Labor Shortages in the Manufacturing Industry

How to address the shortage of available employees in the manufacturing and distribution industry now

The United States economy continues to thrive in a period of unsurpassed expansion and job growth; however, manufacturers are still contending with the tightest labor market in recent history with expectations for it to worsen. In the next several years, organizations are predicted to face the challenge of having the number of open jobs exceed the number of people looking for and/or available to workWhat does this mean for the industry?

Employee Shortage and the Skills Gap

Filling open jobs in the manufacturing and distribution industry has been an ongoing struggle in recent years, but the current conditions are reaching serious levels. Beyond this deficiency of individuals, manufacturers have to additionally consider problems brought on by the skill gap: there is a widening gap between jobs that need to be filled and the qualifying talent pool capable of filling them. Jobs are evolving due to the impact of technology and automation, and manufacturing companies need to address this while simultaneously solving today’s current employee shortage. Some manufacturing companies have begun to tackle the skills gap by making training opportunities available to assist workers in advancing their skills and developing their knowledge.

At the end of 2018, there were 508,000 open manufacturing jobs in the U.S.—the largest number in almost 20 years. While growing job opportunities are a positive indication that the industry is healthy and continuing to recover from the recession, it also demonstrates that finding the right talent with the right skill set to fill open positions is nearly impossible. Increasing production levels to meet customer demands means that the skills gap is predicted to leave an estimated 2.4 million manufacturing positions unfilled between 2018 and 2028, with the most significant gap predicted to be in the year 2025.

Labor Woes in Distribution and Warehousing  

Distribution and warehousing companies face this talent shortage; however, they are further challenged during the seasonal peak periods. The nature of the temporary job struggles to attract even unskilled labor. Companies will often utilize unskilled temporaries and/or tax their permanent employees to work excessive overtime to make up the shortage—both undesirable and unsustainable solutions for the long-term.

Warehousing companies must recognize their jobs are more time demanding, less desirable and pay less than manufacturing jobs, and thus have to compete for low-income earner labor availability in unique ways. Appealing benefits packages and flexible paid time off for immediate hires help to attract and retain laborers who might otherwise show little interest in applying for a warehousing job.

Automation and the Adoption of Technology

While many organizations have been early adopters of technology such as robots, cobots, machine learning and artificial intelligence (AI), the industry is still finding it increasingly challenging for the workforce to keep pace. The type of skills employees need in order to co-exist with the Internet of Things (IoT) is quickly changing, and oftentimes, the people can’t keep pace with the machines. In the Future of Jobs Report, the World Economic Forum highlighted that by 2022, machines and algorithms will contribute 42 percent of total task hours, compared to 29 percent in 2018. Manufacturers that are proactively taking steps to keep their business running are combating this talent crisis and turning towards automation to supplement the low-skilled jobs they cannot fill. By having their employees work alongside robots and cobots, manufacturers can get ahead of this obstacle by distributing work to both humans and machines based on capabilities.

In addition, they are focusing their existing workers on jobs that are highly skilled or require a unique human skill set. In-house training and learning courses, along with on-the-job training that leverages digital technology prove to be beneficial methods to embark on. Manufacturers should consider increasing investment in training programs and integrating digital technologies to add relevance, helping employees move ahead on the digital curve.

Addressing the Labor Shortage

As the economic situation and skills gap continues to unfold in manufacturing, there must be a deliberate effort to address the need for finding qualified talent to ensure a sustained workforce. Following a path of industry-wide approaches to narrow the skills gap is a key initiative to offset the expected shortfalls of skilled workers the upcoming decade will present. Industry leaders should explore and embrace ways to provide early exposure to robotics, automation and computer programming to not only their current workforce, but the younger generations, to build a foundation of skills and abilities needed to succeed in the future of manufacturing.

A method to address the labor shortage is to automate unfavorable and dangerous jobs. The automated material handling (AMH) equipment market is estimated to be valued at USD 33.46 billion in 2018 and is expected to reach USD 53.59 billion by 2024, at a compound annual growth rate of 8.2% during 2018–2024. Further evidenced by the growth in companies offering robotic solutions for warehouse automation, significant recovery in global manufacturing and rising labor costs and safety concerns are the key factors driving the AMH equipment market growth.

Take Action

Currently, unemployment across all industries has sunk to near three percent, which is the lowest level in nearly 50 years. Add to that the historical demand for extra workers during the holiday season, along with the numbingly routine nature of the job, entrance of millenniums and exit of baby bombers, and we have something approaching a crisis for warehouses. Coupled with shifts in customer demand, wanting order cycle times reduced and handling E-Fulfillment double-digit growth projections, productivity improvements are not optional for organizations.

To discuss how the labor shortage can affect your manufacturing or distribution business, please contact us to align with a resource from our Human Resources and Supply Chain Advisory teams.

Sources:

  • U.S. Bureau of Labor Statistics
  • U.S. Census Bureau
  • “The Future of Jobs Report 2018,” World Economic Forum
  • Automated Material Handling (AMH) Equipment Market 2018

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By |2019-04-04T18:08:56+00:00April 4th, 2019|Human Resources, Manufacturing|0 Comments

About the Author:

Sikich LLP
Sikich is a leading professional services firm specializing in accounting, technology and advisory services. For over 30 years, Sikich has been helping clients focus on overall business growth and the components that result in building the bottom line. Sikich has more than 750 associates and has been ranked as one of the country’s 30 largest accounting firms and among the top one percent of all enterprise resource planning solution partners in the world.
This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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