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2016

Vocational training without a strong college-preparatory focus leads to blue-collar jobs for men but penalizes women in the labor market, according to new research from Cornell University.

 

“This has been a real blind spot in the public discussion: the assumption that men and women would equally benefit from high school training for local blue-collar jobs,” says April Sutton, a Frank H.T. Rhodes Postdoctoral Fellow at the Cornell Population Center, and lead author of the study. Sutton and her colleagues, Amanda Bosky and Chandra Muller, both of the University of Texas at Austin, wrote the study, “Manufacturing Gender Inequality in the New Economy: High School Training for Work in Blue-Collar Communities,” which will appear in the August print issue of the American Sociological Review.

 

Their research shows that high school vocational training in blue-collar communities reduced both men’s and women’s odds of enrolling in a four-year college but it also led to different outcomes for men and women when they looked for jobs. On the one hand, men in these communities enrolled in greater numbers of vocational courses in high school, had higher rates of blue-collar employment and earned comparable wages relative to men who attended high school in non-blue-collar communities.

 

In contrast, women who attended high school in blue-collar communities were less likely to be employed at all and less likely to work in professional occupations when they were employed. They also earned far less than their female counterparts from non-blue-collar communities.

 

“This curricular tradeoff did not penalize men in the labor market, at least in early adulthood, but it restricted women’s opportunities to get good jobs,” Sutton says.

 

Those women with that training who do obtain blue-collar jobs often find themselves still on the outside looking in at high-paying blue-collar positions, Sutton says. Among high school graduates ages 25-28 in blue collar jobs, the study found that the hourly gender wage gap was 22 percent, with women making 78 cents for every dollar men make.

 

“The disparity is striking for a millennial cohort of women for whom the pay gap has substantially narrowed on average,” Sutton says.

 

These findings deserve close attention in light of recent proposals from both sides of the political aisle aiming to reemphasize blue-collar related vocational training, as well as recent legislation in several states bolstering blue-collar related high school training while relaxing academic graduation requirements, Sutton says. Moreover, the study “raises questions about how high school training for these male-dominated, local jobs would impact gender inequality, and it emphasizes the importance of considering gender in debates about the best type of high school training to succeed in today’s economy,” Sutton says.

 

Women currently represent nearly half of the total U.S. labor pool (and are expected to overtake men soon), but when it comes to manufacturing, they make up less than a third of the workforce. At the same time, it’s estimated that more than 3.5 million U.S. manufacturing jobs may need to be staffed over the next decade, and considering the current lack of skilled workers, two million of those positions may go unfilled.

 

The solution, says Sutton, isn’t to simply add more skills training at the high school level, but to offer the training in conjunction with college prep classes. After all, she continues, men will also benefit from taking college prep courses.

 

What are your thoughts on training young men and women alike for skills-based jobs? Are there enough STEM classes being offered as well?

Now that the Brexit referendum, British withdrawal from the European Union, has passed, manufacturers of all types are left to wonder about its ramifications. Considering the significance of trade with Europe and trade agreements negotiated through the EU, there are many implications for the supply chain, such as the application of tariffs. However, the larger issue is that thousands of jobs are potentially at risk in the UK after some of the world’s largest companies warned they may be forced to relocate their British-based operations.

 

In Britain itself, executives in the aerospace and pharmaceutical industries are concerned about possibilities ranging from declining demand to new regulatory hurdles. However, the automotive industry is poised to be the industry most hard hit, as executives wonder not only about exports and tariffs, but also the future ability to recruit talent internationally and influence new standards. Indeed, Britain’s automotive industry said today that its growth depends on the country keeping “unrestricted access” to the European single market.

 

“UK automotive has gone from strength to strength, and is now delivering record turnover, record productivity and more jobs,” Mike Hawes, chief executive of industry body SMMT (Society of Motor Manufacturers & Traders), said at an annual conference in London for automotive leaders from across Europe, Agence France-Presse reports. “This success has been due to unrestricted access to the single market, input to EU legislation to safeguard the interests of UK automotive, and the ability to recruit talent from abroad. Our growth depends on certainty and continued open and reciprocal access to the 100-plus markets with which the UK automotive industry so successfully trades.”

 

It’s worth pointing out the size of the UK’s automotive industry. USA Today reports that roughly 80 percent of the 1.5 million vehicles assembled in Britain last year were exported. About 58 percent of them were exported to other European countries.

 

What’s more, as the UK exits the European Union, countries on the continent could impose tariffs of as much as 10 percent on those vehicles. Exported auto parts could face tariffs of about 2.7 percent, but the details will depend on negotiations with the EU.

 

Before the vote even took place, automotive companies were making their preferences known. “The UK is the fourth-largest global market for GM and the largest European market,” General Motors said in a statement. “We employ over 4,500 people directly and 11,000 indirectly in our retailer network and supply chain there. Not to be part of the EU would be undesirable for our business and the sector as a whole.”

 

Since the vote, other companies have made statements about their position. Ford, which has 14,000 employees in Britain, said in a statement that “While Ford will take whatever action is needed to ensure that our European business remains competitive and keeps to the path toward sustainable profitability, we have made no changes to our current investment plans and will not do so unless there is clear evidence that action is needed.”

 

Concerns continue to grow among Japanese automakers as well, since Nissan, Toyota and Honda Motor produce about half of all vehicles made in the UK each year. Executives of top Japanese automakers have already met with government officials at the industry ministry in Tokyo to discuss “Brexit” scenarios, an article in the Wall Street Journal reports.

 

“We will carefully analyze various aspects of the matter, given that there are still many uncertain factors,” said Shigeru Hayakawa, a Toyota senior managing officer, after the meeting.

 

The biggest danger for the Japanese automakers—as it is with other companies that manufacture in Britain for export—is the possibility that Brexit would lead the EU to raise tariffs on British goods. Higher tariffs could force British auto plants to pay more to procure auto parts, said Daisuke Yamaguchi, a director at Japan External Trade Organization’s business research department overseeing Europe, the WSJ article continues. Furthermore, depending on the terms of Britain’s departure from the EU, Japanese automakers might have to seek visas for immigrant workers from other EU nations who can currently travel freely to Britain.

 

Obviously, a great deal needs to be worked out, and much depends on decisions from the European Union. However, no matter what happens, or doesn’t, the nature of the automotive supply chain in Europe is bound to change dramatically.

Although the expanded Panama Canal has been briefly tested, the official opening took place last Sunday, when the neo-Panamax Chinese vessel COSCO Shipping Panama passed through the canal’s new Atlantic-facing Agua Clara Locks. Originally named Andronikos, the vessel—bearing 9,472 containers—was renamed to “honor and pay respect” to the country of Panama and the Canal.

 

The nine-year, $5.4 billion expansion of the 48-mile canal more than doubles its cargo capacity. The canal’s new locks are wider than the old ones, 180 feet vs. 110 feet, and are deeper as well, 60 feet vs. 42 feet. A third lane has been added to the canal that accommodates ships large enough to carry up to 14,000 containers, compared with around 5,000 currently. This alleviates a cargo bottleneck caused by the smaller ships that was expected to worsen over time.

 

Canal authorities say expansion of the canal, which handles about a third of Asia-to-Americas trade, was necessary for the canal to remain competitive. As the shipping industry copes with a downturn, major shipping companies are pooling their resources and using fewer but much larger ships, which are too large to fit through the pre-expansion Panama Canal.

 

The expansion makes the Panama Canal more competitive with the Suez Canal in Egypt by shortening the one-way journey by sea from Asia to the U.S. East Coast by roughly five days and eliminating the need for a trip around Cape Horn to get to the Atlantic. Consequently, it’s expected that roughly 10 percent of the Asia-to-U.S. container traffic will shift from West Coast ports to East Coast terminals by 2020, according to a recent report by business adviser Boston Consulting Group and supply-chain management provider C.H. Robinson Worldwide Inc. So far, 170 neo-Panamax ships that wouldn’t have fit through the pre-expansion canal have booked reservations to pass through the expanded locks.

 

“We knew that if we did not embark on this project, the quality and span of our services ran the risk of deteriorating, impacting shippers, customers and our country alike,” the Panama Canal Authority’s chief executive, Jorge Quijano, said in a speech Saturday night. “The expansion will open new trade routes.”

 

What remains to be seen, of course, is how East Coast ports continue to respond. The American Association of Port Authorities says close to $155 billion will be invested by 2020 to expand U.S. ports and add necessary infrastructure to handle bigger ships.

 

The problem, however, is that while some East Coast ports—Baltimore, Miami and Norfolk, Va.—are ready to accommodate much bigger ships, others aren’t. Dredging projects are still under way at the ports of Savannah, Ga., and Charleston, S.C., and the tidal channel on the Savannah River has only received approval to be deepened to 47 feet—not the 50 feet required for the neo-Panamax ships. What’s more, some of the ports lack infrastructure such as cranes and docking space to handle the ships. At the port of New York and New Jersey, for example, the three largest terminals are walled off to the largest container ships by the Bayonne Bridge, which the local port authority is raising by more than 60 feet at a cost of more than $1.3 billion.

 

Then again, the ability to accommodate larger ships doesn’t necessarily mean they will come to port. Indeed, it’s a common mistake to think that if you build up a port, traffic will come, says Asaf Ashar, a port infrastructure expert and professor emeritus at the University of New Orleans, in a recent Wall Street Journal article.

 

“It’s not like suddenly we lift the bridge and people will buy more tennis shoes,” Ashar says.

 

What are your thoughts about the impact the expanded Panama Canal will have on the supply chain? Do you think there will be a significant shift in port traffic from West Coast ports to those on the East Coast?

 

Use of the Internet of Things can bring value but it also creates a growing number of network entry points for cyber criminals. Not surprisingly, according to a new report from BDO USA, 92 percent of manufacturers the firm studied cite cyber security as a key concern, which is a 44 percent increase since 2013.

 

The 2016 Manufacturing Risk Factor Report from accounting and consulting organization BDO USA examines concerns listed in SEC disclosures from the largest 100 publicly traded U.S. manufacturers. The companies are in the fabricated metal, food processing, machinery, plastics and rubber, and transportation equipment industries.

 

“As the industry races toward the next frontier, manufacturers must strike a balance between progress and security,” says Rick Schreiber, partner and national leader of the Manufacturing & Distribution practice and National Association of Manufacturers (NAM) board member, in the report. “Data analytics and the Internet of Things may spur the next industrial revolution, but with that comes increased exposure to cyber risk. Manufacturers still have some catching up to do to adequately protect their data, customers, products and factory floors.”

 

On the one hand, manufacturing seems to have flown under the radar as high-profile attacks continue against the retail, financial services and healthcare industries. Then again, manufacturers’ information, intellectual property and products have increasingly become targets for cyber criminals. Consequently, cyber risk is moving up on manufacturers’ list of priorities.

 

To maintain a competitive advantage, manufacturers increasingly develop smart products and processes, which correspondingly also creates more network entry points. Tellingly, although manufacturers recognize the cyber issue, only eight percent in the MPI Internet of Things Study, sponsored by BDO, said they are very confident in their ability to prevent an IT breach.

 

“All it takes is one weak link in the security chain for hackers to access and corrupt a product feature, an entire supply chain or a critical piece of infrastructure,” says Shahryar Shaghaghi, National Leader, Technology Advisory Services and Head of International BDO Cybersecurity. “The stakes are too high in the manufacturing industry for complacency or inattention. Security can no longer be considered an add-on to products and processes. It must be built in from design to distribution, and monitored with a high level of priority.”

 

Although cyber security is a top concern for the manufacturers that were studied, they do, of course, have other, higher concerns. For example, nearly all of the manufacturers (97 percent) cite competitive pressures as a key concern this year, and 91 percent of them worry about inability to properly execute corporate strategy—including cost reduction, capacity expansion or improving efficiencies. The ability to comply with federal, state and local regulations is also a key concern, cited by 99 percent of the manufacturers. Threats to international operations and sales was also cited by 94 percent of the manufacturers as a key concern, up from 93 percent last year and 87 percent in 2013.

 

I was also interested to read that the manufacturers listed bridging the talent gap as a significant concern. Indeed, labor concerns were cited by nearly all (97 percent) of the manufacturers this year, and risks related to labor strikes are cited by 66 percent. Furthermore, considering the strategic and technological changes impacting the supply chain, identifying the right leadership team has become critical. For the second year running, nearly three quarters (74 percent) of the manufacturers cited attracting and retaining key personnel as a key concern.

 

What are your thoughts on current, key business concerns? Is cyber security now a significant concern? Do you think attracting and retaining personnel is now a key concern as well?

Brexit—voters in the United Kingdom voting for the UK to withdraw from the European Union—and the subsequent extreme stock market volatility dominated the news at the end of last week, almost overshadowing news about Volkswagen AG. The automaker is expected to pay more than $10 billion to settle claims by nearly 500,000 owners stemming from its U.S. diesel emissions cheating scandal and to fund efforts to offset pollution.

 

Volkswagen has acknowledged installing so-called cheat software on some 11 million vehicles world-wide. In the U.S., officials say Volkswagen diesel-powered vehicles emitted nitrogen oxides at up to 40 times the allowable standard.

 

The U.S. Justice Department sued Volkswagen in January on behalf of the Environmental Protection Agency, alleging the German automaker violated federal clean-air laws by using software known as defeat devices that allowed vehicles to pollute more on roadways than during government tests. The Federal Trade Commission, which enforces U.S. consumer protection laws, also sued the company in March alleging the company falsely advertised “clean diesel” vehicles with low emissions. Volkswagen also faces numerous lawsuits by consumers and dealers alleging declining resale values and other grievances.

 

The EPA, California Air Resources Board, U.S. Justice Department, Federal Trade Commission and lawyers representing owners have been working for weeks to reach the final agreements. Reuters, Bloomberg the Associated Press and the Wall Street Journal have all reported on details of the expected settlement. All have cited sources speaking on condition of anonymity, due to court-imposed gag rules.

 

However, what’s generally agreed on is that under the proposed deal, Volkswagen would offer to buy back cars and provide additional compensation for owners of almost 500,000 diesel-powered vehicles with two-liter engines that contain software capable of duping government emissions tests, the sources say. Owners may, according to the anonymous sources cited in various articles, receive an average of $5,000 in compensation along with the estimated value of the vehicles as of September 2015, before the scandal came to light. Owners would also receive the compensation if they choose to have the vehicles repaired, assuming U.S. regulators approve a fix at a later date, various sources say.

 

The people in all articles also caution that negotiations among Volkswagen, plaintiffs’ lawyers and government officials involved in widespread litigation consolidated in a San Francisco federal court were ongoing, and terms of the settlement could very well change.

 

“The consumer is finally getting their due, but it took a long time and lot of money,” Steve Kalafer, a Volkswagen dealer in New Jersey, says in a Wall Street Journal article. Volkswagen halted sales of affected vehicles in the fall, leaving dealers with expensive, hard-to-sell inventory. Kalafer says dealers are still waiting for the company to comprehensively address their troubles.

 

“It has been a nightmare for the retailers,” Kalafer says.

 

There are two aspects I am most interested in following. The first will be to watch what happens to Volkswagen consumer confidence and loyalty moving forward.

 

Secondly, what happens to the auto industry moving forward? In France, government fraud investigators have raided PSA Group offices as part of broader checks into vehicle emissions. Earlier this year the same authorities raided offices of Renault SA. Japanese automaker Mitsubishi Motors also recently admitted it manipulated fuel-economy tests to mislead consumers. In the U.S., Daimler has announced it has been asked by the U.S. Department of Justice to investigate the certification process of its cars, as a consequence of U.S. class-action suits that allege some of Daimler’s cars violated emissions standards. If Volkswagen does reach a settlement soon, will it provide a clear path for the other automakers being investigated?

 

 

Concerns about the skills gap in manufacturing aren’t uniform across all companies, according to a PwC/Manufacturing Institute survey of 120 U.S. manufacturers. However, the need for advanced manufacturing skills is still great, and is strong.

 

The results of the survey are detailed in a study, titled “Upskilling Manufacturing: How Technology Is Disrupting America’s Industrial Labor Force.” It explains that manufacturers need a new generation of employees who possess both skills and comfort with evolving technology and increased automation, and, consequently, companies are competing to hire tech-savvy talent, upskill existing workers or both.

 

I was particularly interested to see that 33 percent of the respondents said their company has no or only “a little difficulty” in hiring talent to exploit advanced manufacturing technologies, but that 44 percent of the respondent said they have “moderate difficulty” hiring skilled workers. Nonetheless, there is significant concern that the situation will worsen: 31 percent of the respondents say they see no manufacturing skills shortage now but they expect there will be a shortage in the next three years; 26 percent said the skills shortage has already peaked and is behind us; and 29 percent said the shortage exists and will only worsen in the next three years.

 

On the other hand, the study also notes that although respondents expressed some nervousness concerning a skills gap, manufacturers are working to close those gaps. The study explains that there are a range of practices used by manufacturers to close the skills gap, and although some are traditional and widely followed, others remain untested but offer potential.

 

The most practical and widely used practice is to train in the workplace, which is what most manufacturers do. Another practical and increasingly common approach is to train outside of the workplace. For example, manufacturers are teaming up with community colleges or vocational schools to meet demand for different skills and equipment. Progress on nationally accepted credentials across different skill sets would likely accelerate uptake, according to the study.

 

Companies are also working to recruit STEM graduates directly, which is typically done via job fairs, internships, and above all, productive relationships with educational institutions. It must be noted, according to the study, that the learning curve for some manufacturers’ HR departments may be steep. Competition for talented people in tech is fierce, and keeping up with the skill sets in demand could also be challenging.

 

When thinking about practices that aren’t widely used, but are poised to grow quickly, the most common practice is to hire outside of the industry, according to the study. Furthermore, as manufacturers invest in and deploy advancing technologies, hiring from outside the sector will likely grow. Additionally, manufacturing jobs requiring skills from other fields—such as gaming, CAD simulation and virtual reality—could draw candidates from, and compete with, other fields.

 

The most promising yet untested hiring practice for the U.S. labor market cited in the study is apprenticeships. The U.S. government and some states are making efforts to support and mainstream apprenticeship programs in the manufacturing sector. Consequently, registered apprenticeships have increased: according to the U.S. Department of Labor, there were about 450,000 registered apprenticeships in 2015, up from 350,000 in 2011.

 

Finally, the study lists two, what it calls, “wild cards.” The first is to import talent from outside the U.S. A majority of survey respondents (60 percent) said they believe the industry would be more competitive if it were easier for foreign nationals with the relevant technology skills to work in the U.S.

 

A second wild card approach is to consider the maker generation and the gig economy. Manufacturers will likely be looking to makers for more than orders, according to the study. They could represent a deep and growing reservoir of talent. There is also a growing number of freelancers who could be tapped for short- or long-term contract work, offering manufacturers a flexible approach to talent management, the study notes.

 

What are your thoughts on the level of a skills gap? Do you think it’s growing? If so, how is your company addressing the skills gap?

Amid all the discussion and speculation about the possible use of drones to make deliveries to customers, it’s interesting to see other ways they may be used to improve supply chain performance. Earlier this month, for example, Walmart gave a demonstration of how it’s testing drones as a possible means to improve warehouse management.

 

Last fall, Walmart, the world’s largest retailer, applied to U.S. regulators for permission to test drones for home delivery, curbside pickup and checking warehouse inventories to possibly use them to fill and deliver on-line orders. Although Federal regulators are still considering rules for commercial operation of drones that would be involved in package delivery—seen as the next step for big retailers such as Walmart and Amazon—the company did receive approval for warehouse use.

 

The company is now testing the use of flying drones to manage inventory at its large warehouses, which supply thousands of Walmart stores throughout the U.S. During a media tour at a Walmart distribution center earlier this month, a drone moved up and down an aisle packed nearly to the ceiling with boxes, taking 30 images per second. A control tower oversees the images on a screen and sends alerts when items are out of stock or stocked incorrectly so workers can go fix the problem.

 

The current practice is for Walmart workers to stand on forklifts that move up and down the aisles to manually inspect labels and inventory by scanning pallets of goods with hand-held scanning devices. The drone’s methodical, vertical movements would essentially mimic the path of a person in a forklift, says Shekar Natarajan, Walmart’s vice president of Last Mile and Emerging Sciences, which focuses on drones, virtual reality and other technologies to identify how the technology may help the company improve its supply chain performance.

 

Natarajan said use of drones can dramatically quicken the current labor-intensive process of checking stock around the warehouse. Indeed, while the process takes a month to complete manually, the drones can catalog the warehouse’s inventory in one day.

 

If all goes well, the drones may be used in one or more of Walmart’s distribution centers in six to nine months, Natarajan says. However, he adds that Walmart is “still in early phases of testing and understanding how drones can be better used in different types of business functions.”

 

Determining how to best warehouse, transport and deliver goods to customers has taken on new importance for Walmart as it deals with rising wages while simultaneously facing pressure to grow—even as on-line competition from Amazon and others intensifies. To do so, Walmart has committed to spending $2.7 billion on labor, technology and other investments, including improving its website and e-commerce business. Tellingly though, while Walmart beat expectations last quarter with $115.9 billion in revenue, Doug McMillon, president and chief executive, acknowledged that the seven percent growth of Walmart’s e-commerce business was “too slow.”

 

The scope of Walmart’s operations is what makes the drone trial so interesting. The company uses 80 supercenters, in addition to its 190 distribution centers, to help fulfill on-line orders. Each distribution center in the U.S. services 100 to 150 stores. Given the sheer number of warehouses and inventory items, it’s understandable that Walmart is investigating new ways to apply technology to fulfill and deliver orders faster.

 

I am curious to learn how the use of drones in Walmart’s warehouses plays out. Are you?

Vicki Holt is on a mission of sorts. Holt, president and CEO of Proto Labs, frequently writes and speaks about manufacturing, and in particular, the need to recruit a skilled workforce. Although the number of open manufacturing jobs is growing, manufacturers need to debunk some myths and change recruiting tactics if they are to successfully target Millennials, Holt says.

 

For instance, Holt recently wrote on IndustryWeek that, to grow the next manufacturing labor force, the industry needs to focus on three areas of improvement. The first, she writes, is that to stimulate a new fascination with the industry and attract workers with skills needed to manage modern shop floors, more of an effort must be made to debunk long-held myths about manufacturing jobs. Perceptions of low-skill manual labor in grease-stained smoky work environments are not the reality of the digital-manufacturing industry, she writes, noting that modern manufacturing floors are as likely to be found in a Silicon Valley-based office park as anywhere else.

 

Secondly, the industry must do a better job of publicizing that manufacturing offers high-paying jobs, Holt writes. For example, before every production run on an injection-molding press, a highly skilled mold tech has to prep and tune the press. Because digital manufacturers provide their customers with options for shorter production runs—100 runs of 1,000 parts rather than a single run of 1 million parts, for instance—they need 10 times more mold techs than traditional manufacturers. Consequently, demand is growing for these highly skilled workers, and today an entry-level mold tech can expect to make as much as $70,000 per year right out of school, Holt writes.

 

Finally, to develop America’s next-generation workforce, Holt believes the manufacturing industry needs to significantly expand and accelerate STEM education, which requires working directly with high schools, trade colleges and universities to enhance vocational training programs. Greater curricular emphasis is needed in data analysis, CAD and analytics, because data, Holt says, is the “oil” powering digital manufacturing.

 

With those ideas in mind, I was interested to also see a recent Wall Street Journal article reporting that, recognizing the need to recruit Millennials, a growing number of manufacturers strive to rebrand manufacturing as a high-tech industry full of opportunity. To specifically recruit Millennials, some companies now use mobile devices, video and virtual reality (VR).

 

Many Millennials use smartphones to access the Internet, says Gina Max, director of talent at USG Corp., a maker of construction materials, in the WSJ article. Working to leverage the practice, USG started accepting job applications sent by mobile phone in the fall of 2014. In that quarter, applications jumped 26 percent, and average applications per job have remained higher since, the WSJ article reports.

 

Similarly, Millennials watch videos to learn about new topics far more than older generations, Max says in the article. So, in 2014, USG also started adding videos to job postings to provide a quick introduction to what a job looks like. Since then, USG has seen the number of people who actually submit a job application after looking at a listing increase by 50 percent, WSJ reports.

 

Other companies now use VR to both attract young talent and dispel the perception of manufacturing as outdated. Lincoln Electric Holdings, for example, uses VR to let young people test their welding skills at career fairs, Boy Scout jamborees, farmer conventions and robot-building competitions, the WSJ article notes. Lincoln estimates more than 100,000 young people have tried its VR simulator, through which they see a welding environment like a race-car workshop or a high-rise construction site. They make virtual welds, and a virtual scoreboard tells them where they need to improve. The system then helps recruiters identify and screen job candidates.

 

What are your thoughts on recruiting the next-generation workforce? Is your company changing recruiting practices and methodology?