Approximately 60 percent of today’s unfilled manufacturing jobs are due to a shortage of applicants with sufficient proficiency in science, technology, engineering, and math (STEM) skills. This estimate is according to responses provided by 83 percent of the manufacturing executives who participated in a survey conducted as part of an industry study by the Manufacturing Institute and Deloitte Consulting LLP. To compensate for staff shortages resulting from the skills gap, current manufacturing employees have been routinely working overtime (an average of seventeen percent more hours than employees in other lines of work). Indicators are that the worker deficit could rise to over 2 million unfilled jobs in the next decade. Industry data for 2004 – 2013 shows an annual loss of at least $17 billion due to vacant positions, with shocking losses of around $45 billion in both 2012 and 2013. Even more alarming is the news that 69 percent of the executives surveyed said they expect the problem to worsen over the next five years.

The skills gap is a dense compound of pervasive problems in education, employment market demographic shifts, social currents, and in the national economy. IMPO Executive Editor, Anna Wells provides insights into the complicated issue in her article “Why The Manufacturing Skills Gap Is Serious”. Wells writes, “In an industry that has yet to recover the jobs lost in the recession, we’re dealing with vacancies in the skilled trades that threaten to derail production growth and sector expansion.”

Skills Shortages

The executives surveyed identified these positions as those they believe currently most affected and that they expect will present even more severe staffing difficulties by 2020.

For a microcosmic sampling, the CMAP report published by the Illinois government (widely reputed as a resource for broader industrial indicators), reveals an acute shortage of qualified candidates to fill essential manufacturing positions in the Chicago region, including CNC Programmers, CNC Operators, Industrial Machinery Mechanics, and Welders.

Nationally, the health care and technology industries have been especially hard hit by the staffing deficits. And, there is a nationwide shortfall of candidates prepared for work in the modern manufacturing environment of computerization, sophisticated robotics, 3D printing, and other technologies designed to streamline systems and automate processes. Further, manufacturing employees need rapid adaptability, critical thinking skills, and aptitude for creative problem-solving. But, the Illinois report exposes a failure by companies in Chicago metro to find enough workers with even more core competencies like strong reliability and ability to work well on teams.

Causes of Deficiencies

Of the 3.4 million total manufacturing job vacancies that will result from the looming mass retirement of 2.7 million Baby Boomers and 700,000 new openings due to business growth, as many as 2 million of these jobs could remain unfilled. The misalignment between applicants’ skills and the requisite skills for work in today’s technologically advanced manufacturing industry are expected to leave these millions of jobs in the skills gap. Averting this outcome depends upon business leaders and government policymakers to actually implement measures to reverse the present trend.

The primary reasons for the growing problem in the U.S. appear to include the following.

Global Labor Market Status

Developing nations have been striving over the past 60 years to build an industrial labor base capable of competing successfully in global markets. By capitalizing on their regions’ very low labor costs and extremely liberal regulatory policies, manufacturing has grown in these rigorously competitive countries—realizing an 800% increase in exports over the past 20 years.

Nevertheless, indicators are that by 2020 there is likely to be a worldwide shortage of around 85 million skilled manufacturing workers. This is in staggering contrast to the prediction that there will be a surplus of 95 million unskilled laborers at that time. For example, in China alone, where the last decade brought millions of new participants into the workforce, a skills gap is expected to cause a deficit of 23 million sufficiently skilled workers there by 2030.

Meanwhile, the U.S. remains a strong international competitor, but the widening skills gap jeopardizes growth of innovation and the nation’s competitive effectiveness over coming years. In recent decades, U.S. manufacturers, along with many in other developed nations, eagerly moved numerous operations off-shore. Ultimately, numerous companies found reshoring the most practical solution to overcome extreme unforeseen costs, and logistical and service issues in operating abroad. A monumental after-effect has been the subtraction of years of training knowledge from the domestic U.S. labor force that has instead been passed on to foreign manufacturing competitors.

Filling the Skills Gap

The good news is that, over the past six years, the manufacturing sector has performed better than the national economy as a whole. The economic rebound from the 2008 financial crisis, reductions in energy costs, and reshoring of major manufacturing operations have generated industry growth. Additionally, notwithstanding predictions, the shortages of job candidates may improve as education costs are reduced, and industry incomes are increased. However, industry analyses consistently indicate that unless leaders in business, labor, government, and education work together to employ a comprehensive strategy that is effective in all of the following initiatives the skills gap will continue to widen, and the losses to GNP can be most reasonably predicted to escalate.

Improving relevant education — The U.S. government is undertaking initiatives to motivate businesses and educators to create workforce development programs. For example, job training grants totaling $450 million were distributed among approximately 270 community colleges in 2014. And, development of 100,000 specializing STEM teachers in the next decade has been prioritized as a federal initiative, as well as programs to permit STEM majors for an additional one million college students. Additionally, the Manufacturing Institute can share its system of certifications (which are endorsed by the National Association of Manufacturers) with colleges and vocational schools to help align curricula with employment requirements.

Changing conceptions of manufacturing careers — Many of today’s optimized manufacturing facilities consist of robots and computerized machinery run by human operators who synchronize the functions of hardware, software, and tooling to work per specifications with materials. The challenge now is to change public misperceptions manufacturing work and raise awareness of these stimulating professional environments and of the abundant personally rewarding and financially attractive career opportunities they present to qualified applicants.

Updating recruiting methodologies — It is clear, based on analyses linked herein, that manufacturers should market the career opportunities they offer in ways that innovatively feature these resources and methods:

Enriching corporate training programs Manufacturing requires much learning through experience. Personnel development must be cultivated by ongoing training for workers. Training Magazine‘s annual survey indicates that from 2006-2013, average investment in training per manufacturing employee was reduced by 31 percent. This may be partly due to broadened availability of on-line training, and, if so, it is despite the publication’s 2015 survey results reflecting that 80% of respondents said they believe “virtual” training is less effective than classroom training. Further, with continual technological and systemic advancements, even employees who’ve completed vocational training need frequently updated training.

A Note On The Broader Scope Of Manufacturing Concerns

Manufacturers have historically been confronted with numerous complex ongoing challenges. For the foreseeable future, these will include no less a task than resolving the complications in reducing shortages of adequately skilled workers while staying steadily on track to fulfill the corporate mission. At a minimum, such a feat requires the maximizing development of the company’s core competencies in current personnel as well as indirectly cultivating prospective applicants before they ever enter the job market.

We will note here that at Cerasis we recognize that addressing these and many other pressing issues in changing times, and keeping pace with characteristic consumer market shifts and supply chain contingencies, all while striving to optimize the additional very extensive and intricate operations of efficient and cost-effective transportation management can unnecessarily divide focus and energies. Manufacturing management is therefore met with a fundamental question about the most practical uses of leadership and staff resources in this regard.

Freight transportation management is, in most cases, most reasonably viewed as a separate business operation from all of the integrated processes of manufacturing, requiring a vast range of very different kinds of specialized knowledge and expertise than can be acquired through the best of training and experience acquired in any positions on the manufacturing team. Top success in transportation services, logistics, the transport components of reverse logistics systems, and reaching financial goals set for transportation management demands a complete commitment of professionals passionate exclusively about excelling in the freight transportation field.

One powerful move toward smoothing operations overall, improving services to internal and external customers, realizing significant cost savings, and permitting full concentration of manufacturing management and staff on building the most productive and innovative team possible is to ground these critical initiatives in a policy of enabling all staff to precisely focus on optimizing efficiencies in its particular business domain and avoiding frustrated pursuits of managing peripheral businesses such as freight transportation, in which core competencies are foreign to those of the manufacturing company. In this organizational conception, it is optimal to assign major operations such as transportation, that are clearly unique from the business’s production and service activities, to experts in successful transportation operations models, who can thus most efficiently serve the manufacturing company’s big picture interests by functioning as a strong appendage of the organization.

Need help in focusing back on your core compentancy and dealing with these forces distracting you from reducing transportation costs? Contact us today and inquire about Cerasis services.

The following is a blog post we came across that points to more numbers about manufacturing jobs and the overall manufacturing industry. Many reports have come out recently of the rise of manufacturing in America around reshoring and continuing positive manufacturing indexes. However, there are still some out there who say manufacturing is not truly recovering until the jobs return. There are also some who argue that jobs are not the core metric to look at, but rather output and dollar share of the GDP. Nicholas Freiling, a freelance writer in Harrisburg, PA who blogs about economics, politics and religion, argues that jobs are NOT the factor we should look at to see the health of the manufacturing industry.

We often hear that the American manufacturing industry is in major decline. In fact, the point often goes without saying these days, or at least without good data to back it up. That’s not to say that the number of manufacturing jobs in America hasn’t dropped off–that much is certain. But is the number of people employed in the manufacturing industry a good indication of that industry’s health?

The answer is no, and here’s why.

First: Consider the chart below from the Mercatus Center’s Veronique de Rugy:

manufacturing industry jobs chart

 

As you can see, even though the number of manufacturing jobs has consistently fallen since around 1980, US manufacturing output is much higher these days than ever before (except for just prior to the 2008 financial crisis). As de Rugy explains, this means the average American manufacturer is more than three times more productive today than they were in 1975. This reveals true economic progress–producing more with less.

Second: In a recent paper, Clemson University’s Bruce Yandle (also affiliated with the Mercatus Center) explains a fact about manufacturing in America I hadn’t considered before. He writes,

“Information technology that drives the cost of contracting and managing is the big unknown in all this. As I have pointed out before, the US economy, especially the manufacturing economy, is disintegrating. Picture a large paper producer, for example. In decades past, that producer would have its own fleet of trucks, timber operation, steam-generated electricity, internal shop for major repairs, large engineering department, finance department, human resources, and distribution and warehousing operations, all as part of one paper-producing firm. Today, that same paper producer contracts out for transportation, logistics, engineering, energy, heavy maintenance, and for some finance and personnel services.

As contracting costs have fallen, the firm has disintegrated. Dramatic improvement in information technology has been the driver. The result? A smaller share of the workforce is employed in paper manufacturing, but more paper is being produced.”

He doesn’t cite data to back up this story (I’m not even sure if any relevant metrics exist), but it makes sense to me and jives with my own tangential experience with the manufacturing industry.

I work at a sales agency that sells for small manufacturers throughout Pennsylvania. Often, we will facilitate everything from product conceptualization to market research and advertising to shipping to final sale for our manufacturer client, leaving them to do only what they do best–manufacture product (don’t you just love the division of labor?). The result is that the number of people working for the manufacturing firm is trimmed down until only those people working on the assembly line, plus a few supervisors, remain employed at that firm. The few dozen employees at my workplace–accountants, marketers and salespeople who, decades ago, might have been employed directly by the manufacturer–are categorized under “business services.” This grows the “professional business services” labor force and a shrinks the “manufacturing” labor force despite no decrease in manufacturing output. If anything, outsourcing business services like shipping and sales–the cost of which is falls with advancements in information technology–only increases manufacturers’ efficiency.

I could say more about the state of manufacturing in the US. Suffice it to say, though, that the number of jobs in a particular industry is no indication of that industry’s overall health. Jobs are important, but that’s an entirely different discussion.

This post originally was posted at http://nickfreiling.wordpress.com/2014/04/18/518/

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