Better training, breaking down barriers would help solve worker shortages

The owner of a small landscaping business contacted my office recently because he could not find enough young people willing to do the type of labor required. He wanted to know about community resources to locate potential employees.

I’ve heard the same concern from local manufacturers, Ohio farmers and construction employers. While the economy is growing, there is still a need for people to cut lawns, run high-tech factory robotics or install electrical wiring.

The reasons for this are numerous. During the Great Recession, Ohio lost 166,000 manufacturing jobs — a staggering 20 percent. This is in addition to the decades-long erosion of American manufacturing due to increased global competition.

Those losses hardly engender confidence in future job security. Moreover, the health care, financial services and technology sectors continue to expand and offer physically less demanding career options. While a number of jobs in those fields offer high salaries, many pay less than a living wage — with no greater prospects for long-range job security.

Policies and programs needed

We do have young people eager to work and willing to accept jobs. What we need are improved policies and programs to match our youth with the training they need and employers with capable, job-ready applicants. We also need to focus on barriers that stand in the way of successful employment.

Millennials who are mired in student debt are less interested in owning a car than in previous generations. Further, low income households often struggle to afford one. According to the census, more than 41,000 Cleveland households in 2012 had no vehicle available. Consequently, thousands of workers use other means to get around — by foot, by bike or public transit.

Without viable transportation to cover long commutes, however, some attractive job opportunities are unattainable for workers. That is why I strongly support federal initiatives that invest in mass transit and transportation infrastructure.

We must also consider expanding high school and post-secondary level vocational training and updating perceptions about career opportunities available in 21st century manufacturing. Since the recession, smart manufacturing technologies have been increasing American companies’ competitiveness in overseas markets.

Manufacturing still a key

Over the last five years, manufacturing has grown twice as fast as the economy overall and accounts for a majority of U.S. exports.

While it’s not expected to regain its ranking as the largest employer in Northeast Ohio, manufacturing remains a critical component of our region’s economic well-being. I have been a consistent advocate of strengthening workforce development programs and believe public-private partnerships can maximize opportunities for businesses. I also encourage employers and trade organizations to provide more internship and apprenticeship opportunities.

The Department of Labor recently announced $100 million in competitive apprenticeship grants to develop innovative, high-quality registered apprenticeship programs. These are proven to reduce turnover costs, generate highly-skilled employees and yield higher productivity, as well as a more diverse workforce, and would apply to more than 1,000 occupations.

The sooner we put smart initiatives to work, the better it will be for local businesses and communities.

U.S. Rep. Marcia L. Fudge, D-11, is now serving in her third consecutive full term. She was elected in a special election in November 2008, re-elected in the general election that was held that same month and most recently in 2012. In 2012, she was unanimously elected by her colleagues to serve as chairwoman of the Congressional Black Caucus in the 113th Congress.

Mentorships, upskilling may offer hope in manufacturing labor shortage

After enduring a protracted downturn and shedding 5.7 million jobs, 33 percent of their workforce, American manufacturers are leaving money on the table — and it’s ironic that a labor shortage would force them to do that.

A recent study from Accenture and The Manufacturing Institute reveals that companies may be losing up to 11 percent of annual earnings due to rising production costs stemming from a dearth of skilled workers.

Engineers, IT professionals and skilled tradespeople such as mechatronics technicians are hardest to find says Amy Cell, senior vice president of Talent Enhancement for the Michigan Economic Development Corp.

“We’re seeing rising wages and overtime and a potential impact on quality due to increasing turnover as new hires struggle to assimilate into the manufacturing environment,” she says.

An archaic image and outdated talent management practices are just some of the reasons why manufacturers are behind the eight ball when it comes to recruiting a new breed of factory worker who possesses technical, communication and math skills.

Nearly 75 percent of companies are reporting a moderate to severe shortage of skilled resources, and unless rectifying steps are taken, millennials will continue to seek greener pasture in places like Wall Street and Silicon Valley.

Here are several proven short-term strategies for closing manufacturing’s talent gaps.

Win head-to-head recruiting battles

In a competitive marketplace, it’s imperative to win direct competitions for available talent. Science and engineering degrees in the U.S. have increased by 19 percent since 2009, which should be good news for manufacturers.

Unfortunately, midsize manufacturers are getting outhustled by large companies and high-tech firms who dangle sexy projects, internships and job offers in front of science, technology, engineering and mathematics majors during their sophomore and junior years.

“Midsize manufacturers start too late,” says Jim Adams, vice president and partner of the Engineered Products and Services Practice at Strategy&. “By the time they get to campus in February or March, the top seniors are taken and they’re fighting over the leftovers.”

Providing guest lecturers, hosting student projects and networking with professors are low-cost ways to build relationships with budding professionals and preview their potential.

Manufacturers need to re-engineer their career track, professional development programs and communications strategy if they want to attract millennials, says Matt Mani, vice president and partner with Strategy&.

“Manufacturers take a fragmented approach to career development and that’s hurting their ability to compete for younger workers,” he says. “It’s not just an HR problem; it’s holistic.”

For instance, manufacturers are having a hard time attracting finance majors Adams says. Meanwhile, G.E. Capital is touting rotational training programs, lateral moves, stretch assignments and promotions based on performance instead of time and grade. Consequently, the financial powerhouse has no problem attracting the best and the brightest.

Manufacturers need to involve younger professionals in campus recruiting, update their image and shift their engineering model to attract and develop STEM graduates, Mani says.

Since millennials are more likely to hunt for work on social media, communicate by text message and are drawn to socially responsible employers, manufacturers need to implement some major shifts in their recruiting strategies to appeal to this idealistic segment of the labor market.

Younger workers are looking for more than a paycheck, they want to make a difference, and most importantly, they want to work for a company whose values match their own. Involving young, energetic professionals in campus recruiting can help to change manufacturing’s staid, dated image.

Mike Baach carries on The Philpott Rubber Co.’s tradition of self-determination


“In business, if there’s a global economic crisis, a U.S. economic crisis, you can’t control what’s going on in industry, but you can control how you react to it,” says Mike Baach, president and CEO of The Philpott Rubber Co.

This philosophy of self-determination has been guiding how the company navigates market challenges throughout its 125-year history. And its longevity comes from the basic premise that the company can’t be fearful of what it can’t control.

“What we are going to be doing is figuring out how best to react to what’s going on around us,” he says.

Following that principle, Baach has moved the once risk-averse company into new and developing markets, ensured its training program is robust and has continued to chip away at the advantages of foreign competition. It’s the latter that has required a particularly innovative rethinking of workforce utilization.

Shared responsibility

“One of the smartest things the company did for certain products was to go out and find partners to help both companies reduce their cost of labor,” Baach says.

He’s referring to a program in which Philpott took some of its equipment that manufactures higher volume products and placed it with “host partners” so the equipment actually resides at partners’ facilities.

“Rather than our having labor sitting there, maybe waiting for the job that may never come, we rent the labor from the host company,” he says.

That results in an incremental utilization of the host companies’ employees on Philpott machines, spreading the companies’ overhead over bigger numbers and leading to near 100 percent utilization of labor for Philpott.

Improving workforce utilization is one way to stay competitive. Another is to expand into new areas of business. For Philpott, that’s the shale oil and gas business.

“We identified the oil and gas area as being one that would help us resist the downturns in the economy,” Baach says. “Cars don’t come off the road, there are fewer that are out there, but demand for gasoline isn’t going to go away.”

The equipment Philpott utilizes in the shale fields is specific to the company, which means training people to use it falls on its shoulders.

“There’s no college on the planet that will teach our people how to operate this specialized equipment that we have,” Baach says.

Acquired skills

“Philosophically we can’t wait for government to do things; companies have to come together and work together in order to do similar things,” he says. “The answers are within our economy, within entrepreneurs, within capitalists. We can’t just complain about the present; we have to do something.”

Training in the shale fields is accomplished through competent management, Baach says, and that manager is Jeff Rog, vice president of Philpott Energy and Transportation, a subsidiary of Philpott Co., where he serves as the company’s corporate vice president of sales and marketing. Working with field crews is his responsibility.

“We daisy-chain, if you will, through our management team — our field management — as well as the hands that are on the site in order to train the people as to what they need to do on the site when they’re there,” Baach says. “We don’t let them out there by themselves until we are confident that they’re trained.”

Philpott’s growth in the shale gas area now accounts for more than a third of the company, and the field can only expand.

“It’s one that we believe is going to be one of the foundations of the company to make us recession resistant.”

Fear of fear

When Baach took the helm of Philpott in 2007, he saw a company that was profitable, but risk averse. That fear of failure was something that had to be addressed.

“Fear of failure is absolutely, positively one of the worst things that can happen. It’s paralyzing to a company. So what we want people to fear is fear,” Baach says.

“And you know what happens when you do that? If you give them confidence, they become creative. And then success breeds success. And it gets easier for management over time on that side of things because people start motivating each other.”

Baach says the company has always had great potential, but its employees had to understand that they had the creativity to take Philpott to the next level. He has made it his responsibility to motivate employees, finding the right mix of incentives to ensure employees are helping the company achieve its strategic objectives.

“It’s in the people, they just have to have the confidence in themselves to make new things happen,” he says.

How manufacturers manage workers’ compensation, disability costs

Mike Stankard, managing director, Industrial Materials Practice, Aon Risk Solutions

Mike Stankard, managing director, Industrial Materials Practice, Aon Risk Solutions

Joe Galusha, managing director, leader for casualty risk consulting, Aon Risk Solutions

Joe Galusha, managing director, leader for casualty risk consulting, Aon Risk Solutions

Middle market manufacturers often think workers’ compensation and disability are uncontrollable costs items. However, it’s more important than ever to change this way of thinking.

“Workers’ compensation is a significant variable cost element for manufacturers,” says Joe Galusha, managing director and leader for casualty risk consulting at Aon Risk Solutions. “It’s an area where controlling workplace injuries and their associated costs can actually become a competitive advantage.”

“We’re coaching our clients to take more responsibility over workers’ compensation and disability prevention, as well as claim management,” says Mike Stankard, managing director, Industrial Materials Practice, at Aon Risk Solutions. “If they do, there’s a significant opportunity to lower costs, and with that comes boosts in productivity, morale and many intangibles.”

Smart Business spoke with Galusha and Stankard about why workers’ compensation and disability management is crucial as well as cost containment and reduction strategies.

What’s the manufacturing landscape today?

Post-recession manufacturing activity is increasing, partially due to repatriation. But with that comes payroll growth, and then typically growth in workforce costs, which for manufacturing can largely be workers’ compensation and disability. There’s also negative trends related to the profile of the typical American worker that will compound the current challenges, so manufacturers that don’t put more effort into managing injuries and related costs may be at a disadvantage.

What workforce demographic trends make this management so essential?

About one-third of adults and almost 17 percent of youth are obese, according to the Centers for Disease Control and Prevention. Obesity drives comorbidity and complexities in an individual’s health, creating a link to the cost of care and recovery from injury.

At the same time, workers 55 and older are expected to be nearly 20 percent of the workforce within a year. A number of physical impacts — decreased strength, more body fat, poorer visual and auditory acuity, and slower cognitive speed and function — come with aging and affect a workers’ ability to recover from injury. People over 60 also are much more likely to be obese.

These trends not only affect employment-related injury costs, but also productivity and business continuity costs when workers are absent for non-occupational injuries.

How can big data be used as a tool here?

There’s never been as much data available for a nominal cost — the challenge is leveraging it. You need the right data at the right time to compare it to the right things. When benchmarking against other companies or applying data sets to your environment, jurisdictions, evaluation base and the age of the benchmarking sources are important to ensuring your data is pure.

Although there are external sources, many times third-party administrators (TPA) or insurance carriers have already done a tremendous amount of data mining and predictive modeling. Businesses just need to know it’s there and to start using it to drill deeper into the cause of loss and the cost drivers of workers’ compensation.

What are some best practices for managing workers’ compensation and disability?

The secret is preventing injuries and creating a healthy workforce. But injuries will occur, so focus on responding quickly with the right amount of effort at the right time on the right claim. Predictive modeling can help identify the types of claims likely to become more costly.

Understand what’s driving your costs by doing a baseline assessment of cost drivers and utilizing benchmarking to drill down. Then, align the incentives of all internal and external parties — TPA, carrier, broker, and vendors involved in loss control and claims management — to focus on the cost-driving elements, using a dashboard to monitor performance. This creates a sustainable loss control and claims management effort.

Many organizations need to align all stakeholders — human resources, finance, legal, operations, etc. Also, combine the efforts of health and wellness with workers’ compensation and safety. A streamlined approach creates a healthier workforce, reducing injuries and their costs.

Joe Galusha is a managing director, leader for casualty risk consulting at Aon Risk Solutions. Reach him at (248) 936-5215 or [email protected]

Mike Stankard is a managing director, Industrial Materials Practice at Aon Risk Solutions. Reach him at (248) 936-5353 or [email protected]


Hear more expert advice about workers’ compensation and disability management in manufacturing by visiting our archived webinar.


Insights Risk Management is brought to you by Aon Risk Solutions


U.S. manufacturing posts best quarter in 2 years: Markit

NEW YORK, Mon Apr 1, 2013 — U.S. manufacturing growth picked up in March as new orders increased and hiring quickened, closing out the best quarter for the sector in two years, a survey showed on Monday.

Financial data firm Markit said its U.S. Manufacturing Purchasing Managers Index rose to 54.6 last month from 54.3 in February. A reading above 50 indicates expansion.

Output increased, though the rate of growth slipped to 56.6 from 57.3 in February.

Overall, however, the index averaged 54.9 between January and March, above the 52.6 average recorded in the fourth quarter of 2012 and the best quarterly showing in two years, Markit said.

“The sector will have provided a firm boost to the economy in the first quarter, with output possibly growing by as much as 2 percent compared to the final quarter of last year,” said Chris Williamson, Markit’s chief economist.

Domestic demand grew steadily at the same rate as the prior month, while new export orders increased after contracting slightly in February.

The pace of hiring, however, increased, with the employment sub-index hitting 54.6 compared to 53.5 the prior month. March’s pace was swifter than the average for all of 2012.

Driving global sales for manufacturers

Andrew Dorn, Industry Leader, Information Intensive Business, Acxiom Corporation

When Andrew Dorn, Industry Leader, Information Intensive Business, Acxiom Corporation, was recently researching the top manufacturers in the United States, one topic kept coming up — the strong growth expectations focused on the world’s emerging markets. With the economies of the U.S. and Europe in flux, Dorn felt that, now more than ever, manufacturers need to be attentive to those emerging markets.

“The world is now flat,” says Dorn. “Competition comes from everywhere, so manufacturers need to be everywhere.”

Because of that, Acxiom has partnered with Smart Business to present a special one-hour webinar: “Driving Global Sales for Manufacturers: Why global growth for manufacturers is more important than ever.”

During the webinar — on Wednesday, September 19 at 1:00pm EST — we will discuss why global sales for manufacturers is critical, what factors should be considered in developing or refining the  international strategy, and, finally, present a roadmap that can be employed to optimize chances for success.

Featured panelists will be Zia Daniell Wigder, Vice President and Research Director, Forrester Research; Jennifer Barrett Glasgow, Global Privacy and Public Policy Executive, Acxiom; and Michael Biwer, Managing Director, Acxiom.

“As you enter the global market, it is imperative you understand the privacy laws in each country as they are quite complex and some are very stringent, for example, having criminal penalties for some violations,” says Barrett Glasgow.

Other topics to be discussed include:

  • How to determine which countries to enter and what data to gather to understand regional customer requirements
  • Recommended approaches to building country-specific strategies that can help facilitate smooth transitions, lowest possible cost-of-entry, and consistent performance
  • Considerations for navigating the complex web of country-specific data protection and privacy laws companies must adhere to in their efforts to connect with customers and prospects
  • Best practices used by leading companies that have successfully entered new markets

“The U.S. and European economies are still recovering and the balance of growth is constantly shifting,” says Dorn. “For example, China and Brazil have been experiencing strong growth. They are encountering a maturity curve, but that doesn’t lessen the importance of the issue — manufacturers need to be diversified and have a presence in all major world markets.”

The webinar, “Driving Global Sales for Manufacturers: Why global growth for manufacturers is more important than ever” will be held at 1:00 pm EST on Wednesday, September 19.

Click here to register for this free event!

U.S. factory activity still slow in August: Markit

NEW YORK, Tue Sep 4, 2012 – The pace of growth in manufacturing remained sluggish in August as exports declined for a third straight month and firms were slow to add new workers, a survey showed on Tuesday.

The final Markit U.S. Manufacturing Purchasing Managers Index stood at 51.5 this month, below a preliminary estimate of 51.9. A reading above 50 indicates expansion.

A slight increase in output and overall new orders helped nudge the index above 51.4, where it stood at the end of July.

But the pace of growth was still one of the weakest since the sector stopped shrinking in October of 2009. New export orders were a drag on activity, as slow or negative growth in Europe and elsewhere sapped foreign demand for U.S. products.

Mark Wingham, Markit economist, said expansion in the sector was “only modest” in August. Without a significant jump in activity next month, “third quarter manufacturing growth will likely be one of the weakest since recovery began.”

Hiring in August was the slowest it’s been since December 2010, which Dobson said partly reflected weak overall trends in output and new orders. The index’s employment component fell to 52.4 from 52.7 in July.

The U.S. government will report employment data for August later this week, and the median forecast of economists polled by Reuters is for a gain of 120,000 jobs, down from 163,000 in July.

Some analysts suspect a number below 100,000 could provoke the Federal Reserve to try to boost overall growth with another round of monetary stimulus when it meets in mid-September.

How manufacturing companies can win the battle by leveraging these innovative tips

Karen Burns, Assurance partner, Sensiba San Filippo LLP

The current economic climate presents significant challenges for manufacturers in the San Francisco Bay Area. Increasing foreign competition, price pressure from weakened demand, tight capital markets and the rising cost of raw materials have combined to create a particularly competitive landscape. However, forward-thinking manufacturers are turning these challenges into opportunities — and using these challenges as a springboard for operational improvement and increased profitability.
“There are many innovative ideas for growing your manufacturing business,” says Karen Burns, assurance partner at Sensiba San Filippo LLP and co-founder of the East Bay Manufacturing Group.
Smart Business spoke with Burns about what manufacturers can do to strengthen their business, such as controlling costs and shoring up financials, best practices for hiring and retaining top talent, and the value of networking effectively.

What are some ways a manufacturer can control rising costs?

Reduce market uncertainty. Consider entering into long-term contracts to stabilize price fluctuation for raw materials. Long-term contracts with customers also can mitigate market swings, albeit negotiated pricing may initially result in reduced margins.
Make safety a priority. Accidents can be costly for your business and your employees. Implementing improvements can decrease downtime and increase your yield.
Encourage innovation by empowering and motivating employees to make product and process improvements throughout the organization. This will lead to your business running smoother and motivating employees to stay longer, which reduces the costs associated with training new hires.
Consider near sourcing. You can gain more control over your manufacturing processes and costs by using suppliers closer to your manufacturing facility. You’ll reduce your shipping costs, too.
Additionally, it’s important to find out what your customers value and focus on delivering what matters to them, then trim costs in those areas that customers do not value. Communicating with your customers is critical. Discussing costs and anticipated cost increases will help strengthen your relationship with them. You can then work together to increase and decrease prices as commodities fluctuate.

Why is it critical now for manufacturers to ‘shore up’ their financials?

Banks and financial institutions are slowly loosening their credit requirements. Venture capitalists and private equity groups also are beginning to invest again. Congress has even established programs that encourage lending to small businesses, such as the Small Business Lending Fund and State Small Business Credit Initiative. Having your financial house in order could make or break your opportunity to secure funding.
Further, merger and acquisition activity is on the rise again. While many business owners do not have a plan in place to sell their company, unsolicited offers are becoming more common. Strategic acquisitions by competitors, vertical integrators and those who have had money sitting on the sidelines for too long create the need to be prepared for this possibility. Ensure your financials are ‘auditable’ and that you have the proper internal controls in place to maximize opportunities such as these.

What advice can you give to business owners for hiring and retaining top talent?

Create a culture that values the whole employee. While pay is important, it is not always the most important motivator. Today’s generation of employees wants it all — good pay, advancement and, most of all, the opportunity to do new and exciting work and have fun doing it. A passionate business leader who treats his or her employees like family and gives back to the community will find employees more willing to follow in his or her footsteps.
Reward innovation at all staff levels and recognize employees for their dedication and achievement. Develop a total rewards strategy that includes compensation, benefits, performance and recognition, and career development opportunities. This will attract the best and brightest, which in turn will help to drive your firm’s brand in the market.

The most competitive edge out there can often be a good network. What strategies can you share with manufacturers on networking?

Networking is necessary, yet can often be a daunting task for many business owners. When an owner starts a business, he or she is usually very good at making his or her product and developing enhancements. While marketing is often not his or her forte, a few simple tools and a little bit of practice can make the most awkward networker into a pro.
Practice your elevator pitch. No one knows your business better than you. Successful networkers practice in advance the answer to, ‘What do you do?’ so that it rolls off the tongue effortlessly. Be brief in your answer to enable others to seamlessly introduce you to others at an event.
Attend interesting events that are a part of your sector. Business events are advertised in newspapers, trade groups, local LinkedIn groups and law firm websites. While the number of potential events may seem overwhelming, business owners who distill their calendar to events with relevant topics will remain motivated to network over time. Attend events that attract a number of prospects. Also keep an eye out for centers of influence — those who can refer business to you or enhance the success of your business.
Create a post-networking communication plan. After an event, successful business owners make the most of their new contacts — and their time — by implementing a pre-set follow-up plan. For business prospects, an email requesting an in-person meeting is appropriate, while many folks you meet will suffice with a reach out on LinkedIn. Inviting centers of influence to lunch or coffee is also an excellent investment in time.

Karen Burns is an assurance partner at Sensiba San Filippo LLP, a regional CPA firm based in the San Francisco Bay Area. Reach her at (925) 271-8700 or [email protected]

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How to manage the risks facing industrial and materials industries

Mike Stankard, Managing Director, Industrial Materials Practice Leader, Aon Risk Solutions

As labor rates rise in China, shipping costs increase, the dollar weakens and supply chains grow more complex, many industry analysts are suggesting U.S. manufacturing activity will increase over the next five years.

And while some risks such as supply chain failures may be reduced if manufacturing firms are closer to operations and manage them more effectively, other risks — such as medical cost inflation for workers’ compensation and nonoccupational injuries — are on the rise, says Mike Stankard, managing director and  Industrial and Materials Practice leader at Aon Risk Solutions.

“High-frequency, low-severity type risks, such as workers’ compensation or fire prevention, need to be managed on a day-to-day basis to prevent and mitigate losses,” says Stankard. “Businesses simply can’t overlook those because they face them every day. They also need to control losses that would prove catastrophic, such as large liability claims or the financial impact from natural disasters. Those risks can be managed with insurance because they are largely unpreventable, and businesses have an obligation to protect shareholders’ capital.”

Smart Business spoke with Stankard about how to manage risks facing the industrial and materials sector.

What are some risks that can impact the industrial and materials sector?

Aon Risk Solutions recently conducted a survey of business leaders in the industrial and materials sector to gauge their concerns, which included the economic slowdown — in both the U.S. and abroad, uncertainly surrounding raw materials and commodity pricing, and future innovations to keep up with customer needs.

In addition to the broad risks that drive macroeconomic issues affecting supply and demand, leaders must consider specific risks and manage them on a day-to-day basis to ensure efficient and effective execution of their business plan. In this area, risks include business interruption and supply chain failures, keeping up with emerging market opportunities and the risks and rewards of globalization.

What are some of the major drivers of risk?

The recession has had a profound impact on manufacturers that were forced to quickly adjust to changing demands for their products. The challenge was that no one knew just how low the economy was going to go. Some manufacturing employers reduced their work force by 40 to 60 percent and closed plants, although some of those reductions are starting to reverse. Many companies, especially automotive, used bankruptcy as the ultimate risk management tool to make long-term fixes to their macro-business models in the areas of labor contracts and raw material purchasing, shutting down inefficient plants and dropping marginal product lines.

Escalating health care costs continue to affect the work force both in terms of group medical insurance costs and workers’ compensation. When workers are injured, an employer is affected by wage replacement, medical costs and productivity leakage.

There’s also been reaction to all of the production moved offshore in the past 10 years. In 2011, natural disasters, such as the earthquake and tsunami in Japan, flooding in Thailand and earthquakes in New Zealand and Chile, put stress on the global supply chain, forcing companies to re-examine the vulnerabilities around their supply and customer chains. Many are now considering whether they were shortsighted when they moved production to low-labor rate countries that could potentially result in larger issues than just how much per hour they are paying employees.

How can mid-sized employers minimize their risks?

Mid-sized employers may want to consider increasing workplace safety to avoid injuries that may result in expensive medical costs. As not all accidents are preventable, effective claims management practices on post-accident behaviors can help control medical costs and get workers back on the job as quickly as possible, even if it’s for light duty work.

When looking at the supply chain, manufacturers need to re-examine their supplier base to look for potential bottlenecks, single-source suppliers that could cause problems down the road. To minimize the risk, contingent business interruption coverage insurance around supply chain failure is available, which can cover loss of revenue.

However, it is important to note that underwriters have changed their business practices to limit their exposure in this space. They want to know about your suppliers — where they are located and how much business you do with them. For example, they might reduce your limits or restrict coverage so it only applies to direct suppliers rather than indirect ones, even though both can have just as much impact on your business.

Once risk management practices are in place, how can you measure them for effectiveness?

Your insurance broker, who optimally deals with your industry, knows it well and works with your peer companies, should be able to provide best practice benchmarks and performance metrics that can be continually updated. They can give you guidance on how to prevent and minimize claims as well as advice on the quality of insurance, how much you should purchase, how you should measure and value business interruption losses, etc. For example, your broker could perform a comprehensive evaluation of your workers’ compensation processes and losses, analyzing your environment and all of the losses you had on a granular basis. After determining the root cause of those losses, the broker would make recommendations such as ergonomic corrections, improvement in communications around losses and reporting lags. These kinds of precise adjustments and the best practices associated with them could add up to millions of dollars in savings over time.

Mike Stankard is a managing director and Industrial and Materials Practice leader for Aon Risk Solutions. Reach him at  (248) 936-5353 or email [email protected]

Please visit to download a copy of the 2012 U.S. Industrial and Materials Industry Report.

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