What Does the Labor Shortage Cost Manufacturers?

One of the biggest challenges we hear from area employers is that they simply cannot fill job openings. A recent study focused on the skills gap was completed by The Manufacturing Institute and Deloitte. The skills gap represents the difference between what organizations list as the skills they need, and the current capabilities of the workforce. The study shows that by 2025, the gap will result in two million manufacturing jobs going unfilled nationwide.

How does the skills gap affect the costs of manufacturing? Companies end up with more overtime costs, for one. More than 70 percent of manufacturers report at least a 5 percent increase in overtime costs and nearly one-third report a greater than 10 percent increase in overtime costs. There is greater reliance on existing workers to fill orders and meet demand. And workers are feeling overwhelmed!

This a significant issue that impacts a company’s ability to grow. When surveyed, 82 percent of CEOs and manufacturing executives indicated that they believe the shortage of workers in their organization will impact their ability to meet customer demand. Nearly two-thirds of manufacturers report at least a 5 percent increase in production downtime and production cycle time.

The shortage of qualified applicants for skilled and highly skilled manufacturing jobs continues to plague growth opportunities for many manufacturers. What are the strategies that manufacturers can employ to help strengthen the pipeline of skilled workers?

Cliff Sanderson, Vice President of Human Resources for MEC, headquartered in Mayville, is familiar with the challenges posed by a labor shortage. Training and collaboration are key, he says.

Sanderson notes that internal training programs can be particularly effective, both in enhancing the technical skills of the best skilled workers, and in engaging employees through training that addresses soft skills and team work.

Collaborating with high schools, technical colleges and creating apprenticeships and other programs that increase awareness and exposure to manufacturing among young people is also important, he notes.

“Developing talent is essential,” says Sanderson. “We not only need to attract workers, but we need to make sure that they have the skills to meet the needs of today’s advanced manufacturers.”

Other manufacturing executives agree with Sanderson, with 94 percent of those surveyed indicating that internal training was the most effective skilled workforce development strategy. Nearly three-quarters of respondents also agree that partnering with local schools and community colleges was important.

Manufacturing offers significant career opportunities. Many entities serving Dodge and Jefferson counties are partnering to promote manufacturing as a career. And Thrive Economic Development and others are looking at strategies to promote these counties as attractive places to live, work and play. Our economic future is dependent upon growing our population base and the skills needed to support business growth.

“Promoting Dodge and Jefferson counties as great communities to live, work and play will need to take center stage to entice people to this region,” notes Sanderson. “We have many great employers and world class educational systems – people are the missing ingredient.”