Manufacturing is an important pillar for many countries and plays a significant role in the global economy. The industry is, however, up against a significant challenge of labor shortage. This issue impacts a wide range of business factors, including quality, competitiveness, productivity, and efficiency. By 2030, Deloitte predicts that the need for more than two million American manufacturing workers will result in a $1 trillion yearly opportunity cost. To ensure the long-term sustainability and growth of the sector, producers must understand this problem and take steps to overcome it.
In this article, we’ll look more closely at the problem of a labor shortage in the manufacturing sector, as well as its causes, effects, and solutions. Let’s first talk about the causes of the labor shortage.
Cause of Labor Shortage in Manufacturing
The manufacturing industry is facing a severe causes of labor shortage due to a combination of factors including the aging workforce, low unemployment rate, low wages, lack of skilled workers, and more restrictive immigration policies.
1. Aging Workforce
Companies are trying to find alternatives as the baby boomer generation reaches retirement age, and many experienced and qualified professionals are leaving the industry. According to reports, 20% of workers in the UK, 1 in 4 workers in the US, and 22% of workers in Canada are over the age of 55 and work in the industrial sector. In South Korea, 30% of the manufacturing workforce is over 50. This is a significant factor in the manufacturing workforce shortage since it leads to the loss of valuable knowledge, experience, and skills. Filling worker shortage with the necessary qualifications and expertise to fill the vacant roles is also becoming more difficult.
2. Low Unemployment Rate
When unemployment is low and skilled labor shortage is on its peak, many people opt to remain in their existing positions rather than take the risk of looking for a new one, making it more difficult for companies to find qualified candidates. This is a significant contributor to the manufacturing labor shortage since it restricts the pool of people that companies can hire from.
3. Low Wages
The fact that many positions in the manufacturing sector pay low wages is one of the factors causing a labor shortage example. Due to the possibility that individuals could locate better-paying employment elsewhere, this can make it challenging for businesses to recruit and retain employees. Low pay can restrict workers from pursuing manufacturing jobs because they may not see it as a long-term career option. It makes it more difficult for businesses to hire and retain employees.
4. Lack of Skilled Workers and Higher Demand for Tech-Related Skills
There is a shortage of people with the required qualifications and experience, and many manufacturing roles demand specific skills and knowledge. This is especially true for high-tech manufacturing roles in sectors like aerospace and military, where it is the main reasons for labor shortage. Due to a skill gap, almost 10 million manufacturing jobs are still vacant.
Industry 4.0 has triggered a rise in the need for individuals with tech-related skills like automation and robotics, as many manufacturing companies are investing in technology to increase production and efficiency.
5. Attraction and Retention of Workers
Some companies are not able to attract and retain enough workers due to a lack of competitive wages, benefits, or working conditions.
6. Immigration policies
More restrictive immigration laws may make it more difficult for businesses to hire workers from other nations, worsening the labor crisis. It restricts the pool of skilled individuals that businesses can hire.
These causes collectively have led to the current labor shortage in the manufacturing sector, which does have a bad impact on the manufacturing industry.
Impact of Labor Shortage on the Manufacturing Industry
Manufacturing companies rely heavily on human labor; thus, when there is a labor shortage, they may need help to satisfy demand and production deadlines. This may result in higher expenses, increased delivery times, and decreased product quality.
The manufacturing sector may be impacted by a labor shortage in a number of significant ways, including:
1. Increased Costs
Companies may have to raise wages and perks when there is a labor shortage in order to attract and retain workers. This may result in higher labor costs, negatively affecting the bottom line.
2. Delays in Delivery Times
Businesses may have trouble meeting consumer demands if there aren’t enough workers to meet production demands. Delivery delays can have a negative impact on customer relations and the reputation of the business.
3. Decline in Quality
Companies may have to rely on less qualified or experienced people to fill vacant positions when there is a labor shortage. Since these workers might not possess the same level of competence as those with greater experience, the quality of the products may suffer as a result.
4. Dependence on manual labor
Due to the labor shortage, businesses may be forced to use physical labor more frequently, which might result in increased costs and errors.
To solve this problem, businesses must invest heavily on finding new ways to train and support the workforce. Augmented Reality helps the industrial enterprises achieve this through products for next-gen training approach and instant remote collaboration.
Let’s discuss each of some strategies to overcome labor shortage in the manufacturing industry.
How to Overcome Labor Shortage in Manufacturing: 6 Strategies
One of the most essential steps towards effectively addressing a labor shortage in the manufacturing industry is identifying areas of “bedrock”. These could include specialized skills or competencies relevant to the production line, such as welding or machining, or general skills that all personnel must possess, like problem-solving and effective communication. By understanding which skills are needed and in what area, manufacturers can create long-term strategies for recruiting and retaining personnel to meet their technical needs.
Companies in the manufacturing sector can reduce their reliance on human labor and increase productivity and efficiency by investing in automation and robotics as it seems to be perfect manpower shortage solution. By automating time-consuming and repetitive processes, automation can help employers save on labor expenses by freeing up staff time for more difficult and important work. Automation can also help to increase work consistency and precision, lowering the chance of errors and improving the quality of the finished product. The use of Augmented Reality (AR) can also be used to train employees on how to operate and maintain automated systems, reducing the need for additional human labor.
Manufacturing companies can lower their workforce requirements by outsourcing non-core tasks like logistics and warehousing. Companies can concentrate on their key skills, such as production and product development, and lower the number of personnel needed to conduct non-essential jobs by outsourcing these functions. This can save expenditures and help with labor shortages.
3. Training programs
Companies in the manufacturing sector may make sure that their staff has the skills and knowledge required to complete their tasks successfully. Employees can get practical training through AR-based training programs, allowing them to practice in a controlled setting before taking on real-world activities. By doing this, the effectiveness of the training may be increased, and the amount of additional work required to manage and train new hires can be decreased.
4. Recruitment and retention incentives
Manufacturing businesses can recruit and retain workers by providing competitive wages, benefits, and working conditions. By offering competitive compensation and benefits, companies can attract and retain workers who have the necessary skills and experience in the industry. Offering flexible working hours and a healthy work-life balance can also help in lowering the impact of labor shortage.
5. Relaxing immigration policies
In the manufacturing sector, easing immigration regulations may make it simpler for businesses to hire workers from other nations, which may help to address labor shortages. Companies can increase their pool of possible employees and recruit workers with the required abilities and expertise.
6. Apprenticeships and vocational education
A pipeline of qualified personnel for the manufacturing sector can be built by promoting and funding apprenticeships and vocational education. Companies can make sure that there is a consistent supply of competent individuals available to fill vacant positions and keep up with industry demand by investing in apprenticeships and vocational education.
In conclusion, the labor shortage in the manufacturing sector is a significant issue that has an impact on a number of areas of the sector, including quality, productivity, and competitiveness.
There are many factors contributing to this problem, such as an aging labor force, a low unemployment rate, low salaries, a shortage of skilled workers, and difficulties in attracting and keeping employees.
Manufacturers can invest in automation and robotics, give employees opportunities for training and development, and use augmented reality (AR) for training to address this problem. Additionally, other approaches can be taken into consideration to address the labor shortage in the industrial sector, including outsourcing, recruitment and retention incentives, easing immigration laws, apprenticeships, and vocational education.