As manufacturing continues to lead both in statewide and nationwide economic recovery, the sector will still need to address a chronic issue that has only worsened throughout the COVID-19 pandemic.
Talent shortages continue to dog manufacturers across Michigan as many companies have not been subtle about their desperate need for more workers.
“We have employers with facilities that are here, but also elsewhere in the states and across the world, and they are very frank in their conversations saying, ‘If I have to, I will move my employees to (another) state because they have a readily available workforce,’” said John Walsh, president and CEO of the Michigan Manufacturers Association. “That worries me. I want to make certain that we as an industry, and we as a state, put talent development first.”
While the initial stages of the COVID-19 pandemic — and ensuing shutdowns of non-essential operations — decimated the manufacturing sector like it did most others in Michigan, manufacturers have snapped back relatively quickly.
Manufacturers of many segments throughout Michigan are staring at backlogs of orders and demand that is nearly at pre-pandemic levels.
“It’s an interesting time — frankly a lot of the current manufacturing environments are sort of bucking the trend,” said Laurie Harbour, president and CEO of Southfield-based consulting firm Harbour Results Inc. “Automotive is going nuts. We’re selling RVs and boats and trailers and everything that has to do with not vacationing today. Even if you go into medical, you have a lot of West Michigan medical guys making medical stuff. That is driving additional plastic parts and whatever is needed. I look at manufacturing right now and things look like they’re positive for next year.”
Manufacturing has recovered steadily on a nationwide scale as well.
The Institute for Supply Management manufacturing Purchasing Managers’ Index registered at 57.5 for November. Anything above a 50.0 in the index indicates growth, and November marked the seventh straight month of growth in manufacturing.
The sector has been tempered by low inventories as manufacturers struggle to replenish while demand is still strong.
This quicker-than-expected climb back to pre-pandemic levels has many operations humming and looking for additional talent, which hasn’t been easy to find.
Walsh said that in January 2020 the manufacturing sector in Michigan employed 628,000 employees. That number is now around 560,000, showing how understaffed the industry still is compared to pre-pandemic times.
“We have a massive amount of people on unemployment but they’re people out of the hospitality business or travel and entertainment and we haven’t figured out, in manufacturing, how to attract those people into these good-paying manufacturing jobs,” Harbour said. “Talent is your No. 1 issue in 2021.”
And while stimulus money and unemployment benefits are paramount for many American workers, it also leads to more people waiting on the sidelines.
“Too much stimulus and people stay home,” Harbour said. “It’s needed, though. I feel horrible for the restaurants and all those in the hospitality industry. These business owners are going to lose their businesses.”
Bridging the talent gap
Eric Erwin, president and CEO of Ludington-based FloraCraft Corp., had almost no trouble reeling his workforce back in after the company was deemed non-essential and closed down for a period in the spring. That wasn’t by luck, either — it was by design.
“My view going forward is that I need to make sure that I keep my workers safe, secure, healthy and engaged,” said Erwin, whose company produces a wide range of foam crafting products. “That is the No. 1 thing it seems we’ve been focused on in particular in the age of COVID, and I don’t think that’s going away next year.”
FloraCraft requires high labor input for its products, making low-skill, low-wage shop workers a critical piece of its operations.
Erwin and his team have emphasized talent retention and development, and it showed when nearly 100 percent of his 300-employee workforce returned after the shutdown.
This investment in workers includes the FloraCraft Academy, which consists of a series of classes for the company’s top engaged employees.
Erwin said he also strives to provide competitive benefits. In 2018, the company gave almost $4 million directly to employees, awarding a $125 bonus for each month the employee has worked at the company.
“I don’t think enough businesses invest for the future with their current employees,” Erwin said. “We invest in a lot of development both for our most engaged employees — those that are on the shop floor — but also investing in our executives who will be the future leaders to make sure they’re prepared for all the challenges that are going to be in place.”
Opportunities and hardships ahead
Simply existing in the manufacturing space doesn’t necessarily make a business bullet proof. Some manufacturers have used PPP loans as the lifelines they are, but haven’t been able to find solid financial footing as a result.
This dynamic lays the groundwork for potential bankruptcies and consolidation in 2021.
“I definitely think there are some people who made it through with PPP loans that probably wouldn’t have made it prior to PPP — there are still many of them that are on the bubble,” Harbour said. “I definitely think we’ll see some fallout in the coming two to three quarters. I know that restructuring firms are ramping up. They’re hiring people left and right. They know it’s coming. The banks are telling them it’s coming.”
The pandemic also exposed the inefficiencies of the global supply chain, and many manufacturers will take steps to reshore or near-shore their supply chains to avoid future issues.
“I do expect some regionalization of supply chains and that’s really going to help,” Walsh said. “We’ve pared down manufacturing to such a thin line of supply for efficiency sake and cost sake. When you have a disruption anywhere now, it can cause a worldwide crisis in manufacturing.”
“We’re working with our members on how we can inspire more on-shoring and that might be through this regional supply chain or more in a duplication effort,” Walsh added. “Those are real opportunities for us.”