Labour shortage slowing manufacturing recovery

by Inside Logistics Online Staff

The resilience of manufacturing is unwavering — but not without struggle. A new study has found that although many manufacturers are emerging from the Covid-19 pandemic on solid footing, a mounting shortage of skilled labour threatens to delay the sector’s full recovery.

The study, The Resilience of Manufacturing: Strengthening people operations and bridging the talent gap amid crisis, was commissioned by The Workforce Institute at workforce management consulting firm UKG. It is based on a survey of more than 300 hiring decision-makers representing a mix of U.S.-only manufacturers (65%) and multinational manufacturers with a strong U.S. presence (35%). With year-over-year comparisons with a similar study completed by The Workforce Institute before the pandemic took hold, the 2021 research explores linkages between understaffing, overtime, employee burnout, absence, and turnover.

Talent gap grew

Before the pandemic — a period when many manufacturers were already grossly understaffed — 38% of manufacturers had trouble finding candidates with the right skills. Today, that number has jumped to more than half (54%).

While the sector has shown steady recovery since losing 30% of U.S. manufacturing shifts between late March and mid-April 2020 — when the U.S. economy hit its lowest point, manufacturing frontline shift-work volume is still hovering at just 88.5% of pre-pandemic levels as of April 2021.

Today, nearly two in three manufacturers (63%) are “struggling” to fill critical labour gaps despite high unemployment caused by the pandemic.

And the research shows that multinationals are facing greater struggles than their U.S.-only counterparts. In addition to experiencing “severe” demand fluctuation at a greater rate (77% vs. 56%), almost three in five multinational manufacturers (58%) cited difficulty acquiring skilled talent compared with just half of U.S.-only manufacturers (49%), while 49% vs. 38% reported difficulty retaining skilled employees.

Production lines understaffed

Attendance and attrition have been persistent challenges in the manufacturing world, and Covid-19 intensified these issues for employers as people were forced to fundamentally reimagine their home life, all while unprecedented demand volatility pushed global supply chains to a breaking point.

The study found that employees aren’t just calling out of scheduled shifts on short notice — many are actually “ghosting” their employer by skipping a scheduled shift with zero notice.

Between January and March 2021, more than two in three manufacturers (68%) let employees go due to poor attendance, and 13% said managers had to adjust labour schedules every day to account for unplanned absences.

Turnover is up 15% over the previous year. Nearly three in five manufacturers (59%) experienced “higher-than-average” turnover from March 2020 to March 2021, compared with 44% from March 2019 to March 2020. Among multinationals, 71% said turnover was up during the first year of the pandemic vs. 52% of U.S.-only manufacturers.

All together, these obstacles are hitting manufacturers’ bottom lines in the form of productivity losses (37%) and overtime pay (34%), as well as costs related to employee burnout (28%), employee turnover (27%), and recruiting (23%).

Investing in the workforce

Accounting for these pronounced impacts to staffing — and preparing for a rise in retiring Baby Boomers — employee cross-training has become a greater focus for nearly three in four manufacturers (73%), and one in three now offer mentorship programs as a way to encourage knowledge-sharing between seasoned workers and newer employees (up seven percent over the prior year).

Four in five manufacturers (81%) say investing in the workforce is a key component of their digital transformation strategy, and just as many say their frontline managers already have the right tools and resources to help employees advance along their career paths.

While employee pulse surveys help managers understand and better respond to employee sentiment, only 27% of manufacturers today provide employees with a means to anonymously communicate feedback upstream.

All employees value flexibility, though frontline team members rarely get it. Only 28% of manufacturers say their employees have autonomy to adjust their work schedules or set their own availability or work preferences.

Flexibility, safety, and diversity

Nearly three in four manufacturers (73%) have advanced their digital strategies by accelerating adoption of new technologies within the first year of the pandemic. Adoption of automated employee scheduling solutions is on the rise — up 16% over the prior year — as is adoption of mobile at-work technology that enables flexible employee practices, like using a mobile device to clock in/out of a shift (up 23% over the prior year) or request schedule changes (up 19% over the prior year).

Similarly, health and safety practices introduced in 2020 — from new testing and screening protocols to enhanced personal protective equipment requirements and “contactless” time tracking — are predicted to remain steady fixtures on the factory floor through the remainder of the year, bringing peace of mind to manufacturing’s essential workforce population.

Showing the industry’s resilience, many manufacturers are recruiting from “alternative” talent pools. Within the past year, about three in four (76%) have hired or considered hiring people with non-traditional skills or work histories, while others are recruiting individual contractors (71%), people with disabilities or special needs (62%), and second-chance workers (52%). Overall, 71% call workplace diversity a “top recruitment priority” for their HR department.

“As shockwaves continue to reverberate through the supply chain, employees are being asked to be more agile than ever,” said John Frehse, senior managing director at Ankura Consulting Group and advisory board member of The Workforce Institute at UKG.

“As exhausted as we all are right now, there is no better time to assess what has happened, develop the right labor strategies to protect the emotional wellbeing of employees, and make our companies more resilient for the next big disruption. It is not a question of if it will happen again, but when.”