In Depth: McGladrey study finds resolve, optimism among manufacturers
In spite of the economy, McGladrey's study reports manufacturers are confident that their industry will grow, but that they are still having trouble finding skilled workers
The McGladrey Industry Summer Monitor asks manufacturers and distributors key questions about growth each quarter. The results of its most recent survey include:
- Manufacturers feel confident about their abilities and their companies — factors within their control. Their pessimism arises when they consider areas outside their control, such as the U.S. and global economies, rising commodities prices and other key risk factors.
- Rays of sunshine might be able to melt the hiring freeze: in both the spring and summer surveys, a majority of manufacturers said they planned to increase the workforce by an average of 7%.
- Respondents who said they increased their productivity seemed especially likely to do more hiring.
- Companies that say they are thriving and growing and are more likely to be more productive, hiring and investing in workforce training.
- Looking up the supply chain: To manage costs, companies should leverage vendor competition and relationships. It’s an overlooked area for growth.
- There are still 37% of companies compiling manual, paper reports. But 80% of manufacturers say they want to be more productive, especially by using Six Sigma, Lean or GMP processes.
McGladrey’s national manufacturing practice lead Karen Kurek discussed the findings of the study in greater depth with CFE Media:
CFE Media: Even amid a somewhat pessimistic jobs market, our readers can’t seem to find skilled workers. How are the better manufacturers overcoming this problem?
Kurek: Manufacturers repeatedly mention that this is a significant issue: the inability to get qualified workers into their open positions. With the unemployment rate still stubbornly high (approximately 9.1%), manufacturers should partner with the community to get people off the unemployment payroll and onto the manufacturing payroll.
Manufacturers need to partner with community colleges as well as with the National Association of Manufacturers’ endorsed skilled certificate systems. They’re hoping to create two-year degree curriculums that will train people and give them the skill sets necessary to get these manufacturing jobs.
In general, better manufacturers are increasing the amount of time and money they’re spending on training. As summarized in the McGladrey Summer Manufacturing and Distribution Monitor, one of the best practices of companies that are thriving and growing is that they are investing in training their workforce.
CFE Media: Your study found manufacturers are confident about what they can do and what they can control. What drives that confidence in their own markets? Do they think they can overcome the global and domestic challenges by being more productive?
Kurek: In general, manufacturers are more confident with what they can control and what they can control is what’s happening within their four walls and what’s going on operationally with their supply chain, from their vendors to their customers. But one thing that manufacturers are concerned about is the uncertainty. And that uncertainty lies in the areas of federal regulation, gridlock, the greater U.S. economy, and the world economy.
CFE Media: The study indicates a relationship between productivity and hiring. The more productive companies get more business, thus need more workers. But what are the keys to greater productivity among those optimistic companies?
Kurek: It has been rumored that with better productivity, companies won’t need to increase their workforce. However, we’ve found a positive correlation between productivity and hiring, because as productivity increases, companies’ bottom lines should also be increasing. With the increase in working capital and the feeling that managers are reaching the natural limits of productivity per worker, companies feel that it is inevitable to hire more people. Encouragingly, for the overall economy, 64% of companies reporting an increase in productivity also plan to increase their workforces in the coming year.
Executives seem to be attributing their increase in productivity to process improvement and better utilization techniques. Organizations that are thriving and growing also have an un-relenting focus on continual improvement techniques such as Six Sigma and Lean Manufacturing. This is truly part of their culture.
CFE Media: You also looked at supply chain issues. Why is this area often overlooked? Is the supply chain mostly about cost savings, or are there productivity gains as well?
Kurek: Supply chain is probably an overlooked issue because it takes time, effort and negotiation to establish an agreement with vendors for cost management purposes. Looking up the supply chain is a good practice to put in place because it allows you to continually foster relationships with your vendors, it leverages vendor competition, it allows for long-term cost reduction in many cases and it reduces the need to increase prices to the customer — which is imperative, because in this economy consumers can be very price-sensitive.
CFE Media: What are the key indicators that lead to productive, thriving manufacturing plants? What do the best plants have in common?
Kurek: The key indicators that lead to productive, thriving manufacturing plants are:
- Increasing productivity by investing in equipment and high-tech automation
- Investing in workforce training to increase productivity and operation efficiency
- Using improvement processes such as Six Sigma, Lean or GMP processes to be more productive
- Looking up the supply chain to manage costs and procurement initiatives with vendors as opposed to increasing costs to the consumer
- Formally measuring procurement activities with the number one item being on-time delivery from vendors
- Exploring emerging markets and expanding globally
- Utilizing real-time digital performance tracking systems as opposed to manual tracking systems
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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.