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2015

As bad as it may be, the manufacturing skills gap is only going to get worse, according to the findings in a new report.

 

In “ The Skills Gap in U.S. Manufacturing: 2015 and Beyond,” authors from Deloitte and The Manufacturing Institute explain that over the next decade, nearly three and a half million manufacturing jobs will likely need to be filled but the result of the skills gap will be that two million of those jobs will go unfilled. There are two major contributing factors to the widening gap: baby boomer retirements and economic expansion. An estimated 2.7 million jobs are likely to be needed as a result of existing workforce members retiring, while 700,000 jobs are likely to be created due to natural business growth, according to the report.

 

Other significant factors, such as the loss of embedded knowledge due to movement of experienced workers, lack of STEM (science, technology, engineering and mathematics) skills among workers, and a gradual decline of technical education programs in public high school, will compound the labor shortage. Perhaps the largest challenge, though, is a negative image of the manufacturing industry among younger generations. Indeed, in a poll conducted by the Foundation of Fabricators & Manufacturers Association, 52 percent of all surveyed teenagers said they have no interest in a manufacturing career, the Deloitte and The Manufacturing Institute report notes. What’s more, of the 52 percent of the respondents who have no interest in manufacturing, nearly two-thirds (61 percent) say they believe a manufacturing career entails a “dirty, dangerous place that requires little thinking or skill from its workers and offers minimal opportunity for personal growth or career advancement,” the report continues.

 

CEOs and manufacturing executives recognize that talent-driven innovation is critical for competitiveness, so they also realize that a worsening talent shortage would have significant impact on companies’ growth and profitability. For example, 82 percent of executives responding to the Skills Gap survey indicated they believe the skills gap will impact their company’s ability to meet customer demand, and 78 percent believe it will impact their company’s ability to implement new technologies and increase productivity, the report notes. Furthermore, the executives also indicated the skills gap also impacts the ability to provide effective customer service (cited by 69 percent of the respondents), the ability to innovate and develop new products (62 percent), and the ability to expand internationally (48 percent).

 

It should be noted that many manufacturers do engage in initiatives that promote the industry as a viable career choice, as a means to address perception issues. For example, more than 1,600 manufacturing events, with an estimated 250,000 attendees, were hosted as part of Manufacturing Day, the report notes. The efforts’ mission is to increase positive perception of the industry and ensure ongoing prosperity of the industry, which is certainly something the industry must do to attract the number and level of talent required for the future.

 

Unfortunately, there isn't a silver bullet that can eradicate the skills shortage. Instead, it seems a combination of strategies must be employed in concert across the industry. For instance, the U.S. federal and state governments must continue and increase their focus on improving the education system and businesses must do their part to support the effort, the report notes.

 

However, the Deloitte and The Manufacturing Institute authors also believe executives at manufacturing companies must rethink their talent sourcing and recruiting strategies to attract new employees, improve candidate screening practices, and define clear competency models and role-based skills requirements. They also need to invest in internal training and development, and engage with local schools and community colleges. None of these solutions on their own will close the gap, but together, manufacturers, academia, communities and government can provide a foundation to mitigate the skills gap over time, the authors write.

 

What are your thoughts on the manufacturing skills shortage? Do you agree with the assessment by the report authors from Deloitte and The Manufacturing Institute?

Although negotiators for the International Longshore and Warehouse Union and the Pacific Maritime Association, which represents shipping companies and port terminal operators, reached an agreement last Friday evening, the issue is far from settled.

 

For one thing, the five-year agreement was between negotiators who don’t have the authority to reach a final deal—the full membership of both sides must vote. The International Longshore and Warehouse Union’s (ILWU) 13,000 voting members may make their decision in April, however the timing has not yet been decided. The maritime association has not said when it expects its members to vote either.

 

In the meantime, work did begin at nearly all West Coast ports this week, as crews began to load and unload waiting cargo ships. The exception Monday was the Port of Oakland, where problems persisted. At that port, the issue was what port spokesman Mike Zampa called a “temporary shortage of experienced crane operators,” an AP story reported. He said at the time the port officials expected experienced crane operators to return soon.

 

Operations at the other West Coast ports, from Seattle to Southern California, appeared to be back to normal. It’s important to note though, that restoring the flow of goods will take weeks—and most likely three months at the Port of Los Angeles, which is the nation’s largest port.

 

That’s because there is such an enormous backlog of containers. Put in a line, the cargo containers sitting on ships off the ports of Los Angeles and Long Beach on Monday morning would stretch 731 miles, according to the AP article. There are smaller, though substantial, backups in San Francisco Bay and Washington’s Puget Sound as well.

 

“We’re estimating anywhere from four to eight weeks before we can get past the backlogs,” Lee Peterson, a spokesman for the Port of Long Beach said in an article in USA Today. “We’ll be running two shifts a day.”

 

That backlog is the result of two main causes. As the contract dispute wore on, ILWU workers allegedly began slowing their work. The companies that operate marine terminals responded by locking out many workers. The consequence was that while major ports never closed fully, the work stoppages created the container backlog.

 

What’s to stop all that from happening again in five years? Well, nothing. Unlike most unions in the U.S., the longshoremen have actually become more powerful over the last few decades of growing trade because they increasingly control the movement of a larger percentage of the economy. What’s more, the threat of business interruption is the only thing that gives a union leverage, so it would seem likely the same situation could appear when the proposed contract is up—if it’s agreed to this spring.

 

On the other hand, that’s not to say the majority of goods coming into or leaving the U.S. must go through the West Coast ports, because there are other options. For instance, ports in Canada and Mexico are working to deepen harbors so they too may attract Pacific Rim business. Furthermore, with the widening of the Panama Canal project nearing completion, Gulf Coast and East Coast port authorities will certainly try to lure cargo shipments that are eventually headed their way to consider using their ports in the first place, in which case they could simply bypass the West Coast ports altogether.

 

What are your thoughts on the supply chain disruptions at the West Coast ports? Have the ports become a risk that now must be considered?


As the West Coast port labor dispute wears on, cargo companies have now taken the unusual tactic of going straight to West Coast dockworkers with what they call their “last, best and final” offer in a contract crisis that has choked off billions of dollars in international trade, an Associated Press (AP) story reports.

 

The employers—in a move which most likely will infuriate union leaders negotiating behind closed doors under a media blackout—distributed letters with the contract offer to rank-and-file longshoremen at 29 ports from Los Angeles up into Washington state. It detailed a third, comprehensive contract offer the employers made Feb. 12, which is more recently than has been previously disclosed, AP reports.

 

It would seem the employers hope union members will support the offer and then pressure their negotiators to accept it. The letter explains the offer includes wage and pension increases and the maintenance of low-cost health benefits, according to AP. Its “last, best and final offer” language is significant, AP notes, because it may lay the groundwork for the declaration of an impasse and a full lockout of workers by employers.

 

U.S. Labor Secretary Tom Perez joined the San Francisco negotiations for the first time on Tuesday, urging the parties to “come to an immediate agreement to prevent further damage to our economy,” reports a Reuters story. In a show of just how far tensions are escalating, also joining the talks on Wednesday were U.S. Commerce Secretary Penny Pritzker and Los Angeles Mayor Eric Garcetti, whose city is home to the nation’s busiest cargo port and neighbors the second largest cargo hub at Long Beach.

 

The labor dispute has had a ripple effect on supply chains. Japan’s top three automakers said yesterday that the West Coast port difficulties have had an impact on their North American production. Honda said it was reducing output at four plants in the U.S. and Canada by a total of 20,000 units this week—primarily of its Accord and Civic models—and added that a decision would soon be made on further production cuts. The company also has begun shipping cargo by air to avoid port difficulties.

 

Toyota also said this week it too is now resorting to airlifts and changing shifts to keep production moving. Finally, Nissan says there has been “some impact” on its North American operations, and that it too has started limited use of air freight to deliver parts from countries in Asia to the U.S.

 

Some estimates say that relying on air cargo rather than seaborne shipments results in a cost that may be five or more times more expensive.

 

On the other hand, Detroit automakers are not experiencing any “significant” problems in shipping or production due to labor disputes at West Coast ports, the Detroit News reported last Friday. Officials for General Motors, Ford and Fiat Chrysler Automobiles NV on Friday each told the paper that their respective companies have either made alternative arrangements for shipping or are not experiencing any major shortage of parts or shipping problems.

 

“With the strong support of our suppliers, carriers and manufacturing sites, we’ve adjusted buffers and established alternate ship contingencies,” GM spokeswoman Freda Agboka wrote in an email to The News. “In some instances, additional cost occurs because of premium freight.”

 

While the U.S. auto companies may not yet notice a “significant” problem, the West Coast port labor strife is costing them time and money, nonetheless. The Japanese companies’ tactical shift to rely more on air cargo and to adjust production shifts in North America will catch up to the bottom line eventually.

 

Regardless of your industry, has your company seen an impact of the West Coast port labor dispute?

Depending on the state’s location, a winter storm bringing freezing rain, sleet, ice and snow has closed roads and—essentially—halted the flow of goods across much of the Southern, Eastern and Northeastern U.S. Soon enough though, the storm will ease and roads will reopen.

 

Goods stuck in Western states are another story. Roughly 20,000 dockworkers have been working without a contract, and recent back-to-back weekend port shutdowns have already had an impact on many companies that rely on goods traveling to and from Asia. To make matters worse, an end to the dispute doesn’t seem to be in sight.

 

The consequences of the labor dispute between dockworkers and the operators of the port terminals and shipping lines have played out for months primarily at the Los Angeles and Long Beach ports, which are estimated to account for roughly 40 percent of the nation’s incoming container cargo. The worth of the goods moving through the ports each day is estimated to be $1 billion. However, there actually are 29 West Coast ports involved in the dispute.

 

The weekend port shutdowns are significant. For example, on Saturday, 32 ships were anchored outside the ports of Los Angeles and Long Beach. They were “unable to unload thousands of cargo containers filled with auto parts, electronics and clothes,” an article in the Los Angeles Times reports.

 

One of the consequences is that Honda, on Sunday, said it would slow production in manufacturing plants in Canada and the U.S. due to part shortages caused by slowdowns at the West Coast ports, Reuters reports.

 

“We don’t have a sufficient supply of several critical parts to keep the production lines running smoothly and efficiently,” Honda spokesman Mark Morrison told Reuters.

 

The issue is a dispute between the Pacific Maritime Association and the International Longshore and Warehouse Union, which dates back to May 2014, when negotiations on a new contract began. The dockworkers have been working without a contract since July, and after nine months of port labor negotiations, the two sides remain gridlocked over rules on the removal of arbitrators who settle disputes on the dock. Since then, both parties have laid blame on each other for the ports’ congestion, slowdowns and work stoppages.

 

The concern among manufacturers, logistics companies, retailers, farmers and politicians is that the slowdown will be detrimental to businesses in the South, and there will then be a ripple effect across the country. Hardest hit so far, are companies which aren’t prepared for the potential supply chain disruptions that may affect their bottom line if they have difficulty getting raw materials or finished products through the ports. A complete shutdown then would potentially have a significant and long-lasting impact on the U.S. economy.

 

Given the situation, it really wasn’t a surprise that President Obama dispatched Labor Secretary Thomas Perez to San Francisco last Saturday to try and help jump-start stalled labor negotiations. Perez was scheduled to meet with both sides today in hopes of brokering a deal.

 

What are your thoughts on the back-to-back weekend port shutdowns? Has your company seen an impact because goods are not unloaded from cargo ships as planned?

President Barack Obama is set to sign an executive order aimed at encouraging companies to share more information about cyber-security threats with the government and each other, which is partly in response to cyber-attacks such as the one on Sony Entertainment last November.

 

The order will encourage companies to create “information sharing and analysis organizations” (ISAOs) or hubs to share cyber-threat data with each other as well as federal agencies such as the Department of Homeland Security. Companies would share the information, which could include the personal data of their clients, voluntarily.

 

“We believe that by clearly defining what makes for a good ISAO, it will make tying liability protection to private sector organizations easier and more accessible to the public and to privacy and civil liberties advocates,” says Michael Daniel, Obama’s cyber coordinator, in a conference call with reporters this week.

 

The proposed order does seem to face an uphill battle of sorts. Indeed, big Silicon Valley companies are hesitant to fully support more mandated cyber-security information sharing without reforms to government surveillance practices exposed by former National Security Agency contractor Edward Snowden.

 

Perhaps the most interesting sign of tensions is that there was a White House summit on cyber-security and consumer protection at Stanford today. However, in what is widely believed to be a reflection of growing tension, Facebook Chairman and Chief Executive Officer Mark Zuckerberg, Yahoo CEO Marissa Mayer, and Google’s Larry Page and Eric Schmidt all declined invitations to attend the conference. They sent their top information security executives to the summit instead.

 

That’s not to imply there wasn’t outright tension at the summit. Apple chief executive Tim Cook delivered what the Wall Street Journal Digital termed a "fiery" speech, aimed at those he said compromise the right to privacy and security of people around the world. The speech sent what WSJ.D calls “a jolt” through the summit, which up until Cook’s speech, had consisted of pledges from government officials and business executives to work more closely together to stop breaches.

 

Cook didn’t mention the U.S. government or any federal agency by name, but his critique of unspecified parties that don’t do enough to protect privacy is thought by industry observers to reflect the anger many technology executives share about the U.S. government’s data collection practices and spying, WSD.J reports.

 

“If those of us in positions of responsibility fail to do everything in our power to protect the right of privacy, we risk something far more valuable than money,” Cook said. “We risk our way of life.”

 

Cook went on to say that the industry must get this right, and that history has shown that sacrificing our right to privacy can have dire consequences, WSJ.D reports. We still live in a world where all people are not treated equally. Too many people don’t feel free to practice their religion, or express their opinion, or love who they choose, Cook said.

 

Many people, he said, live “in a world in which that information can make the difference between life and death,” Cook said.

 

On the other hand, Cook also did pledge to work more closely with the White House and Congress to improve data security, though he stopped short of saying what that cooperation might entail.

 

What are your thoughts on cyber-security and personal privacy? Are big Silicon Valley companies right to be hesitant to fully support more mandated cyber-security information sharing—particularly with the government? On the other hand, would it be beneficial if the U.S. government were to dedicate increasing resources to battling cyber-threats directed at private industry?

Most cars now contain sophisticated electronic control units to collect vehicle data and improve performance, and nearly all also have wireless entry points that could act as a gateway for hackers. The result is that almost all the cars on the market today are vulnerable to “hacking or privacy intrusions” while most automobile manufacturers are unaware of or unable to report on past hacking incidents, says Sen. Edward Markey, D-Mass.

 

Today’s cars and light trucks typically contain more than 50 electronic control units that are part of a network in the car. At the same time, nearly all new cars on the market today include at least some wireless entry points to these computers, such as tire pressure monitoring systems, Bluetooth, Internet access, key-less entry, remote start, navigation systems, WiFi, anti-theft systems and cellular-telematics, notes a report written by the senator’s office.

 

Prompted by earlier studies on some vehicles which showed how hackers can access the controls of some popular vehicles, causing them to suddenly accelerate, turn, de-activate brakes, activate the horn, control headlights, and modify the speedometer and gas gauge readings, Senator Markey’s staff asked automakers a series of questions about the technologies as well as any safeguards against hackers built into their vehicles. They also asked how the information that vehicle computers gather and transmit is protected.

 

When it comes to wireless connectivity and Internet access in today’s vehicles, the responses from 16 automotive manufacturers “reveal there is a clear lack of appropriate security measures to protect drivers against hackers who may be able to take control of a vehicle or against those who may wish to collect and use personal driver information,” according to the report.

 

Furthermore, manufacturers now collect large amounts of data on driving history and vehicle performance and distributing it to third parties—while offering little information on how the data is used, how it’s stored or for how long, says Markey, who also is a member of the Senate’s commerce, science and transportation committee. Consumers often aren't explicitly made aware of data collection and, when they are, they often can’t opt out without disabling valuable features, such as navigation, he says.

 

“Drivers have come to rely on these new technologies, but unfortunately, the automakers haven’t done their part to protect us from cyber-attacks or privacy invasions. Even as we are more connected than ever in our cars and trucks, our technology systems and data security remain largely unprotected,” says Markey. “We need to work with the industry and cyber-security experts to establish clear rules of the road to ensure the safety and privacy of 21st-century American drivers.”

 

Last November, two auto manufacturing trade groups, the Alliance of Automobile Manufacturers and the Association of Global Automakers, released a joint statement setting out voluntary privacy protection principles for the industry. Among their suggestions was a call for automakers to collect information “only as needed for legitimate business purposes.” Markey says the protections fell short in a number of key areas by not offering explicit assurances of choice and transparency.

 

However, the Association of Global Automakers now says the responses provided to Markey are many months old and don’t reflect extensive discussions between the industry and federal technology experts aimed to improve the industry’s understanding of cyber-threats.

 

  Nonetheless, the probe by Markey’s staff and the replies from auto manufacturers do show there is growing concern about, and room for improvement in, the security of increasingly connected cars and trucks. Do you think concerns about security and consumer privacy will lead to increased security in the wireless devices used in cars and trucks? If so, what impact will it have on the automotive industry?

When it comes to accounting for women in manufacturing, the unfortunate news is that although women account for nearly half of the U.S. workforce, they hold less than a third of the nation’s 12.2 million manufacturing jobs, according to the to the U.S. Bureau of Labor Statistics.

 

The good news, however, is that as companies face a growth in U.S. manufacturing and Baby Boomers continue to retire, companies such as Harley Davidson Motor Co., Illinois Tool Works and Essve Tech, among others, are actively recruiting women to fill the labor shortage, reports an article in Chief Executive.

 

Other good news comes from the results of a survey conducted last fall by accounting firm Plante Moran and Women in Manufacturing, a trade group comprised of roughly 500 women executives “dedicated to attracting, retaining and advancing women in the manufacturing sector,” the Chief Executive article explains. Young women responding to the survey who were just starting their careers ranked compensation as the most important factor they were considering, followed closely by finding work that was interesting and challenging. At the same time, more than 80 percent of women respondents who are already working in the manufacturing sector said their work was interesting and challenging, and half said that compensation was “the most significant benefit.”

 

Interestingly, nearly three-quarters (74 percent) of the experienced women workers said they believe the sector offers multiple career paths for women, and more than half of the respondents said the sector is a leading industry for job growth for women. What’s more, 64 percent of the respondents said they would recommend a career in manufacturing to a young woman.

 

The survey results aren’t all cheery, and they do point out that considerable work needs to be done to continue recruiting women to manufacturing and the supply chain. For example, less than half of the young women surveyed believe that manufacturing offers the interesting and challenging work they’re seeking. Furthermore, less than 10 percent of the young women placed manufacturing among the top five career fields they believe offer the most opportunity for young women today, the Chief Executive article relates.

 

“On the whole, these survey results should be seen as a call to action in a space where there is great opportunity,” WiM Director Allison Grealis says. “When we know what young women are looking for in careers, we are in a better position to demonstrate how manufacturing can help them meet their aspirations. We have long known that women are good for manufacturing; and these survey results go a long way to showing that manufacturing is good for women too.”

 

Part of the problem is that the supply chain still suffers from an image problem. For example, when people outside of the industry think of the supply chain, they think trucking and warehouse activities, says Corrie Banks, founder and president of Calgary-based Triskele Logistics, in a recent Industrial Distribution article. When people think manufacturing, they think of a male-centric role, she says.

 

“We need for people to think differently,” Banks says in the article. “There’s a lot of management and supervisory roles. Not everything is about picking in a warehouse and driving a forklift.”

 

What are your thoughts on the lack of women in supply chain? Do you agree the supply chain as an industry suffers from an image problem? If so, what needs to be done to address the issue?

President Obama introduced his $3.99 trillion budget proposal earlier this week. There are several items in particular that caught my eye—most notably, it provides resources to expand the National Network of Manufacturing Institutes. “To create jobs, continue growth in the industry and strengthen America’s leadership in advanced manufacturing technology,” the budget calls for creating seven new national manufacturing innovation hubs in 2016, along with funding required to complete a national network of 45 such manufacturing institutes.

 

“Creating jobs that pay good wages is the best way to grow our economy and the middle class,” the Obama administration writes. “To compete in the 21st Century economy and make America a magnet for job creation and opportunity, we need to invest in American innovation, strengthening our manufacturing base, keeping our Nation at the forefront of technological advancement, and leading in the development of clean energy alternatives and the promotion of energy efficiency while moving toward energy security through safe and responsible domestic energy production.”

 

I was interested to see that in addition to the manufacturing institutes, the budget also calls for launching a public-private investment fund for advanced manufacturing start-ups, known as the American Made Scale-Up Fund, to help ensure, as President Obama says, “if a technology is invented in the United States, it can be made in the United States.” The Scale-Up Fund will help emerging American-made advanced manufacturing technologies reach commercial scale production in the U.S., creating manufacturing jobs for the future and helping to ensure America keeps making things the rest of the world wants to buy, Obama says.

 

Although the President’s proposal to provide two years of free community college to responsible students has been in the news lately, that’s not the administration’s only focus on community colleges. Indeed, Obama says that community colleges, like those in Tennessee and Texas, that build strong employer partnerships and offer training in in-demand fields are creating career pathways to the middle class. Consequently, the budget requests $200 million for a new American Technical Training Fund to create or expand innovative, evidence-based job training programs in high-demand fields that provide a path to the middle class for hard-working, low-wage Americans. Projects would emphasize strong employer partnerships, work-based learning opportunities, accelerated training and flexible scheduling for students to accommodate part-time work.

 

One final item that caught my attention is what is termed “Expanding Apprenticeships and Employer-Validated Credentials.” The Budget makes investments to achieve the goal of doubling registered apprenticeships across the U.S. over the next five years. Those investments will then allow workers to learn skills while they are earning a paycheck, and ensures that training leads to high-quality jobs by investing in projects that feature strong industry partnerships and incent additional employer investment in worker training, Obama explains.

 

It’s no secret a Republican-controlled Congress will likely balk at much of what the White House is proposing. However, the manufacturing hubs—which combine federal and non-federal funds to build research clusters involving companies, universities and nonprofit groups—have drawn bipartisan support in the past. Furthermore, one would think there would be bipartisan support for initiatives that help Americans upgrade their skills and education. It may not be an immediate fix, but plans to expand technical training and increase apprenticeships would provide a pipeline for skilled labor further down the road.

 

What are your thoughts on plans to continue spending on manufacturing hubs as well as making education and apprenticeships more readily available?