What’s in store for manufacturing?

As demand for their goods remains strong, manufacturers face multiple head winds to provide products, including inflation, trade uncertainties, supply chain disruptions caused by shutdowns in Asia to battle COVID-19, challenges with access to capital and the war in Ukraine. Those, however, are overshadowed by the tight labor market as manufacturers have difficulty trying to find sufficient workers to meet capacity needs.

“Labor is a big problem for manufacturers, getting enough employees in their manufacturing plant to produce product,” said Jeff Major, director of U.S. sales at Greenfield Industries Inc. in Seneca, South Carolina, and president of the Cleveland-based United States Cutting Tool Institute. “A lot of companies — I know ours has — have struggled with finding people to work the second and third shifts.”

He said some manufacturers are attempting to overcome the skills gap by offering tuition incentives for continuing education and seeking workers through machinist and other manufacturing programs at vocational-technical schools.

A common approach is to direct money at the problem.

“It’s high wages and in some cases incentives,” Major said, “such as sign-on bonuses, retention bonuses and things of that nature to attract employees.”

According to the Manufacturers’ Outlook Survey for the first quarter of 2022 by the Washington, D.C.-based National Association of
Manufacturers, companies expected 3.9% growth in employee wages over the subsequent 12 months. That is a record high dating back to NAM’s first survey, which was conducted for the fourth quarter of 1997.

The latest survey was based on responses from 290 manufacturers, including 61 small firms, 114 medium-sized ones and 115 large
manufacturers.

NAM reported that manufacturers had 800,000 or more job openings — a very elevated rate — for 10 straight months. Notably, that was just before the Russian invasion of Ukraine. The severe disruptions caused by the war and the resulting sanctions have added significant uncertainty in the global marketplace, exacerbating supply chain issues, energy costs and inflationary problems for manufacturers, according to NAM.

Generous benefit packages help attract and retain skilled workers. Nonetheless, Major said companies face the dilemma of providing those benefits to existing employees when used to entice new hires.

In addition, the most common benefit, health insurance, is expected to exert more pressure on the bottom line for manufacturers that offer it. NAM’s survey showed that the growth rate for health insurance costs was projected to increase 7.9% over the next 12 months, which is the highest rate since the fourth quarter of 2017 at 8.1%.

As the U.S. and global economies transition from a pandemic to an endemic scenario, Major said cutting tool manufacturers are grappling with acquiring needed raw materials and production components.

“We’re not unlike the automotive industry when it comes to chips and so forth for equipment,” he said. “I know the supply chain coming out of China with the disruptions of the ports, both in China and the States, has extended lead times on
material.”

Lead times also have extended for manufacturing equipment.