New Labor Gap Report: Manufacturers are Optimally Staffed only 11 Days in a Month

Labor gap issues could derail the US production lines if HR managers and business leaders don’t recruit and retain soon enough. Manufacturing companies continue to suffer badly due to poor staffing and unplanned supply chain management. According to a recent report, manufacturers are overtly burdened by poor workforce management in their production lines. 11 days in a month — that’s exactly the time for which production lines are staffed appropriately. 62% of the time production lines are either over-staffed or under-staffed. This is happening despite manufacturing companies increasingly automating their systems with Robotic processes and AI-assisted production line management.

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The new industry research surveying the future state of manufacturing in the U.S. examined whether stability is in sight for the sector. The Workforce Institute at UKG identified the urgency of staffing misalignment on the US production lines and the efforts manufacturing companies should take to recruit and retain workforce to overcome supply chain woes.

Labor Gap is the Goliath HR in Manufacturing Sector Must Fight

According to a newly released survey of manufacturing HR leaders by The Workforce Institute at UKG, 4 in 5 U.S. manufacturers are having difficulty keeping up with production demands due to increased supply constraints and ongoing labor shortages amplified by today’s competitive job market. Although a skilled-labor gap has plagued the sector for decades, 87% of the 300 manufacturing HR leaders surveyed feel its impact “more than ever.”

“Volatile demand has been a hallmark of the pandemic era, affecting 83% of manufacturers in the past year alone. This variability exacerbates staffing troubles, impacting people’s livelihoods and well-being,” said Kylene Zenk, director of the manufacturing practice at UKG.

Kylene added, “Looking ahead to positively manifest the future state of manufacturing, more concrete strategies and people-first tools are needed on the front-lines to forecast demand and satisfy the needs of all employees, with respect to real-time market conditions.”

How Bad is the Labor Gap Problem?

In 2021, 63% of the surveyed manufacturers were finding it hard to fill up their existing labor shortages. On an average, nearly one-fourth (24%) of the time production lines were under-staffed. That under-staffing issue has swelled to 38% of the time in 2022. 87% struggle to fill critical labor gaps, manufacturers report frontline facilities are understaffed 38% of the time, while a quarter said they were understaffed at least half the time in April 2022 — up from 14% in 2021.

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The UKG report also found supply constraints and the skilled-labor shortage impact nearly every manufacturer’s bottom line, as 2 in 3 labeled these financial impacts “mild” or “moderate,” while close to 1 in 3 described them as “severe.” Although production demand holds strong, the number of hourly shifts worked in manufacturing has degraded slowly but steadily since February 2022, a result of both the widening labor gap and a shortage of parts and materials forcing plants to cut employee hours.

Employee Exits, Ghosting and the Torrential Labor Market

Behind labor and supply issues, employee absence, turnover, and quality issues hit manufacturers’ bottom lines hardest in the past 12 months, with 29% calling these impacts “severe.” Compared with 2021, at least half of respondents said employee resignations, manager departures, and retirements all increased, while employee ghosting — e.g., when an employee unexpectedly skips a scheduled shift or suddenly stops coming in to work — also gained traction. And, while demand for workers is high, more than 2 in 3 manufacturers (68%) terminated employees in April 2022 citing intolerable attendance issues.

Getting Retention Right with HR Technology and People-Centric Approach

Unlike the IT sector or other industries where it is possible to provide Work from Home and remote working options within a hybrid model, employees in manufacturing units face deeper challenges. They work in shifts, have comparatively tighter schedules, and are often working in hazardous conditions common to a manufacturing company. Despite these issues, HR managers are able to retain and recruit new staff– which is a silver lining. HR Technology tools and the right people-centric approach can take such organizations forward.

Half of HR leaders surveyed said their organizations increased wages for existing workers in the past year, while many raised starting pay for hourly employees (70%) and front-line managers (65%), too. More manufacturers today also offer remote-work options (44%) and flexible schedules (40%).

The majority of manufacturing organizations are working to actively enhance workplace culture (91%) and doing more today to support employee well-being than 12 months ago (89%). They have also committed to several employee-centric goals among their top-five priorities for the year ahead:

(1) employee safety and well-being,

(2) strengthening the supply chain,

(3) diversity, equity, inclusion, and belonging,

(4) recruitment, and

(5) retention.

“Caring is the foundation of strong leadership. Attracting new talent is critical in this moment, but taking care of existing people is good for your bottom line in good times and in bad,” said Zenk. “People have more choices than ever when it comes to employment and what matters to them is changing. Initiatives that make all employees feel safe, heard, and valued is key to retaining your best people and unlocking greater business outcomes.”

Is Employment Stability in Sight for U.S. Manufacturing?

HR leaders in manufacturing are becoming more innovative in hiring and diversifying candidate pools to offset difficulty finding the right people with the right match of manufacturing skills, certifications, and experience, with 63% increasing employee headcount year over year.

Nearly half rehired former employees — i.e., boomerangs — as well as people reentering the workforce after a career break (both 48%), and 38% hired people with no manufacturing experience at all.

“If you can offer training and development or can tailor a job to meet candidates’ flexible qualifications, filling open headcount becomes more realistic in a tight labor market,” said Zenk.

Survey Methodology

Research findings are based on an industry survey conducted by InnovateMR on behalf of The Workforce Institute at UKG from April 20 to 28, 2022, to understand the organizational challenges facing U.S. manufacturers related to the current job market and economic climate. Responses were collected from 308 HR leaders who work for a U.S. manufacturing company, including HR directors (65%), HR executives (19%), HR managers (14%), and other hiring decision-makers (2%). Seventy percent of respondents said their company’s annual revenue is more than $250 million, and 8% said they work for a U.S.-based multinational organization.

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Source: UKG / The Workforce Institute