Manufacturing sentiment: Workforce and supply chains vex manufacturers even as prospects for growth surge

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Across CompanyWeek‘s network of manufacturing reports, writers fanned out in the first two quarters of 2022 to interview 170 manufacturers in multiple industries.

Executives paint a picture of high demand for products and services with operations challenged by supply chains and workforce. The net positive sentiment corroborates the June 2022 Purchasing Managers Index of 52.7 that placed the sector in expansion mode (a score of 50 and over). In the same Institute for Supply Management survey, an “overwhelming majority” of manufacturing companies also said they were hiring.

But the search is tough: The U.S. Department of Labor counted 797,000 unfilled manufacturing jobs in May 2022. Posting a job and finding a qualified employee are two different things.

Here’s data summarizing the top challenges and needs gleaned from CompanyWeek reporting – along with voices from featured companies.

The workforce barrier — and opportunity

Here’s a snapshot of manufacturing sentiment relating to challenges:

2022 Q1 | Top 5 Challenges

  1. Supply Chain 39%
  2. Workforce 29%
  3. Managing Growth 18%
  4. Pricing 11%
  5. Market Uncertainty 10%

2022 Q2 | Top 5 Challenges

  1. Supply Chain 50%
  2. Workforce 24%
  3. Managing Growth 11%
  4. Market Uncertainty 8%
  5. Pricing 8%
  6. Shipping/Transport 8%

2022 Q1 + Q2 | Top 5 Challenges

  1. Supply Chain 45%
  2. Workforce 26%
  3. Managing Growth 15%
  4. Market Uncertainty 9%
  5. Pricing 9%

As pressing as the supply chain challenge is today, workforce is manufacturing’s sustained and stubborn need.

2022 Q1 | Overall Top 5 Needs

  1. Workforce 49%
  2. Finance/Funding 22%
  3. Real Estate/Space 20%
  4. New Customers 12%
  5. New Suppliers 9%

2022 Q2 | Overall Top 5 Needs

  1. Workforce 50%
  2. Finance/Funding 20%
  3. Real Estate/Space 20%
  4. Marketing 16%
  5. Equipment 13%

2022 Q1 + Q2 | Overall Top 5 Needs

  1. Workforce 49%
  2. Finance/Funding 21%
  3. Real Estate/Space 20%
  4. Marketing 12%
  5. New Customers 11%

One in four companies cite workforce as their top challenge — and fully half cite it as their top need.

Voices

“We’ve been working hard to try and build our staff,” says Hunt Dabney, CEO of HDA Technology in Lake Forest, California. “That will be a limiting factor if we don’t see some improvement. But I’ve talked to a lot of other guys with businesses, and I think an awful lot of engineering and software development people with high levels of expertise are in their forties and fifties. And I think a very large number of them have discovered that they could rearrange their lives, simplify them, and not go to work anymore, but just retire early or freelance remotely from somewhere else. A whole lot of the labor pool that we would normally draw from seems to have gone off the market.”

Colorado Tech Shop’s Heidi Hostetter echoes the sentiment. “Employees want flex time, they want to program machines remotely, they want us to accommodate things that we’ve not had to in the manufacturing realm,” she says. “Unless we diversity into that space, automation and tech won’t matter, to be honest with you.”

“Supply chain and labor — that’s really stunted our comeback,” says Ryan Christensen, CEO of Christensen Industries in Salt Lake City. “We’d like to be bigger. I think our customers have more volume for us, but we have to turn certain things away because I can’t support it with the current labor force that I have. And material lead times are pushing things so far out that sometimes those projects just get put on hold — not because we can’t do it, but because our customer says, ‘Well, we’re going to go focus on something else.'”

Christensen’s needs are straightforward: personnel. “Quality management folks, fabricators, assemblers — A to Z,” he says, noting that he could use 10 new hires immediately and “another 20 or 30” in the second half of 2022.

If quality is the calling card for most manufacturers, companies are also concerned how labor is impacting their ability to maintain it.

Cabinet-making is a labor-intensive process, and for co-owners Gabe Powers and Stephanie Lemon of Abacus Cabinetry in Denver, finding the right employees to do the job has been challenging. “We can cut as many parts as required on the machines, but at the end of the day, we need people with experience to make sure the quality stays at the highest level,” says Powers. “Keeping good people around is one of the biggest challenges I see.”

In a tight labor market, retaining talent is as important as new hires.

“In our company, we train our own people and have very low turnover,” says Maya Royberg, co-founder of Precision Group in San Antonio, Texas. “Some of them came to work for us at the beginning when we opened our doors, and they’re still here.”

That said, recruitment and hiring has proven increasingly difficult for the company in recent years, she adds. “For the longest time, it was: Find a toolmaker. Training a toolmaker is a tedious process, so we decided to go more with sophisticated, computerized equipment. Machines are so powerful that I don’t need many employees.”

Professional development is top of mind for VB Cosmetics founder Vivian Valenty in Chandler, Arizona. “With COVID, the difficulty of finding skilled workers is tougher,” she says. “Some of the staff that we hired do not have experience in our industry or the tasks we have available. We need to train them, and we’re getting help from the Arizona MEP — that’s the Manufacturing Extension Partnership.”

“I think the focus for us is willingness to train now,” says Dalyon Ruesch, CEO of La Verkin, Utah-based Vitalpax. “We’ll find folks with aptitude, whether they’re coming out of technical schools, even high school graduates, people that are interested in this type of work, we bring them in and say, ‘We’ll train you on the job.’ We’ve had to offer better benefit packages, better salaries, things like that to try and lure folks in here. It’s good for the workforce and the guy looking for work.”

“Finding talent to run equipment is challenging, primarily because there’s not as many guys who are supplement manufacturers here in southwest Utah as there might be in New Jersey,” says Ruesch. “A lot of this technology is not just open to the public — you can’t just go find a class on it. You have to have connections and you need to have a teacher, a master, someone you can be an apprentice to.”

Technology as a catalyst for employment

Automation, long viewed as a threat to manufacturing employment, may be emerging as a catalyst. Companies investing in new equipment to automate operations are getting ahead in the workforce competition.

San Leandro, California-based Scandic operates in the Tesla supply chain, and president Hale Foote describes a scenario playing out across the sector. “Scandic started 53 years ago with mechanical spring coiling machines,” he says. “The technology is based on cams and gears, and adjustments require a technician to stick their hands into a dark greasy gearbox. The number of younger employees who are willing — or even want to learn — to do that is limited. Fortunately, the very same equipment manufacturer now makes CNC machines that use identical end-point tooling but most adjustments are made via computer with a screen showing the parameters. We have installed this technology, and this will be a much easier position to hire for.”

In Orem, Utah, laser-cutting pro OSH Cut may be a case study of the positive effects of Industry 4.0 on workforce prospects. “We combine high automation with high pay so we can get great people,” says co-founder Caleb Chamberlain. “We’ve had zero problems attracting the best of the best to run the operations on the floor.”

A higher level of acumen means higher wages, but it’s a price Chamberlain is willing to pay. “We’re paying our people often as much as two or three times more than what the median pay is in this industry for the job they’re doing,” he says, a bonus given the fact the company will be hiring about 12 more employees in the coming months.

John Cornell, founder of Surprise, Arizona-based Atec Engineering, sees other advantages. The company just purchased a new Hyundai CNC lathe with a sub-spindle and bar feed, which should improve overall efficiency. Cornell says, “We got every bell and whistle we could get with the machine, and that’s a huge addition for us. We’re still installing it right now, and I’m hoping it’s going to increase our capabilities and take a step toward a certain amount of automation, because it can be very hard to find people when you need them. I think that’s part of the answer going forward.”

In Frederick, Colorado, Xpect Solutions President Walt Papierski sees another upside to investing in automation — the lack of skilled labor across the industry is driving sales. “We have companies come to us and they say, ‘Well, we used to build all of our enclosures and panels here, but we don’t have the time or the labor to do it so we send it out.’ A lot of big companies are starting to look at that model.”

More on the challenges associated with snarled supply chains next time.

Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.