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Labor Shortages & Skills Gaps In Manufacturing

The Convergence of near full Employment, Labor Shortages and skill gaps are impacting manufacturing and supply chains throughout the United States. 

The role of temporary labor is changing in manufacturing staffing today. Traditionally temp staffing has been a tool to reduce cost of labor and increase workforce efficiency, which works well if there is a pool of available talent locally to draw from. 

However, as the US economy faces historic near full employment and talent is often NOT available locally, specialized contingency staffing services that recruit workers nationally and deliver workforce's where they're needed most are becoming more important. As is developing contingency plans for staff shortages. 

If your hiring managers at local plants are finding that the pool of skilled applicants isn't big enough, then we can help. Learn more about the industries we service and positions we staff here.

 

What is the “Skills Gap”? 

We are all hearing in the news lots about the Skills Gap in Manufacturing, that older highly skilled workers are retiring or leaving the workforce with limited younger workers to replace them. We see this “gap” reflected as labor shortages on the the local or regional levels all across the country.

40 percent of global employers report a talent shortage, according to a ManpowerGroup survey. This is why companies are focusing more on training and development, as well as looking for different types of staffing firms to help them address this problem.

 

 Is the “Skills Gap” in Industrial Manufacturing a Myth?

There is a lot of discussion today about talent shortages and difficulties companies face finding personnel with the skills and certifications they need. Though some “experts” would argue that the “skills gap” is a myth, we talk with clients everyday that tell us otherwise. The fact is, that with unemployment now at record lows, many manufacturing companies are having trouble finding qualified workers. Surveys have proven this repeatedly over the last decade.

According to the ManpowerGroup survey, employers can't fill positions for a variety of reasons, including:

  • A lack of available applicants - 24%
  • A lack of hard skills - 19%

So, what can a company do to address these problems?

James Bessen, an economist at Boston University, believes employers must change their hiring processes, as "new technologies frequently require specific new skills that schools don't teach and that labor markets don't supply."

This trend necessitates that employers who use new technologies need to "base hiring decisions not just on education, but also on the non-cognitive skills that allow some people to excel at learning on the job."

Think about Manufacturing. Plants today are adopting more and more automation, robotics, AI and more, in their quest to increase productivity and remain competitive.

The 21st Century workforce needs to learn proficiency with these technologies. In addition, pay structures should reward those willing to learn new skills. One question becomes, how can this process be streamlined to reach more workers, faster?

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Labor Shortages: How Can Manufacturers Solve the Problem?

Some companies are starting to experiment and find new ways to fill their labor needs. A streamlined hiring process, more open, less rigid job descriptions, and more effective training, scheduling, and use of technology can help. However it is becoming clear that even with these adjustments, companies may still not be able to meet their short term operational needs, especially in states where unemployment is extremely low. 

Labor shortages can pose a significant threat if they  result in delayed orders, losses of revenue, or customers. If this is the case, companies may need to consider different workforce staffing solutions, such as sourcing and mobilizing temporary labor from across the United States. 

For instance, if your company needs more welders of a specific type to finish a job, but there aren't welders with the skills needed in the local area, companies may be compelled to expand the scope of their recruiting efforts or else face the risk that the job won't get finished on time and that disappointed customers will seek other suppliers.

Additionally, unexpected challenges, from civil unrest to natural disasters, can make it necessary to be able to access skilled labor on short notice if business continuity is to be maintained. Physical risk management best practice dictates that any company needs to be prepared for threats like these.

Simply put, the skills gap and its impact on labor continuity and the risk that unfilled positions pose to manufacturing operations is now a planning priority so that critical positions at the plant are always properly staffed and that labor continuity is maintained no matter the business threat.

Download your Labor Inventory Workbook

The Skills Gap in the Automotive Industry

Due to the scope, scale and precision of their supply chains and operational complexity, one sector that must pay special attention to short and long term skills gaps, labor shortages and labor continuity is the automotive industry.

First, there is an ongoing skilled labor shortage in the automotive industry. Some estimates say unfilled positions could exceed 2 million auto manufacturing jobs by 2019.

According to research carried out by the Automotive Industry Action Group in collaboration with Deloitte, more than half of OEMs and suppliers believe they will face a high level of difficulty if appropriate action isn't taken to close the gap between the rate at which the industry is losing experienced workers and the rate at which it's acquiring new workers.

On top of this, depending on the region and the role, right now there are local talent shortages that can and are having cascading repercussions up and down the global supply chain. This means that for OEMs and suppliers, there are lots of labor challenges to address in order to reduce the risks of labor shortages and ensure business continuity and supply chain resilience.

New Automotive Staffing Solutions to Address Labor Risk

This is why in the auto industry, having automotive staffing solutions  that utilize a variety of temporary resources and contingent staffing solutions at the ready to meet the complex labor needs of the industry is important to help reduce the risks of supply chain interruptions and resulting consequences.

Here's what you need to know about managing labor continuity for your business:

Supply Chains Are Especially Vulnerable to Manufacturing Staffing Shortages

Industrial manufacturers today need to have strategic manufacturing crisis staffing solutions that address labor shortages and limited talent availability.

The first step is to prioritize key roles and then develop in house or source contingent staffing solutions. Keep in mind that different agencies and contingent staffing solutions offer a variety of staffing deployment capabilities which you can then map to meet your different manufacturing staffing needs.

The potential for supply chain interruptions is a constant concern for OEMs and suppliers. After all, 51 percent of all disruptions in the auto supply chain originate below the first tier. Today Tier 1 suppliers need ways to not just monitor their sub-suppliers better in order to assess and mitigate risk, but also limit damage when an issue does arise.

It's impossible to control external events like the 2011 flooding in central Thailand which shut down 1,000 factories, but companies can have business continuity plans in place to respond if such a disruption were to occur and impact your suppliers or facilities. Software companies such as Resilinc offer solutions to track suppliers so that when events such as these occur, an OEM can proactively prepare by understanding which suppliers are within a certain radius of the incident.  

And it’s not just the physical plant that is at risk. What happens if a natural disaster affects your your employees and their ability to get to work, or if reduces the available local labor pool?

  • Where will you source additional labor from if you need it quickly?
  • Will you pull employees in from other locations and if so, who is managing this process?
  • Do you have vendor relationships in place already that can quickly deploy teams to your facility and manage the process for fast resumption of your operations?

There are many automotive suppliers and areas of the country that are already feeling the impact of the skills gap, such as Michigan's auto tooling industry which has the largest concentrations of openings in the Grand Rapids-Wyoming area along with Metro Detroit.

Other industries are also feeling the strain. Ask any distributor across the United States how they're doing hiring CDL-A Drivers and they'll tell you the same thing -- that's it's becoming more challenging each year and hiring qualified drivers is a constant struggle. In 2014, the industry was facing a shortage of nearly 40,000 CDL Drivers and as of 2017, that number has more than doubled.

While many U.S. manufacturers are planning for long-term solutions, business also need to consider and incorporate short-term contingent staffing solutions in their manufacturing staffing and crisis staffing solution strategies to quickly source and deploy qualified production labor, skilled trades workers and craftsmen. 

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Manufacturing Staffing: Temporary Agency or Contingency Staffing Service?

There is a difference between a traditional staffing agency that supplies temp labor to reduce costs verses a consultative-type contingency staffing services that's focused on business continuity and risk management. 

A traditional staffing agency usually focuses their recruiting efforts within a certain radius of their facility or their client's facility, and they may or may not have access to the experienced workers you need.

A contingency staffing service, like MADI's, that sources its employees from across the United States is focused on the operational needs of the client and is not limited by location.

This enables us to either source workforce's, from CNC Machinists to Assemblers or a mix of talent at one time. We also focus on sourcing the most experienced and skilled labor that can acclimate quickly to increase production. Having more experienced labor cuts down on training time and turnover, which is becoming a huge issue for companies receiving unskilled and under qualified temps from local staffing agencies.  

The question then becomes, do the workers from you local staffing agency have the proper skills and experience to meet your production requirements? Can the agency provide the number of workers you need? Can they provide them quick enough? If not, then contingency staffing may be the better option. 

Contingency Planning For Staff Shortages & Skills Gaps

In today's labor market, forward-thinking companies are shifting their mindset on talent, considering different staffing strategies, preparing contingency plans and deploying workforces for staff shortages in order to maintain competitive advantage.

Even if you're able to find the talent you need locally and you're not having issues with hiring now, you may want to consider a worst-case scenario and develop a staffing contingency plan in case you need to ramp up production or fill in critical staffing gaps. Learn more about why and how to develop a contingency plan for staff shortages here.  

 

How to Manage Risk with a Labor Continuity Plan

To help, we have created our Labor Audit Workbook. Now you a tool conduct a labor audit to identify skills gaps and develop your own Labor Continuity Plan, as well as identify and put into place different temporary staffing solutions to respond to a variety of threats to your business operations.

Download our free Labor Audit Workbook here, and asses key manufacturing personnel by skill sets, department(s), shift(s), priority level(s), ramp-up time by position, and more.

This tool will help you manage and reduce risk of labor shortages, especially during a period of near full employment with talent in low supply by being able to:

  • Identify and prioritize critical staffing gaps
  • Put in place various staffing resources mapped to individual positions based on priority and local availability
  • Assemble responsible parties and points of contact
  • Modulate speed of deployment in a variety of conditions.

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What is Contingency Staffing and When Do I Need It?

Contingency staffing is typically used when a company needs workers fast -- in response to labor disputes, natural disasters, or any crisis situation to help companies return to normal operations quickly.

The differentiated features of a Contingency Staffing solution can include:

  • National talent pool
  • Fly-in or Drive-In options, depending upon urgency
  • Turnkey - travel and accommodations, logistics, workmen’s comp, payroll, etc are taken care of
  • Workforce management to provide structure and ensure workers arrive as a group each day prior to their scheduled shift. 

The goal of contingency staffing is to ensure that open positions are quickly filled and managed so that production logjams are eliminated, operations are maintained and the company’s commitments to its customers are met.

Here are some questions to ask in order to determine if contingency staffing resources are needed:

  • What is the impact on my business if my open positions don’t get filled? 
  • Is the labor I'm receiving from local staffing agencies qualified? Is high turnover and no-shows impacting operational stability? What is the high turnover actually costing?

  • Are my Managers experiencing training fatigue from high-turnover of my staffing agency?

  • With the low unemployment in my state, can my staffing agencies actually source the amount of workers I need within the time-frame that I need them?
  • If labor from local staffing agencies are not qualified, is the time and money spent on training them worth it or would it be more cost effective to hire experienced skilled labor from other areas to decrease the training period and increase productivity and output?  

If you find that you're not able to source the skills needed locally, the amount of workers you need locally, or that too much time, training and money is spent on unskilled and unreliable labor from your local area, then an alternative workforce solution, such as MADI's contingent staffing, is a service option worth exploring. 

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What are the Benefits of Contingency Staffing?

As you will see in the following chart, the Temp Staffing Agency and Contingent Staffing Services have different strengths and are useful in different situations:

Feature/Benefits Temp Agency Contingent Solution

Talent

Lower cost if local resources are available, not reliable if talent is not available. Higher cost with reliability and certainty the positions will be filled.
     

Talent Quality

Variable quality and ability to meet job specs, based on limits of local talent pool. Higher quality and reliability due to ability to draw upon national talent pool.
     

On-Site Management

Oversee processes for efficiency and controlling costs of labor. Oversee personnel for fast workforce integration and maximum productivity.
     

Business Continuity

Determined by availability and quality of local talent and lack of training and on-site management. Time needed to recruit, deploy & train is offset by on-site management and higher quality talent.
     

Speed

Fastest in terms of getting bodies on site immediately. Fast with personnel on-site usually within 48 to 72 hours.
     

Productivity

Slower. High turnover, lower skill levels can reduce even further. Fastest. Higher quality talent, better alignment with on-site management.
     

Market Response

Fastest response, if talent is available. Productivity  uncertain. Fastest productivity, talent and management is available.

 

What Types of Industries Can Benefit from Contingency Staffing?

Ensuring there is a sufficient amount of skilled labor to maintain operations is critical to business continuity and success in today's economy. 

For industries that often require temporary help especially with hard-to-fill roles, it's even more crucial to that they have contingent staffing tools to access and deploy skilled short-term workers where and when needed.

This is especially true when operations are vulnerable to disruptions because key roles aren’t or can’t be filled by traditional means.

Here are some examples of industries that can benefit from skilled contingent personnel:

Production and Manufacturing

Production and manufacturing jobs account for 24 percent of all temporary jobs in the United States. This is a significant slice of the temporary/contingent labor segment, and it highlights a large need for labor continuity in Manufacturing.

Unfilled skilled positions like CNC programmers and machinists, and injection mold operators to Welders of all types (MIG, TIG, etc), to mechanics, boiler operators and a host of other trained workers can cause significant disruptions to manufacturing operations.

There is expected to be two million unfilled jobs in production by 2025. Temporary personnel is becoming more essential in Manufacturing because a large skills gap has emerged that can, if left unaddressed, impede profitability and growth, and there are simply not enough skilled laborers available.

When a full-time employee can't be found, going to a temp agency may be an option. However, because many traditional temp agencies focus on local pools of talent, this may not be the right tool if there is local labor shortage in your area.

This is where a contingency staffing services provider, one that sources talent nationwide, can help. The best are able to quickly and reliably provide access to experienced skilled trades personnel no matter the location.

Manufacturers are applying the temporary labor and an average of five percent of manufacturing payroll is spent on short-term help.

Many of these manufacturing companies are currently using temporary and contingent labor to in the Labor Continuity context to help:

  • Fill surprise big orders
  • Overcome a pressing supply chain logjam or other issue
  • Solve critical labor gaps during a busy season
  • Deal with an unexpected event, like a natural disaster

Transportation

Based off a study by the American Transport Research Institute (ATRI), 80 percent of motor carriers are currently experiencing a decline in productivity. This is being caused by new rules on driving hours, poor scheduling (possibly due to the inconsistent nature of the business) and the high cost of operations and maintenance.

In the trucking field, which has a rapidly aging workforce, it is expected that there will be nearly 900,000 job openings in trucking through 2025. However, even by 2022, this will more than double and there will be roughly 240,000 unfilled positions.

These are the reasons why the transportation sector is one of the highest employers of temporary workers. Logistics companies simply need CDL-A drivers, diesel mechanics, fleet maintenance pros and other specialists in the industry.

However, the skills gap in the transportation industry is very pronounced and the talent pool for high quality CDL-A Drivers has shrunk to historically low levels making the shortage for drivers national in scale, and sourcing qualified drivers extremely difficult.

Construction

The construction industry has long been a sector where seasonal employment is popular. Even with full-time construction employment rising, and some cities undergoing a construction boom, the construction sector is still one of the highest employers of skilled temp labor.

There are nearly 200,000 unfilled construction jobs as of 2016 and that number is higher today. So, this is why many construction companies choose to go to a staffing agency for heavy equipment operators, pipefitters, crane operators, industrial electricians and other skilled workers. This sector is extremely volatile regionally. Companies often don’t want to hire full time personnel, and  skilled “gig economy” temporary personnel often follow the money, which can exacerbate labor shortages in lower value markets even more.

It's also partially the nature of the industry that makes temp work so common. Construction jobs have a definite start and finish, and many companies choose to bring on added help temporarily for a big project. Once that project is finished, there may be no need to continue employing some of those workers.

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More Information

Avoid Falling Behind Your Production With Temporary Workers

You're not always going to have enough staff on hand to keep up with production. What's more, if your manufacturing facility is located in a remote area or in an area where skilled labor is hard to source, traditional staffing agencies may not be able to help find the personnel you need to keep production on schedule.

Having a labor continuity plan in place for when you're facing a staffing emergency is important for every business, but especially needed within the automotive industry where large penalties can be imposed if product is not delivered on time. Download our Labor Inventory Workbook to proactively plan for such issues.

Harvard Business Review Estimates That 45% of Workforce Will Be Contingent by 2017

Today's companies benefit greatly from flexible workforces and it's needed in order to compete globally. It becomes even more important, in times of crisis, to be able to respond to man-made or natural disasters with the help of contingent workers.

As of October 6, 2017 there had been 15 weather and climate disaster events with losses exceeding $1 billion each across the U.S., according to the National Oceanic and Atmospheric Administration. Contingent workforces play a critical role in disaster recovery efforts to get your business back up and running.

Trends in Contingent Staffing and Business Continuity: What Decision Makers Need to Know

Business continuity planning is often misunderstood or overlooked, however, it is a critical aspect of long-term business success regardless of industry.

One thing that has become crystal clear, is that local labor shortages are a real threat to business continuity and are often overlooked by businesses until they're facing a dire situation. Thankfully, there are tools like this Labor Inventory Workbook to proactively help business prepare and companies like MADI that can quickly respond by mobilizing teams of 50 to 100 highly skilled employees at a time and have them acclimate to your operations quickly and seamlessly.

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You get the individualized staffing solution that will meet your project-specific needs.

Here's how:

  1. MADI conducts extensive national recruiting of skilled labor.

  2. Our employment screening process includes thorough in-house background investigations and drug testing.

  3. We fully vet and process qualified personnel faster than traditional solutions.

  4. Qualified candidates can be deployed to single or multiple client sites, usually within days, regardless of location.

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