fill, and the current workforce pool isn’t keeping up.

The result is about 488,000 jobs open today, and as many as 2.4 million going unfilled in the next 10 years, the study says. Those vacant positions add up to a lot of unrealized productivity, and even more manufacturing GDP at risk — more than US$2.5 trillion over the next decade. It’s no wonder that almost three-fourths (73 percent) of U.S. manufacturers say a workforce shortage is their biggest concern, according to a NAM survey.

“Manufacturers are experiencing some of the highest levels of growth we’ve seen in decades, yet the industry seems unable to keep up with the resulting rebound in job growth,” says Paul Wellener, Deloitte vice chairman and U.S. industrial products and construction leader. “With nearly 2 million vacant new jobs expected by 2028, compounded by 2.69 million vacancies from retiring workers, the number of open positions could be greater than ever. (This poses) not only a major challenge for manufacturers, but it may threaten the vitality of the industry and our economy.”

The manufacturing positions hurting for candidates include skilled production workers, supply management practitioners, digital talent, engineers, researchers, scientists, software engineers and operational managers. The biggest reason these positions go unfilled, according to the study, is a potentially daunting one: a negative perception of the manufacturing industry, cited by almost half (45 percent) of manufacturers.

Other research seems to affirm this public-relations hurdle. The Manufacturing Perception Report by Thomas, a New York-based product sourcing platform, indicated that 55 percent of respondents in a survey of more than 1,000 Americans described the country’s manufacturing industry as “weak” or “in decline.” Tony Uphoff, Thomas president and CEO, says that trend can be reversed with “increased national awareness.” However, convincing the public is one thing, selling skilled prospective employees who have options thanks to a good economy and low unemployment is another.

“A variety of factors are driving the crisis, from having the wrong perceptions about what modern manufacturing jobs look like to not having the skills to get them,” says Carolyn Lee, executive director of The Manufacturing Institute. “(The sector is) driving a range of initiatives, designed to engage and inspire more young people, more women, more veterans — more Americans of all backgrounds — to build careers in the industry that built our country.”

Facing competition from other industries, the Skills Gap Study states, manufacturers are exploring:

●Compromising on the level of experience (77 percent of respondents) and skill set (65 percent) desired.

●Paying more to attract and retain talent (83 percent)

●Outsourcing certain functions (24 percent)

●Tapping the wisdom of the projected 2.7 million workers expected to retire in the next 10 years by developing (1) knowledge-transfer programs for younger employees and (2) short-term project opportunities for retirees.

Another option will provide no boost to the manufacturing workforce — automation. One quarter (26 percent) of companies are turning to new technologies, not necessarily to cut costs, but to fulfill tasks once done by workers in formerly-filled positions. Also, 59 percent indicated they will rely on automation to “fill” production jobs in the next three years.

“Companies are trying new ways to fill the (skills shortage) and appeal to candidates,” says Chad Moutray, NAM chief economist. “Some manufacturers are shifting their own policies to be more adaptive and flexible, such as allowing nonproduction work to be done from remote locations, while others are implementing automation to supplement the existing workforce.”