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Posts Tagged ‘manufacturing employment’

mfg-emplOur business revolves to a large extent around manufacturing – we implement business management software systems for companies who make and distribute a wide range of products – and have for nearly 30 years.  So of course, the topic is bound to come up in this blog from time to time…

In spite of the concerns about a modern day downturn in manufacturing, the truth is that thousands of factory jobs are going unfulfilled across the U.S., according to Anna Sussman in the Sept. 2, 2016 Wall Street Journal.  In fact, the number of unfilled jobs has been rising since 2009 and stands today at its highest level in 15 years according to the Labor Department.

The reason?  Factory work has evolved tremendously during that period, and today’s new advanced machinery and automation systems require a new set of skills.  Those lower-skilled jobs of workers laid off in recent decades due to recession, offshoring and technology aren’t coming back, and the ones that have replaced them are causing a mismatch and a growing problem for the economy, limiting some companies’ ability to boost productivity while weighing on growth.

At Ohio’s Kyocera Precision Tools, production is now twice what it was 25 years ago with just half the staff, thanks to higher-skilled workers and expensive new CNC machine tools.  There, managers struggle to find workers with the electrical and mechanical skills required to run their complex machinery.

The Journal notes that this is mirrored in manufacturing jobs across the country, where openings have averaged 353,000 jobs per month, up from 122,000 in 2009.

In 2000, 53% of manufacturing workers had no education past high school.  15 years later, that figure was just 44% while the share with a college (or higher) degree increased by 8%.  Increasingly, factory jobs are high-skill jobs, and such ‘upskilling’ in manufacturing “mirrors a broader bias in the economy toward more educated workers,” notes the Journal.

But companies say education and training systems have not kept up with industry needs, and therein we think, lay both the problem and the opportunity.  As the Journal points out… “As manufacturing lost jobs to technology and outsourcing, young people pursued college degrees or jobs in the growing services sector.  Colleges and high schools reduced their focus on technical education.”

Yet 8 in 10 manufacturing execs say the growing skills gap will affect their ability to keep up with customer demand according to a recent study by Deloitte.

With workers and educational institutions slow to adapt, companies can spend months searching for appropriate candidates.  And these are good jobs, paying about $25 per hour or more.  The solution is not the simple one of “pay more” experts say.  As the president of Akron Tool & Die succinctly noted when interviewed, he would only lose a bidding war to bigger firms in his area and it won’t solve the problem of too few skilled workers.

We would add that it’s high time to look at the apprenticeship models of countries like Germany, where they recognize that not everyone is, nor should be, destined for college.  And company/school educational programs are showing promise in many communities today.

But it will take all these and more in a concerted effort to solve the problem, and we can’t start moving soon enough.

 

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time_madeUSAWe periodically comment on news from the world of manufacturing, as most of our clients live in that world.  Today, some encouraging news…

Last week’s Time Magazine cover story (“Made in the USA,” April 22nd issue) confirms much of what we and others have been noting for awhile now… that U.S. manufacturing is back, and in meaningful ways, though the impact this will have on future direct employment trends may leave some less than satisfied.

The article points out most notably that while direct manufacturing employment overall may only be responsible for 9% of U.S. jobs, this statistic belies the importance of the sector for the overall economy, because manufacturing represents “a whopping 67% of private sector R&D spending as well as 30% of the country’s productivity growth.”  In fact, every $1 of manufacturing activity overall returns nearly $1.50 to the American economy.

A number of reversals have occurred when compared to the offshoring trend of recent years.  Companies from Apple to Airbus to Ashley Furniture, among many others, are making serious returns to U.S. manufacturing.  As one economist quoted in the article notes “The offshoring boom does appear to have largely run it course.”

When you add in factors like newfound, cheap U.S. based energy courtesy of shale oil and the natural gas boom, and the increasing (and tighter) alliances among government, academia and industry… and combine these with the rising wages of other nations, even as U.S. wages overall have fallen due to reworked labor contracts… the overarching conclusion is that America has once again become truly competitive in the world marketplace.  In fact, while U.S. wages on a per capita basis are still about seven times greater than those in China, that disparity is down significantly from years past.

Meanwhile, speed to market has increased markedly, thanks to new technology.  The new wave of 3-D printing – not of the plastic toys & widgets variety, but of actual metal and machine parts fabrication now being “printed” in a similar manner (called “additive printing”) – means that companies can get parts produced and shipped within a week by such specialty printers, without ever having to own the means of production.  That kind of turnaround time, combined with today’s Just-In-Time manufacturing ethos, makes it a lot harder for foreign producers to manufacture and transport from there to here, given the competitive time and cost factors.

One Illinois provider of parts to Caterpillar says he is increasingly getting business that otherwise would have gone to China, and his comments are telling: “We can do faster delivery with higher quality.  By the time you factor it all in, it makes sense to keep some of that work here.  I think the insourcing trend is going to be huge.”

However, the workers required for today’s factory need to be the most educated, well-prepared ever.  As Time’s article points out, employers today often look for college grads for the shop floor.  The technologies involved… the expectations to “step up their game”… and the new emphasis on continuous improvement, employee adaptability and acquiring new skills, all require a new kind of worker.  There may be fewer of them in tomorrow’s plant (thus extending a century long trend), but these folks are the future manufacturing jobs of America.

I heartily recommend picking up a copy of Time’s April 22nd issue and reading the full article for yourself, if you want to feel good – or even better — – about where we’re heading as a country, as employers and as an economy as a whole.

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workers_mfgAs noted in our prior post, we were intrigued by comments made by TRENDS, the subscription publishing arm of AudioTech in Willowbrook, IL in a recently published article titled “Advanced Manufacturing: The Key to America’s Innovation Advantage” in December (Vol. 9, No. 12).  (www.crucialtrends.com).

Read our first post for the run-up to today’s conclusion, in which we look at what the TRENDS article’s authors say are three key forecast trends for the future of manufacturing employment.

Their first conclusion: “Over the next decade, high schools and universities will redirect their vocational training and guidance efforts away from the liberal arts toward the skills demanded by advanced manufacturing.”  Schools will need to make students more aware of the opportunities inherent in the new, advanced manufacturing.  Look to Germany’s trade school model for inspiration here – it works for them.  Businesses have tremendous stakes in the success of our schools.

Their second conclusion: “Over the next seven or eight years communities will actively encourage ‘high-impact technology clusters’ that will help advanced manufacturing take off.”  Innovation thrives when related companies and educational institutions are co-located.  Collaborative networks will (in fact, in many areas, already are…) encouraging greater innovation and new forms of technology startups (we’re seeing a Renaissance of idea formation and corresponding startups, even in small towns like our own, in South Bend, Indiana).

Their third conclusion: “In an effort to re-energize the economy, government will play a role in supporting the growth of advanced manufacturing.”  We’ll need joint cooperative (government and private sector) collaboration in efforts including development of intellectual property.  Just as importantly, we’ll need tax policies that encourage investment in R&D, human capital, IP development and fixed assets.  Some of these exist today; more can be done.  Policies that reward venture capital will help make the most of this opportunity.

As suppliers of software and consulting to America’s manufacturing and distribution breadbasket, we see on a daily basis the strength and vigor or our small business manufacturing sector.  They’re smart, experienced and agile.  We can only hope that America’s policies and educational institutions have the same smarts and vigor to keep up with, support, and provide the future talent for these difference-making companies of the 21st century.

 

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worker_mfg_2Many would agree that a strong manufacturing base is key to a vital economy, a point we’ve emphasized in this blog over the years.  True, we’re biased, as we earn our living selling software solutions for manufacturers, and have for 25 years.  But that doesn’t make us wrong – just keenly interested in the topic.

And so when TRENDS, the subscription publishing arm of AudioTech in Willowbrook, IL recently published an article titled “Advanced Manufacturing: The Key to America’s Innovation Advantage” in December (Vol. 9, No. 12), we paid attention.  We’ve used some of their comments, in addition to our own, to survey the current playing field in U.S. manufacturing.  To give credit where due, TRENDS can be reached at www.crucialtrends.com.

The article notes the result of a Deloitte Consulting survey of American manufacturers who reported that they had 600,000 jobs open, “for the simple reason that workers with the right skill sets for the open positions were not available.”  The result, as one might imagine, is that this limits the ability of those firms to grow, or improve productivity.

America, the articles notes, developed its manufacturing strength in the first place because of a wealth of natural resources, a lack of government restrictions, and an “undying spirit of innovation”.    But as those assets waned – that is, as prices rose while our edge in materials costs diminished and we absorbed the rising cost of regulatory compliance —  U.S. companies lost market share.  And jobs.  In fact, we lost over 6,000,000 jobs just in the first decade of the 21st century.

So it is surprising perhaps to learn that despite the decline in many industries, according to the American Enterprise Institute, over 75% of America products are still manufactured… in America!

One key reason, notes TRENDS, is our ability to adapt by working smarter.  There has been a 40% increase in high-skill manufacturing jobs since 1980, which exploit things like cutting edge materials,  and new technologies and capabilities.  Any future growth, TRENDS points out, will surely rely on growth in these areas.   And the effect transfers beyond just manufacturing.  Since R&D “tends to follow manufacturing as it crosses borders, a domestic increase in manufacturing will not only aid manufacturing jobs, it will also ensure R&D activity remains in the U.S.”

Along with this trend is expected to come a greater protection of intellectual property — notwithstanding the latest hacking efforts by international competitors, as we’ve described in our previous PSSI blog post.

When Deloitte looked at the sectors facing the worst shortages of skilled employees, many of them were from the manufacturing sector, including automotive, aerospace & defense, and industrial and consumer products.

And while major manufacturing companies like GE, Boeing, Alcoa and others are working closely with community colleges and veterans groups, the TRENDS article points out that such efforts are merely a “good start” and that a better trained workforce will only come from a “broader approach.”  We’ll look at that broader approach in the second of this two part series.  Stay tuned…

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We occasionally in this post address hiring concerns and issues, particularly in the manufacturing arena in which so many of our clients operate.  So a recent (9/20/12) article in the Wall Street Journal by Nick Schulz, author and Fellow at the American Enterprise Institute, caught our attention.

In the Journal article, Schulz tells of asking employers about the skills today’s manufacturers are unable to find.  His assumption is that positions are going begging today because employers simply can’t match up current needs with today’s workforce.  

Turns out, that’s not really it at all.

[For a look at what we learned about so-called “soft” skills a few months ago, we remind you of this post.]

As one respondent told him, “To be perfectly honest… we have a hard time finding people who can pass the drug test.”  He’s since heard this many times.  Just as troubling, Schultz finds, are those who say that simply finding someone who could properly answer the phone was a challenge.

Despite a recent emphasis in manufacturing hiring that is focused on STEM (science, technology, engineering and math) skills, the evidence suggests many employers would be happy just to find job applicants who have the “soft” skills that used to be taken for granted.  In fact, a recent Manpower skills survey noted that nearly 20% of employers cited this lack of soft skills as a key reason they couldn’t hire needed employees.

Such traits as interpersonal skills, enthusiasm, motivation and an elementary command of the English language (written and oral) are in increasingly shorter supply these days.  Simple grammar and spelling skills – ones at the top of the “basic” skills embodied in older workers — are not readily present among younger ones, according to a joint SHRM-AARP study.

The same study found that “professionalism” or “work ethic” is the top “applied” skill that younger workers lack.  Another study found that manufacturers were finding it harder to find punctual, reliable workers, compared to even as recently as five years ago. 

What writer R.R. Reno has termed “forms of social discipline” are, in the words of Journal writer Schulz, “indispensible components of a person’s human capital and… needed for economic success.” 

There’s plenty of blame to go round, of course, from our primary and high school educational challenges to the collapse of intact families and what the Journal calls “the erosion of human and social capital in many communities.”

When viewed in this somewhat discouraging light, it appears our current unemployment woes run even deeper and more fundamental than appear at first blush.  Truly, as both a nation and as an economy, there is serious work to be done.

And if you are an employer, I suspect you know exactly what we’re talking about.

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As strong promoters of the benefits of domestic manufacturing, we occasionally diverge from our usual posts about software, technology and business to take a look at the bigger picture in manufacturing.  Since nearly all our clients are manufacturers or distributors (or both), we like to highlight stories that we think point up the successes found in U.S. manufacturing today.

In a recent article in Outside Magazine entitled “Born in the USA” (Sep ’12) — admittedly, an odd place to learn about manufacturing but, as it turns out, a worthwhile article — contributing editor Tom Vanderbilt takes a look at several American manufacturers’ efforts to keep American products American.

Apparel maker Ibex of Vermont is returning manufacturing to U.S. shores despite the 37% tariff it pays to sell its wares in Canada.  It would be cheaper, sadly, to send goods directly from China to Canada, but Ibex’s customers have been known to “beat it up” over Chinese production, says CEO John Fernsell who notes that “we get a real good-quality product in the U.S.”

In part, this may be at the core of the real feel-good story in manufacturing lately: that U.S. manufacturing, long in decline, has actually rebounded since 2010.  And by the way, talk about manufacturing returning to the U.S. often overlooks the key point that, according to the U.S. Dept. of Commerce, much of it never left: 75% of what Americans consume today is produced here.

Meanwhile Chinese labor costs, adjusted for productivity, have grown to nearly a third of U.S. levels.  And for many companies, labor isn’t necessarily even the most important variable.  “The reason companies re-shore is they want to make more money,” says Harold Sirkin, a consultant with the Boston Group.  “They make more money because they’re closer to their customers and can supply them more quickly.”  And that proximity is one key to the long-term viability of American manufacturing.

Here’s another: the growing trend toward mass customization. At Princeton Tec, a maker of bike lights, workers pluck parts from bins that can be assembled and shipped the same day for the firm’s custom headlights – all made possible because, as their marketing manager points out, “we make it right here.”  Not that they hadn’t tried China.  It turned out that labor costs there were rising, factories couldn’t keep up with rapidly changing technology, and government-driven consolidation was closing suppliers.  Back home, the company can produce smaller batches, control inventory better and take care of problems as they arise.  At its New Jersey plant, they’ve since doubled their manufacturing capacity.

As China grows, it is producing more consumers, and its ‘middle-class’ will dwarf the entire U.S. population in just three years.  This in turn may benefit American manufacturers in the most ironic way of all: as noted by MIT supply chain guru Bruce Arntzen, “Made in the USA is very important to China.”  Which means still more customers for American-made goods.

 

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“The arrival of hundreds of millions of cheap, diligent Chinese workers in the global economy saw America trade blue-collar jobs for low cost T-shirts and toasters,” according to a recent (July) article by Tom Orlik in the Wall Street Journal.  The lesson in these and other demographic changes for manufacturers today comes as no surprise: brace for change.

In roughly the first decade of this new century, the U.S. manufacturing sector shed nearly 5 and a half million jobs.  Meanwhile, China’s labor force is said to have already plateaued in size and will soon start to shrink.  Manufacturing wages there have risen over 20% just last year, outstripping productivity improvements.  Import prices from China to the U.S. are rising, thus crimping American spending power and gradually fueling inflation.  (On the plus side: as noted one of our recent posts, the rising trend in foreign wages has resulted in the return of some manufactureing jobs to U.S. shores.)

Yet, to make matters worse, millions of “cheap and diligent Chinese graduates” will be vying for positions soon in the global labor market, thus exerting further pressures on Americans’ wages and our competitive position.  A big increase in the global supply of highly skilled workers in the coming two decades will likely have an even greater impact on the U.S. than the surge in low-skilled workers of the recent past. 

As a result, there’s a very real possibility – likelihood, really — that professional wages and employment in the U.S. will come under increased competitive pressures.  (Fortunately, language and cultural barriers may dent the impact of China’s professional workers in the global workplace, unlike their factory worker parents did.)

On the other hand, one benefit we may derive from this demographic surge: rising incomes in China, and the other Asian nations with whom we increasingly compete, “should also help U.S. workers by creating more demand for [our] high value exports,” according to Orlik.

Still, the outlook remains clear: brace for change.  First, America’s blue collar workers lost their shirts (and jobs), during China’s first stage of recent, major economic development.  In the next stage, the U.S. needs to be wary of the same results for its white collar jobs.  Is it only a matter of time?  Or we will find ways to spur advancements through higher education that will preserve our high-wage, high-value jobs?

 

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