Lean Labor Strategies Can Help Address Workforce Shortages
Companies that prioritize culture, automation and supportive systems can have an easier time getting, and keeping, the right people in the right roles to increase productivity and keep manufacturing moving.
Author: Paul Parish, Engagement Director, Consulting and Accounting Solutions Team, CliftonLarsonAllen LLP
A shortage of workers is forcing manufacturers to confront one of the biggest labor crises of all time.
The unemployment rate in the U.S. was 3.7% in November 2022, remaining close to September’s 29-month low of 3.5%. In the Northeast Wisconsin Manufacturing Alliance (NEWMA) annual survey released in December, 60% of companies plan on hiring in the first three months of 2023, and in subsequent quarters, over 60% plan on hiring. However, 91% of manufacturers are concerned that they will not find the workforce they need in the new year.
The situation is not new. In 2021, businesses added an unprecedented 3.8 million jobs. But at the same time, the U.S. Chamber of Commerce stated that workforce participation remained below pre-pandemic levels, meaning there’s 3.4 million fewer Americans working now compared to February of 2020.
According to Jeff Anderson, President, Precision Paper Converters and NEWMA board member, several complex forces are at play, diminishing the workforce ready and willing to join manufacturing. While younger employees are leaving jobs in the great resignation, the COVID-19 recession and gradual labor market recovery have been accompanied by an increase in retirement among adults ages 55 and older.
The bottom line: fewer people are looking for jobs, and many bypass manufacturing as a potential career.
And the future doesn’t look much better. According to the U.S. Census Bureau, by 2030, Baby Boomers (born between 1955–1964) will be age 65 or older, and older adults are projected to outnumber children under age 18 for the first time in U.S. history by 2034.
If every unemployed person in the U.S. found a job, we would still have 4 million open jobs.
So, what’s a manufacturer supposed to do?
“Lean” Labor
The concept of lean is not new in manufacturing. It’s been used for decades to increase efficiency and productivity while reducing costs. In lean labor, people move away from repetitive, non-value add activities and focus on revenue-generating activities, ultimately increasing a company’s competitive advantage.
Lean labor and workforce management techniques that give manufacturers real-time visibility into what is happening on the shop floor means manufacturers can redeploy people to more valuable areas, where workers can help reduce delays and avoid extra costs.
While it makes sense to apply lean principles to manufacturing workforce management; the question that remains is how to do it. “The goal is to both upskill people to expand their roles in manufacturing and to automate repetitive tasks that also pose ergonomic risks,” Jeff said. “Lean labor practices do both.”
While many factors can contribute to improved efficiencies in manufacturing, based on more than two decades of experience in manufacturing and leadership roles in the NWMA, Jeff suggests prioritizing:
- Culture
- Automation
- Systems support
- Training
Culture
If you’re not managing culture well and keeping people engaged, turnover can be a problem. Poor retention rates can destabilize culture and create more turnover, increasing recruitment and onboarding costs. According to the Society for Human Resource Management (SHRM), employee turnover triggered by poor workplace culture drained nearly a quarter of a trillion dollars from businesses over the last five years as workers fled caustic environments.
Part of the culture problem is forcing employees to take on the work of employees who have left, even if it’s not a good fit. “When you operate as if everything is in triage, employees are operating only in the moment and not able to create efficiencies or better ways to do things,” Jeff said. “These employees have enough supervision; what they don’t have is adequate coaching.”
Automation
Robotics can handle jobs people don’t want to do, or shouldn’t do. For companies hesitating to incorporate robots into their manufacturing, now is the time. Automation is affordable, cost-effective over time and at scale, and makes the most sense when customized for repeatable tasks.
Systems support
“The amount of time in manufacturing spent on non-value-add steps is mind-boggling,” said Jeff. For many people, the struggle is not a lack of effort but a lack of knowledge about a better way. This is where leaders can make the biggest difference by asking people who use those the systems and processes how they can be improved, and then measuring that improvement upstream and downstream for greater overall efficiency.
Attracting talent to manufacturing
Almost every manufacturer has felt the sting of too few people – some even are forced to reduce shifts while expensive equipment sits idle.
Few manufacturers need to be convinced that lean labor has a place. To achieve the desire outcome, people need to feel valued, and that they have a voice and a stake in the results.
“The world has changed and the ability to attract and retain talent differentiates thriving companies from companies closing their doors,” Jeff said. “For future leaders, investors and private equity firms, turnover rate is a key metric. The lower your turnover, the better your operations are viewed. But reducing turnover and keeping people in more productive jobs requires a new way of thinking and an investment in lean labor practices that pays dividends in a company’s competitive position.”
How do you compare?
How do you benchmark with the leanest in your industry? Ask CLA about our Business Opportunity Assessments – to hear about opportunities to take efficiency and productivity to new heights at your company.
About Paul Parish
Paul Parish is an Engagement Director with CLA’s Consulting and Accounting Solutions Team (CAST). Paul works with companies and private equity firms that have manufacturing businesses to assist in process improvements and overall financial gains. This involves lean manufacturing initiatives, coupled with financial analytics and modeling to uncover opportunities. In addition to several years of public accounting experience, Paul previously held positions of CEO and CFO of closely held manufacturing businesses.
Jennifer Clement is an executive sales and marketing leader specializing in value creation for the C-suite. In her current role at CLA, Jennifer collaborates on strategy with executives of global manufacturing and distribution companies to accelerate results. Previously Jennifer served as a Global Business Acceleration Leader for Complete Manufacturing and Distribution (CMD). During her time with CMD, Jennifer lived and worked in Asia from 2015-2019. Prior to CMD, she spent 10 years in senior care technology. Jennifer started her career at Johnson Controls (JCI) and spent nine years in leadership roles; followed by five years at Rockwell Automation (ROK) leading c-suite strategy and marketing operations.
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