Beyond reshoring: Why restarting plants and hiring workers are just as crucial
An emphasis on addressing both the skills gap and opening plants that are either closed or underutilized is essential if manufacturing wants to continue growing and attracting new workers
Even as the reshoring of manufacturing jobs gains momentum in the U.S., other issues still face the industry as it looks to grow in the coming years. Patrick Van den Bossche, the Americas Lead Partner of A.T. Kearney’s Strategic Operations Practice, talks about the skills gap and the issue of restarting closed or underutilized plants that need to be addressed to take full advantage of the resurgence in manufacturing.
PE: The top issue facing Plant Engineering readers is the lack of a skilled workforce. Based on your research, how do we mobilize our workers to meet the challenges and skills needed for modern manufacturing jobs?
Van den Bossche: Dependence on traditional recruitment channels will clearly be insufficient to meet the staffing challenges. To successfully recruit both short- and long-term job seekers, manufacturing needs to be reinvented as an attractive career option. It requires that private, public, and educational sectors take preemptive steps by working together to increase the awareness, interest, and positive perception of manufacturing jobs. It also means that recruits need to be willing to look beyond the “bad rep” that manufacturing has acquired over the years.
Efforts need to address not only new college graduates, but also high school students before they decide on their college majors and career paths. Once recruits are hired, they will need to be trained, and companies need a strategy and plan for training them before they start on the shop floor. Currently employed workers need to be open to being retrained with new skills. Also, in some cases, older workers may need to be retrained in their old skills because manufacturing activity has been absent from the United States for so long that in certain areas the knowledge base has been lost.
Perhaps the biggest challenge is to retain people, especially the Gen Y workers. Unlike earlier workers who spent lifelong careers with one company, this generation has no qualms about switching jobs or careers…frequently. To counter this trend, companies must have robust career progression plans and mentor programs in place, and they must invest in employment incentives that go beyond compensation.
PE: What factors do you see as driving the migration of manufacturing jobs to the U.S.?
Van den Bossche: A number of macroeconomic factors have tipped the balance in favor of domestic manufacturing. Among them, for example, are the appreciation of China’s currency vs. Western currencies, labor rate inflation in China, increased concerns about supply interruption and product adulteration, and in the U.S., falling energy costs due to prospects of shale gas.
Also, the U.S. Economic Development Administration, part of the Department of Commerce, actively encouraging companies through its “Make It in America” challenge, has provided incentives to both domestic and foreign companies to shift manufacturing back to the United States to create jobs and increase the country’s competitiveness on the international stage.
PE: Many former low-cost manufacturing countries, China in particular, are seeing pressure on manufacturing jobs. What are the unique pressures in the U.S. that would slow manufacturing job growth, and what common pressures do all countries have in 2013?
Van den Bossche: In the U.S., there are already more manufacturing jobs available than there are skilled workers to fill them. In 1970, 25% of the U.S. workforce was in manufacturing-related activities. Today, this figure has dropped to less than 9%, according to the Bureau of Labor Statistics. As a result, the Manufacturing Institute’s 2011 Skills Gap Report noted that as many as 600,000 U.S. manufacturing jobs remained vacant across the country due to shortages of skilled workers. A more recent survey of more than 800 U.S.-based manufacturers indicated that 90% of them face a shortage of skilled production employees.
It’s only logical that the competition for talent that can manage and operate manufacturing assets will heat up as companies look to bring back their operations. As a recent IndustryWeek Salary Survey shows, this competition is already starting to result in significant upward pressure on salaries for manufacturing managers. This year’s survey marked the first time since 2008 that the average manufacturing manager salary has breached the $100,000 level. The same pressure can be expected at lower levels of the manufacturing ladder, as the rise in open manufacturing positions further exceeds the overall availability of talent.
Similar issues exist also in emerging markets where there are plenty of “common” low-skilled laborers, but as higher value-add activities have moved to (India and China for example), the demand for higher skilled workers, not just in manufacturing but also in sales and the services sectors, etc., has outgrown the availability of those types of workers, either because of the sheer volume of demand (China) or because those that have the skills prefer to work elsewhere ( IT and services, in the case of India). This is one of the main reasons why in emerging markets compensation levels are expected to increase significantly in years to come and, ironically, it’s also one of the key drivers for manufacturers to look at returning to the U.S.
So the common challenge across most countries will be to make sure that the size and skillset of their (manufacturing) labor force keeps pace with the demands of ever more efficient, more complex manufacturing operations.
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Annual Salary Survey
In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.
Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.