Lack of Workers Keeps Manufacturing CEOs Up at Night

From an ongoing skilled labor shortage and significant supply chain disruptions to inflationary pressures and rising cyber security concerns, manufacturers today are beset by more pain points than in recent memory, says Stephen Gold, President and CEO, Manufacturers Alliance. In this interview, Gold discusses the findings from his group’s latest survey of manufacturing CEOs and talks about where he sees the industry heading.

IX Network: What can you tell us about your latest survey of manufacturing CEOs?

Stephen Gold: In October 2021 Manufacturers Alliance surveyed 70 CEOs of industrial manufacturing companies based in the United States, but with global footprints, to gauge their top concerns at this moment in time. As a manufacturing leadership network, it’s important to help our members benchmark themselves against others in their space, and “what keeps you up at night” surveys are one useful way to do this.

Our findings confirmed that there are more pain points today than in recent memory, from an ongoing skilled labor shortage and significant supply chain disruptions to inflationary pressures and rising cyber security concerns.

There was a virtual tie among this group of CEOs for the current top challenge – talent recruitment and the skills gap beat out supply chain disruptions by a nose for the top issue. This isn’t surprising: the former has been on their radar for well over a decade now, while the latter has just hit crisis conditions for many manufacturers this year. These two issues were followed, in descending order of concern – though it’s all relative, these are all major issues – by cyber security worries; general economic instability including inflation; and political and policy instability.

Of course, each individual manufacturing company faces its own set of priorities, and the current circumstances each manufacturers faces, the respective priority lists, can change virtually overnight.

IX Network: You’ve mentioned a number of pain points – labour shortages, supply chain disruption, cost of raw materials, cyber security, economic volatility – if you had to pinpoint it, what is the single biggest issue giving manufacturing CEOs insomnia right now?

Stephen Gold: It is a constant struggle to find workers at so many levels of the enterprise. Of course, this isn’t just affecting manufacturing. A Federal Reserve Bank of Atlanta survey of CFOs across all sectors showed the same challenge. Right now, multiple industries, like retailers, trucking companies, hotels, and restaurants, are struggling even more than manufacturing to find workers. The U.S. government has reported around 10 million job openings across society over the past few months, and manufacturing had 900,000 of those openings.

But for manufacturers it isn’t just a short-term headache – trying to find employees with the requisite skills to work on shopfloors and to fill R&D departments has become a chronic pain point. The sector has struggled for years to change its image and steer qualified high school and college kids towards their open doors.

Manufacturing was already behind the curve when the Great Resignation started, and now it’s got to work doubly hard to start channeling workers to its factories and R&D departments, along with retaining its current talent.

IX Network: Were there any surprises for you in the survey data?

Stephen Gold: Interestingly, last on the list of concerns was keeping pace with changes to international, national, and state regulations. Considering that manufacturing is one of the more heavily regulated sectors, particularly in the U.S. and the EU, this concern used to rank higher. It’s a testament to how other issues have risen in importance, particularly supply chain, cyber risks, and inflation and global markets, that the regulatory environment is no longer in the top three or four.

IX Network: I understand you last conducted this survey 10 years ago. What are the big changes since then?

Stephen Gold: Ten years ago, manufacturers – in fact, most industries – were concerned about instability in the economy, considering we were just coming out of the Great Recession. Other issues haven’t changed much, like labor shortages and supply chain worries (though it’s a lot more of a crisis today).

Definitely the biggest change is the increased concern about cybersecurity, which really wasn’t on most manufacturers’ radar in 2011. When it first popped up, the primary concern was intellectual property theft. That’s evolved over the years.

Today, the number one concern – probably among most businesses, not just manufacturers – is a ransomware attack where the bad guys demand large sums to unfreeze the networks of the businesses. More specific to manufacturers, the second biggest cyber concern today is the potential for equipment sabotage and equipment shutdowns.

IX Network: We’re getting to the time of year where we start to turn our attention to the year ahead. As someone who works closely with industry, what do you see as the big challenges that 2022 has in store for manufacturing?

Stephen Gold: 2022 challenges start with continuing supply chain bottlenecks. Most manufacturers don’t think this will subside until at least the second half of the new year, which is requiring them to consider other options – such as diversifying supply chains, increasing inventory, changing supply chain logistics, even switching to suppliers closer or even in the United States.

The problem is rooted in several factors. You have labor shortages such as a dearth of truck drivers and warehouse workers. There was a dramatic rise in demand for durable goods after the services industry shut down last year due to the pandemic, leading to shortages of raw materials for industries such as automotive and construction. There is a shortage of shipping containers, skyrocketing shipping rates, and congestion at international ports.

Another growing concern for the new year is continuing inflationary pressures from higher priced raw materials, rising shipping costs, and increased wages. This will eventually have to be passed on to intermediate and end users. The Federal Reserve Board in Washington, D.C., had called inflation “transitory” earlier this year. Surveys by various Federal Reserve banks around the country suggest this is a longer-term problem, which should ultimately lead to action on interest rates by the Fed.

Finally, there is no doubt that the future of work is a complex problem that will only begin to resolve itself more in 2022. Amid the Great Resignation – 300,000 employees quit manufacturing jobs each month this summer – how does an industry that is already challenged to improve its image continue to attract and keep younger employees? It’s like changing a tire while the car is still moving – manufacturers will have to figure things out along the way.