3 Solutions to the Manufacturing Industry's Labor Shortage Problem
A large portion of the manufacturing workforce is ready to retire. But workers entering the industry lack the specialized skills to fill their roles. According to an in-depth Accenture study, over 75% of manufacturers report a moderate-to-severe shortage of skilled resources. As a result, these companies face reduced yearly earnings of up to 11%.
The increased production costs and revenue losses resulting from this skill gap will have an unprecedented impact on productivity and innovation unless steps are taken to retain skills and prepare an incoming workforce.
Industry leaders are already taking some of these steps, but more can be done. Here are three potential solutions that, if properly executed, may alleviate manufacturing’s labor shortage problem.
1. Strategic Workforce Planning
In the face of a widespread labor shortage, manufacturers need to take a laser-focused, long-term approach to hiring and training. Strategic Workforce Planning, or SWP, is the practice of aligning HR processes with a company’s business objectives. This may seem obvious, but SWP’s tenets go far deeper than the average HR team’s day-to-day. It includes hyper-targeting candidate pools, offering more competitive compensation and investing in technology to make the recruiting process more data-driven.
Once SWP is established, manufacturers’ HR divisions should hone in on the skills that are in danger of disappearing and do whatever it takes to protect them. In most cases, this will be a three-pronged strategy: retaining skilled individuals that are in danger of exiting the workforce, recruiting new workers with those skill sets and building the skills of existing workers through targeted training.
2. Recruiting Millennials
Millennials (individuals between 22 and 37 years old) are a prime recruitment target. Many have technological skills and know-how that make for an easy transition into manufacturing. Unfortunately, they also tend to stigmatize the industry, believing it’s an archaic career path that won’t align with their interests and goals. In conversation with the Wall Street Journal, Manufacturing Institute executive director Jennifer McNeily explains, “What millennials don’t realize is that modern manufacturing is full of cutting-edge technology. We make life-saving medicines. We make cool cars. We are problem solvers on a global scale.”
The industry must work hard to prove this. Already, companies like GE are producing Millennial-focused ad campaigns that highlight the advanced technology and innovation applied in its manufacturing divisions. Plus, GE and its contemporaries are establishing a more tech-focused presence at career fairs, competitions and conventions. They use VR simulations to allow young people to step into the shoes of welders, oil recovery workers and other hands-on jobs. And since social validation is a key motivator for millennials, many of the facilitators at these events are in the same age group as the target audience.
3. Supporting STEM
While millennial recruitment is the most timely solution for resolving the labor shortage by 2020, manufacturers must also consider what comes after. In order to ensure a bright outlook for generations to come, there must be an emphasis on STEM (science, technology, engineering and math) skills in early education, specifically for ages two through 19—a.k.a., Generation Z.
High-profile corporations have begun to make significant contributions to STEM education in recent years. In 2015, Intel pledged $300 million to K-12 STEM programs, focusing on female and minority students in under-served areas. FIRST Robotics—an international organization hosting youth competitions and supporting mechanical skill-building—has a long list of sponsors including Boeing, GM and United Technologies.
But smaller manufacturers can also get involved, and perhaps see more direct results, by making contributions to their own communities. The Alamo Academies began in 2001 when San Antonio-area manufacturers partnered with a local community college to create an industry-driven manufacturing curriculum for high school students. Since then, 94% of the program’s graduates have transitioned into higher education or placement in manufacturing roles at Toyota, Lockheed Martin and other San Antonio businesses.
While significant steps have been taken to close the skill gap and end the labor shortage, success cannot be achieved without widespread cooperation. By streamlining recruitment initiatives, targeting younger candidates and investing in future generations, manufacturers big and small can do their part—not just in saving an industry in crisis, but in assuring America’s continued economic prosperity.
Meet the Author
Chief Executive Officer
John Lauseng, CPA
Aldrich Group of Companies
John Lauseng is the Chief Executive Officer of Aldrich, a role he assumed on July 1, 2020. An Oregon native, John joined Aldrich in 2009 as an auditor in the accounting firm. He brought extensive experience with financial statement assurance, business consulting and financial due diligence to the Aldrich manufacturing niche and helped companies strengthen... Read more John Lauseng, CPA
- Certified Public Accountant
- Assurance and audit
- Professional services
- Closely-held businesses
- Manufacturing and distribution
- Food processing