Confronting the Onshoring Workforce Crisis

Workforce planning should be part of every manufacturer’s supply chain strategy, helping to maximize digital opportunities and drive industrial growth.   

For decades, the goal was globalization. In the early 1990s, the end of the Cold War and the growing ubiquity of the internet ushered in an age of new possibilities for American manufacturing, which caused supply chains to sprawl worldwide. Recent years have provided strong incentives to reverse this trend and encourage investment in reshoring. As BlackRock CEO Larry Fink noted in a March 2022 letter to shareholders, we are seeing the “end to the globalization we have experienced over the last three decades.”

Manufacturing today is also plagued by a variety of negative forces from material scarcities to shipping delays to rising costs. At the same time, manufacturers are rethinking their geographic footprints and adopting Industry 4.0 tools and technologies to improve resiliency, meet heightened customer expectations, and decrease risk in the face of continued supply chain disruption. However, an ongoing labor shortage stands in the way of these future plans. Fortunately, there are multiple steps manufacturers can take to address workforce issues and pave the way to continuing success.

Manufacturing Workforce Trends

The manufacturing workforce is aging. According to the National Association of Manufacturers, nearly one-quarter of the manufacturing workforce is age 55 or older. The workforce’s march to retirement was accelerated by COVID-19, which prompted approximately more than 2.4 million Americans to retire early. Nearly all industries were rocked by a mass exodus of employees of all ages during the pandemic, but manufacturing was hit the hardest and experienced a nearly 60% jump in resignations compared to pre-pandemic rates.

Workers now expect more from their employers. Upskilling programs and competitive compensation and benefits policies can help manufacturers meet those heightened expectations to better attract and retain top talent.

Industry 4.0 Success Requires a Human Touch

U.S. manufacturers are aware that they need technology as urgently as they need talent. The 2022 BDO Manufacturing CFO Outlook Survey reveals that 50% of manufacturing CFOs consider falling behind on innovation to be a significant business risk. That risk has compelled 68% to pursue digital transformation in the next 12 months. Manufacturers on the path to digital transformation require personnel with the right skills to harness the technology and make Industry 4.0 investments worthwhile. In this way, digital adoption presents both an opportunity and an added workforce challenge.

Workforce should be a core component of manufacturers’ Industry 4.0 strategies. Investments in technology do not yield adequate returns if workers do not have the skills to use the tools to full efficacy. This challenge will require manufacturers to hire new workers with skills they have not traditionally sought in applicants, which means they may be competing with companies beyond other manufacturers for tech-savvy talent. Manufacturers should make their job offers competitive with nontraditional competitors, such as technology companies, to attract and retain talent with in-demand skills. In addition to hiring, manufacturers should also ensure that their existing workforce is adequately trained in the use of new tools. This requires developing a comprehensive change management strategy to enable the adoption of technology throughout the enterprise.