turers are looking for help in reducing
costs, creating more stability in production processes and establishing
more comprehensive sourcing and
As consultants specializing in nearly
all sectors know, relatively high unemployment rates are, at best, an imperfect indicator of the state of the
talent supply. “We see a great deal of
competition for labor among manufacturing employers,” reports Seattle-based Point B Practice Director Chris
Olsen. Despite the gloomy chatter
about U.S. unemployment, domestic
manufacturers have quietly added
about 500,000 jobs since early 2010.
The big workforce picture is more
complicated. Since 2003, the total
number of U.S. manufacturing employees dropped by nearly 25 percent. The U.S. unemployment rate
remains high at just under 8 percent,
so the supply of recently and not-so-recently available manufacturing
workers should be relatively high.
But it’s not. Try finding an engineer
or that highly trained employee who
can operate the freshly installed automation tools on the shop floor.
“The person who can work the
new computerized production equipment and ensure that the company
gets the most out of that technology
investment is very valuable right
now,” asserts Steven Menaker, a
Charlotte, N.C.-based assurance partner for McGladrey and the Eastern
region leader of his firm’s manufacturing and wholesale distribution
practice. Or, try finding machinists,
operators, craft workers, distributors
and technicians in some parts of the
U.S. or almost any corner of an
In the near future, “talented human
capital will be the most critical resource differentiating the prosperity of
countries and companies,” Giffi says.
Bain & Company Partner Peter
Guarraia, who heads his firm’s North
American operations practice, notes
that the retirement of baby boomers
will exacerbate the manufacturing
skills gap, particularly within aerospace and defense companies. “There
will be significant capability gaps in
core manufacturing skills like welding, pipefitting, electrical work and
diesel engineering that will hinder the
ability of key industries to grow,” he
explains. If U.S. companies respond
to these skills gaps by using overseas
partners or operations to source this
type of work, they risk further, even
permanently, diminishing the domestic supply of some core manufacturing skills. “Once gone, it’s unlikely
those capabilities will return,” adds
Guarraia, who points to the ability
roll thick-plate steel as one example
of an extinct U.S. competency.
Deloitte’s “Boiling Point” report,
conducted with The Manufacturing
Institute last year, found that U.S.
manufacturers could not fill as
many as 600,000 skilled positions
last October (when the unemployment rate was higher). The report’s
survey of 1,123 manufacturing executives indicated that 5 percent of
manufacturing jobs were unfilled
due to a lack of qualified candidates. This lack hampers agility, a
keen need most manufacturers share
given global competition and
volatile resource prices.
An October 2012 analysis con-
ducted by the Boston Consulting
Group puts the number of “highly
skilled” manufacturing positions cur-
rently unfilled at closer to 100,000.
While the manufacturing skills gap
“exists and must be addressed,” says
BCG Senior Partner Harold Sirkin,
the issue is “very localized” and more
of a problem in “larger communities
where supply and demand evens out
more efficiently thanks to the bigger
pools of workers.”
Regardless of its magnitude, the
skill gap appears more acute at mid-
sized companies. A couple of years
ago a roughly $100 million U.S.
manufacturer that supplies equip-
ment to oil and gas companies saw
demand for its product soar thanks to
the North American boom in shale
gas extraction. But the company
could not meet that demand as
quickly as it hoped, reports Menaker.
For years, the outsourcing (and offshoring) of manufacturing jobs to
China, India and other emerging-economy nations was driven by a
simple math problem: extremely
low labor costs added up to big savings. Today, the values of the variables in this equation are rapidly
changing. Rising overseas labor
costs plus impressive U.S. productivity gains plus rising supply chain
risks and shipping costs plus the difficulty of managing long-distance
relationship just may equal a U.S.
manufacturing renaissance, according to BCG and other firms.
“The U.S. is starting to become
more attractive,” notes Chris Olsen.
“Even with higher direct labor costs,
the advantages of having work performed more locally can outweigh
the increased cost of touch labor. As
fuel and transportation costs increase, local manufacturing becomes