U.S. manufacturers may be losing up to 11 percent of their earnings annually as a result of increased production costs stemming from a shortage of skilled workers, according to a new study from Accenture and The Manufacturing Institute.

 

That was interesting to see but the growing scale of the issue is surprising. The study, “Out of Inventory: Skills Shortage Threatens Growth for U.S. Manufacturing,” explains 39 percent of the 300 U.S. manufacturing executives surveyed described the shortage of qualified, skilled applicants as “severe,” and 60 percent of them report it has been difficult to hire the skilled people they need.

 

Furthermore, the report notes when manufacturers are unable to fill roles, overtime, downtime and cycle times increase; more materials are lost to scrap; and quality suffers. More than 70 percent of the respondents reported at least a five percent increase in overtime costs, and 32 percent reported an increase of 10 percent or more. As manufacturers used overtime to maintain base production levels, 61 percent said their downtime increased by at least five percent because they lacked enough people to run and maintain the equipment. Cycle times also increased at least five percent at 66 percent of the respondents’ companies.

 

“The skills shortage facing U.S. manufacturers is apparent from this report and its severity can be measured in dollars,” says Matt Reilly, senior managing director, Accenture Strategy, North America. “U.S. manufacturers’ plans to increase production and grow manufacturing roles over the next five years are positive indicators, but they are likely to exacerbate the problem. Given today’s limited pool of relevant talent, companies may have to forget the notion of finding the perfect candidate. Instead, they should look for candidates with more generalist skills, and develop them to match the specific work that needs to be done.”

 

Successful companies, according to the report, spend training dollars as part of an overall strategy designed to address critical skill shortages, with clear objectives set for the short-, medium- and long-term.  Based on Accenture’s ongoing research, the report suggests manufacturers take steps that include: maintain a current inventory of in-house skill sets and regularly map that against current and anticipated skill needs to inform talent strategy as well as training investment decisions; leverage digital technologies to make skills training available to employees as needed; and incorporate nationally-recognized, certified training programs to build standardized skill sets.

 

More importantly, I believe, the study suggests manufacturers engage with educators at colleges, community colleges, trade schools and high schools to build a pipeline of future skilled workers, influence curricula and lend employees to help teach specialized skills to potential manufacturing recruits of the future. Indeed, manufacturers across the U.S. are targeting schools and colleges to let young people know manufacturing is a valid career path, and that manufacturing plants aren’t dark and dirty places.

 

Another interesting option is apprenticeships. Last month, the Obama administration announced $100 million in federal grants for creating or expanding apprenticeship programs. Apprenticeships are “underappreciated and underutilized,” says U.S. Secretary of Labor Thomas E. Perez in an article in the Buffalo News.

 

Perez says that when he hears a parent say, “I don’t want my kid to do an apprenticeship; I want my kid to go to college,” he points to the program at Tampa Electric in Florida, which pays apprentices about $32 an hour as they learn how to maintain and repair electrical power systems and equipment. The apprentices can earn as much as $70,000 as full-time employees.

 

“There’s a bright future in America for people who work with their hands,” Perez says. “We need to do a better job of marketing it and explaining to parents and others that these jobs are tickets to the middle class.”

 

Has your company experienced a skills shortage? If so, what is it doing about the problem?