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US manufacturers losing 11% through skills shortages

15 May, 2014

US manufacturers may be losing up to 11% of their earnings as a result of increased production costs arising from a shortage of skilled workers, according to a new survey from The Manufacturing Institute and Accenture.  

Of the 300 US manufacturing executives surveyed, 39% described the shortage of qualified, skilled applicants as “severe,” and 60% said it has been difficult to hire the skilled people they need. Despite this, more than half of respondents are hoping to increase their production by at least 5% in the next five years.

The report – called Out of Inventory: Skills Shortage Threatens Growth for US Manufacturing – notes that if manufacturers are unable to fill roles, then overtime, downtime and cycle times increase; more materials are lost to scrap; and quality suffers.

More than 70% of the respondents reported at least a 5% increase in overtime costs, and 32% reported an increase of 10% or more. As manufacturers used overtime to maintain base production levels, 61% said their downtime increased by at least 5%, because they lacked enough people to run and maintain their equipment. Cycle times also increased by at least 5% at 66% of the companies surveyed.

“The skills shortage facing US manufacturers is apparent from this report and its severity can be measured in dollars,” says Matt Reilly, senior managing director at Accenture Strategy, North America. “US manufacturers’ plans to increase production and grow manufacturing roles over the next five years are positive indicators, but are likely to exacerbate the problem. Given today's limited pool of relevant talent, companies may have to forget the notion of the perfect candidate. Instead they should look for more generalist skills in candidates and develop them to match the specific work that needs to be done.”

“It's getting harder to tell the workers from the managers in today's plants,” adds Blake Moret, chairman of The Manufacturing Institute's Board of Trustees and senior vice-president of Rockwell Automation’s Control Products and Solutions business. “Production workers, engineers and managers all spend a significant part of their day using advanced technology to configure, control and monitor processes.

This infographic, based on the survey, shows how a typical US manufacturer could be losing almost $5m a year through skills shortages
Source: Accenture

“While these skills are in high demand,” he continues, “the number of qualified people who have them is small. Manufacturers will need to invest in training to develop a highly skilled production workforce that supports the advanced technologies that are essential to modern manufacturing competitiveness today.”

To mitigate the skills shortage, the manufacturers tend to spend more for training new staff rather than existing employees, with 55% spending at least $1,000 per new hire as compared to 42% who said they spend at a similar level on training for existing employees. However, the study found no correlation between spending on training and impact on skill shortages.

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