Call it a perfect storm or the worst-case scenario, but a convergence of factors is giving the manufacturing industry headaches in the labor department.
As the industry is moving out of the economic recession and continues to add jobs, older skilled workers ? those who perform advanced procedures other than repetitive assembly ? are retiring or getting close to retirement. What makes that situation worse is that there aren’t enough new ones to replace them.
“That created the perfect storm for the tremendous skills gap that’s out there,” says Chad Schron, manager of Tooling University, an online training site based in Cleveland for manufacturers and vocational schools. “There weren’t enough in the pipeline of new people learning welding, fabrication and machining and entering the work force as employees started to retire.”
Mark Tomlinson, executive director and general manager of the Society of Manufacturing Engineers, sees the skilled worker shortage as an iceberg looming on an uneasy sea.
“We’re just approaching it; we haven’t hit it yet but we know it’s there,” he says. “People are starting to see it. They just don’t know how to deal with it.”
Before companies focus on how to deal with the situation, they need to take a retrospective look to see the trends that have put the manufacturing sector in troubled waters.
Evaluate the factors
While forecasts of a shortage of skilled manufacturing workers first arose in the 1980s, it has been in recent decades that it became reality as the industry evolved from needing low-skilled production-type assembly workers to being highly technology-infused as it follows lean principles.
“If you go on today’s manufacturing floor, it’s extremely high-tech, lots of computers, lots of lasers, lots of robotics, very high-precision, a very clean environment where they’re making some of the advanced aerospace or medical device parts,” Schron says.
Companies who haven’t already heeded that wakeup call need to realize that times are changing.
Technology innovations enabled companies to reduce the number of employees and required higher skills and education levels of remaining workers, says Emily Stover DeRocco, president of The Manufacturing Institute of Washington, D.C., an organization dedicated to improving and expanding manufacturing in America.
The automotive industry, once the sector that provided the lion’s share of jobs in manufacturing, is not as strong as it was a decade ago. Some automotive suppliers did not survive the recession. Many cut their training programs. Those that did survive often diversified into other areas of manufacturing.
“Now there is an increased need to fill the manufacturing jobs associated with aerospace, energy, medical device manufacturing and aspects of transportation,” Tomlinson says.
While many observers acknowledge that manufacturing has led the United States out of the recession, the improvement brings a mixed blessing ? more skilled workers are being needed, but the supply is limited.
“What we’re seeing right now is really a lack of a pipeline, and the disruption is causing us so much pain,” says Jeff Joerres, chairman, president and CEO of Milwaukee-based ManpowerGroup, a work force solutions supplier.
Baby boomers, who have put in their time over the last few decades, are reaching retirement age. U.S. Bureau of Labor statistics estimate that 2.8 million, nearly a quarter of all U.S. manufacturing workers, are 55 or older.
“We are facing a huge replacement requirement for the retiring baby boomers, as well as a huge quality issue in the level of education and skills that are necessary to work in today’s more advanced manufacturing environment,” DeRocco says.
Building up the skilled worker pipeline is taking time because of a number of factors, including a waning interest in mathematics and science fields.
“I think we’ve got a long-term history of not producing enough skilled workers in the area of science and math and technology in this country,” says Ed Hughes, president of Gateway Community and Technical College in Florence, Ky. “We are now seeing some effects of not having students graduate from public and private schools with significant skills in those areas.”
Jim Ferguson, director of training at precision manufacturer Penn United Technologies of Cabot, Pa., agrees.
“There is definitely a skill gap in terms of people’s ability to do basic math at the level we need, which isn’t super high, but certainly, geometry and a little trigonometry are an important part of the package,” he says. “We find very few people are able to pass even a basic aptitude test to be hired.”
Look at it as branding
Companies of any size will likely tell you that branding is important, that image is how people see you ? and correcting an unflattering image takes time and effort.
In an age when innovation occurs regularly and perception is vital to success, manufacturing has been trying to shake off the view that it’s dark and dirty ? to rebrand itself.
“It’s absolutely true that the image and the definition of manufacturing in this country has not kept up with the industry,” DeRocco says.
Indeed, the parents, teachers and counselors who influence students and young people are often given the wrong picture.
“They have an image that either there are no manufacturing jobs or the ones that they know or they think they know are really what they remember as children in their communities,” she says.
Only 30 percent of respondents to the 2010 “Made in America?” survey conducted by Deloitte and The Manufacturing Institute said they would encourage their child to pursue a career in manufacturing ? despite reporting encouraging improvements in their perceptions about the jobs.
The survey reported that respondents feel state and federal leadership, tax rates on individuals and government business policies are the top concerns hampering American manufacturing competitiveness ? and that Americans are less likely to pursue jobs in manufacturing or encourage their children to consider these jobs in the future because of those issues.
In addition, only 22 percent said their school system encourages students to pursue manufacturing careers and only 18 percent said their parents encouraged them to pursue a career in manufacturing.
“Most people in Gen Y out of high school don’t think of manufacturing as a career or as a good option,” says Kika Young, human resources director at Forest City Gear Co. Inc. of Rockford, Ill. “They don’t think of it as glamorous; they think of it as dark and dingy and dirty and aren’t interested in going into that.”
It’s important to break the mold of that outdated image, and some signs of progress are being seen. Appealing to a nobler perception is key to successful image building. So is taking innovative approaches and strategies.
“I don’t think the image is the problem any more,” Tomlinson says. “You see many examples in advertisements, like General Electric’s, that take manufacturing out of the dark and dirty environment,” he says. “The real value right now for the younger generation is that through making things they could change the world. You have to innovate, create and make if you really want to improve everybody’s lives and environment.”
In the end, each level of success builds upon the previous one. For the manufacturing industry, those levels are the employers, workers, educators and economic developers.
“This winning proposition for these sectors has really led to an incredible amount of momentum and support, and not that we don’t have a long way to go, but we think it’s a model that other business sectors can and should be using,” DeRocco says.
SBA loans are available to a wide number of businesses for training and other purposes
There is a common belief about loans guaranteed by the U.S. Small Business Administration that they’re only for small businesses like the corner coffee shop ? and that the loan criteria are very restrictive.
Not so, says Pamela Davis, senior vice president and national sales manager for SBA lending for PNC Bank.
In fact, SBA-guaranteed loans with either fixed or floating interest rates even can be used to retrain employees, and about 98 percent of U.S. businesses would qualify under the definition of small business.
To meet the SBA eligibility criteria, a business must either comply with the Standard Industrial Classification code, found on sba.gov, or alternative size standards based on tangible net worth and average net income.
One of the types of loans available is the SBA Express Program.
“It can go up to $350,000 and can be used for any type of working capital,” Davis says. “It can be reworking of your people, purchasing inventory, if you had to buy computers to help train these people ? everything like that.”
Under that program, loans are guaranteed at 50 percent by the SBA against default. Part of SBA’s flagship 7(a) loan program, the Express Program, offers an accelerated turnaround time and lower interest rates for borrowers.
Businesses turned to SBA loans for longer and more creative terms than conventional bank loans to the amount of $22 billion in 2010. Guidelines were revised in 2009 and 2010 so more businesses could obtain capital to survive and grow.
For businesses seeking larger loans, there is the SBA 7(a) Preferred Lender Program that can go up to $5 million.
“That can be used for a lot of different things,” Davis says. “You have to qualify under prudent lending criteria, but it can be used for literally anything you can think of. You can buy equipment, you can use a portion of it for working capital or an addition to the building or if you wanted to hire more employees because you wanted to send some over into Germany to do processing there.
“Any program that creates jobs in my mind is a great program.”
How to reach: PNC Bank, www.pnc.com
Innovative strategies are aimed at providing manufacturers with skilled job candidates
As the shortage of skilled manufacturing workers continues to worry companies, creative ways to fill the need are on the increase ? and are starting to show signs of progress.
It’s no surprise that candidates with potential are in high demand, enrollment is rising at technical schools and training programs are adding teachers. Competition for students can get intense.
“When we recruit students for manufacturing, it’s the same student that other people are going after for engineering technology, for information scientists ? those types of things,” says Ed Hughes, president of Gateway Community and Technical College. “We think we’re in a better position to compete with them now that we have our new advanced manufacturing center.”
As creative and varied as the approaches are, the common thread is to nurture a future employee whose career pathway is aligned to credentials. Having industry-recognized skills certifications ? like those automotive repair technicians have ? applicable across advanced manufacturing and related fields give employees the opportunities to move among careers rather than be at one job in one industry that may experience a downturn.
“Credentials provide a third-party validation that the individual has the general workplace and the technical skills to succeed in an entry-level job as well as an advancement path within their employment,” says Emily Stover DeRocco, president of The Manufacturing Institute, which conducts efforts in 25 states to deploy certification systems.
Grooming potential workers is starting as early as possible. The Society of Manufacturing Engineers Education Foundation offers a complete K-12 program.
“The foundation puts on over 300 one-week day camps in middle schools and high schools across the county to show the value of math and science in making things,” says Mark Tomlinson, executive director of the Society of Manufacturing Engineers. “The hope is that they then go back into their school lives and consider jobs in the process of making things rather than just jobs in the service sector.”
Foundation scholarships to the tune of $600,000 a year also entice those entering manufacturing, education or educational programs related to manufacturing.
Challenging the traditional “man’s world” of manufacturing is another approach to tap a hidden source of potential workers. A program conducted by the College of Engineering and Engineering Technology at Northern Illinois University in Rockford, Ill., focuses on middle school girls selected by their science and math teachers.
Dividends are in the making. Brian Cluff, vice president of Star SU, a gear-making machinery supplier, hopes that his 13-year-old granddaughter Alexi might follow in his footsteps as a result of her enrollment in the NIU program.
Companies with apprenticeships or training programs that had been cut to save money during the 1980s and 1990s are rejuvenating the practices. Penn United Technologies of Cabot, Pa., an employee-owned precision manufacturer, set up an in-house apprenticeship program that blossomed into a 17,000-square-foot learning facility where employees are trained.
Similarly, Jergens Inc., a Cleveland manufacturer of holding and clamping systems, started a training program for employees that evolved into Tooling University, now used by 1,200 companies to train employees through 400 online classes.
Machine tool manufacturer MAG IAS of Erlanger, Ky., began an apprenticeship program with Gateway Community and Technological College in 2007 that provides 100 percent company-paid tuition to successful candidates.
Even a good, old-fashioned job fair can bring results.
Forest City Gear registered 120 people at the Rockford, Ill., manufacturer’s recent job fair. The company was willing to take unskilled laborers and train them, but only 30 were cleared for interview. A dozen were hired. Four had no skills, five had some skills and experience and three were skilled and needed only minimal training.
Still, it’s reason to hold future such events, says Human Resources Director Kika Young.
“We ended up needing more workers even after that,” she says.