Coping with a Skilled Labor Shortage

Labor trends in US manufacturing

As we mentioned in the Megatrends post, US manufacturers are facing a number of headwinds when it comes to sourcing their labor.  These manufacturers differentiate themselves by employing a skilled labor force to create products.  However, Most US manufacturers are small firms with 75% of them employing 20 people or less.

The competition for skilled labor is only going to increase over the next 10 years as 3.5 million workers will be needed in the sector.   The small manufacturing firms are powerless to push back against the Megatrends.  The workforce is changing as Baby Boomers are exiting the workforce, and more and more people move into cities.

All the external pressure on the workforce creates a difficult environment for a company to grow.  A business will find it challenging to meet demand, implement innovative solutions, and increase productivity during peak demand.  This means the business must get the most utilization out of their skilled labor to just keep up.

Skilled Labor Levers

When charting a strategy, a business has three options to select from:  1) Do nothing and maintain the status quo with limited to no growth potential, 2) Hire skilled labor and start a price war eroding profit margins or maintain the same rate and likely hire the low quality labor remaining in a tight labor market, or 3) Increase productivity with the Veryable on-demand labor marketplace.

The Veryable platform is a new operational tool for businesses to capitalize on growth opportunities by flexing general labor into the workforce without the constraint of a long-term commitment.  To keep skilled people mission focused, the Veryable platform provides an easy option to find general labor.

Recommended Approach

Shifting non-value add work to general labor frees up capacity for skilled labor to focus on their work.  If you take a hard look at a skilled labor person’s day, you will find that they spend a good chunk of the day not performing skilled work.  A welder spending 20% of their day welding has the opportunity to increase their welding output 4x by utilizing general labor to prep, clean, and move materials.

Veryable is the on-demand platform to find and flex general labor to better utilize skilled labor.  In a tight labor market, getting more out of the people you have is the most accessible and scalable avenue at hand.

Lean vs. Six Sigma

Many people today tout Lean Six Sigma as a common tool to drive process improvement across industries and functions.  You may think that the two are one in the same, but Lean methodology and Six Sigma are two distinct tools to achieve performance improvement smashed together under one banner: LSS

Six Sigma

Six Sigma is oriented towards identifying and removing causes of defects and minimizing process variability.  The six sigma name references 3.94 defects per million, which is six standard deviations between the mean and control limits. Conducting a Six Sigma improvement project involves collecting data on the process, inputs, and outputs.  The practitioner then statistically analyzes the process data to understand capability and improvement opportunities.

This approach makes sense for a stable and repeatable process that serves customer needs and is not anticipated to change.  Six Sigma is not well suited for updating a process for changing customer demands or a technological disruption.

Lean Methodology

Lean is a method and tool set focused on creating or re-defining a process, so it’s more capable to respond to changing customer demand and to eliminate waste.  While executing a lean process design, the project leader will lead the team through process mapping analysis to define the future state and then compare this against the current state to identify and quantify areas of waste and barriers to change.  

In lean, waste definition extends beyond the obvious material consumption or wait times and into reducing handling and touches, ahead of schedule production, and wasted effort such as re-work.  The lean framework will cause a critical look at the entire process and certainly question the time and effort tied up in quality control processes.

In a manufacturing environment, the lean process is setup to accommodate the needs of the customer as reducing their waste is a logical focus and result of the lean project.  A lean process methodology grounded in serving the customer what they want and when they need it will win that customer for the long term.

Future Vision

As a first step, companies need to think of their desired outcome of the project.  Lean and Six Sigma are both means to performance improvement. However, they both lead to different types of results and continuous improvement mindsets.  Six Sigma will deliver the process improvement, and Lean will create a process toward satisfying the customer needs.

With Industry 4.0, the real possibility of LSS methodology is here.  The automation of real time data acquisition and analytics to identify the appropriate process sequence, to schedule preventive maintenance, and to drive out bad lots of raw materials.  The Internet of Things is the piece that will truly allow the convergence of Six Sigma and lean into a unified tool for performance improvement.

At Veryable, we have a flexible, on-demand labor solution to capture the operating gains and incremental revenue identified by a rigorous process improvement project.  Check out how you can use on-demand, flexible staffing to improve your performance at www.veryableops.com or let us know if you are interested in Veryable Operation Services (VOS) to drive performance improvement.

Closing the Skills Gap

The Skills Gap Problem

The manufacturing industry is booming, and soon there will be more jobs than workers.   Where have all the workers gone?  They are retiring at an alarming rate, and the manufacturing industry has failed to appeal to the younger generations.   Traditionally, manufacturers have looked to technical schools, unions or apprenticeship programs to provide skilled labor.  The problem with these traditional models is they aren’t working for the new workforce.  The training and apprenticeship programs are too long, too expensive and have too much turnover.

The Veryable Solution

So how can a business in today’s environment solve their skills gap problem?  There are really only four solutions:

Expand manufacturing to a new group of workers: The Veryable model is already bringing a younger, more diverse group of workers to the manufacturing, distribution, and warehousing sectors.
Increase the capacity of current skilled workers: The Veryable model enables businesses to bring in general laborers to free up the time and capacity of their skilled workers to complete the high value tasks.
Train general laborers for your skills needs: The Veryable Elite Skills Training (VEST)* program is designed to help businesses connect with workers trained specifically for the business’s labor needs.
Pay above-above market rates: Businesses don’t have the ability to pay above-market wages, and the Veryable model doesn’t require them to do so.

*The Veryable Elite Skills Training (VEST) Program

The VEST program is a new program designed to help businesses connect with workers trained specifically for the business’s labor needs. Veryable has partnered with Meritize to offer free training programs to the workers on the Veryable platform in skills such as welding, machining, and commercial driving. How are these training programs different than traditional training programs or apprentice programs?

Cost: Free to both the workers and the businesses.
Time: Training programs can be completed in as little as 6-8 weeks.
Skills: Training programs are geared toward the specific needs of the business.
Commitment: Workers must remain in the VEST program for a minimum of one year.

As you can see, the Veryable model is able to solve the skills gap problem for businesses using a multifaceted approach.  For more information about Veryable on-demand labor model or to learn more about the VEST program, please view our website at: www.veryableops.com.

Why Independent Workers Are Taking Over The World

Millions of people around the world are waving goodbye to the traditional cubicle work life and saying hello to independent work. In a 2016 report by the McKinsey Global Institute (MGI), we can explore the numbers and the reasons why so many people are making the switch.

Why are millions of people defying the norm of a full-time office job? Recent research shows that “independent work” is increasing within the working-age population. MGI’s 2016 global survey showed that up to 30 percent of the working-age population earn income through independent work. Veryable offers employment in this category as on-demand labor, where operators get to choose what work opportunities to bid on.

On-demand labor offers freedom and flexibility to the worker. The autonomy experienced with on-demand labor is one of the key reasons millions of people have been joining this labor pool. This allows for individuals to manage their personal work-life balance in the way you prefer. Operators choose the work and hours they want, and get paid quickly. Short-term opportunities offer an opportunity for workers to break up the mundane and gain experience with several different businesses.

Better yet, this kind of work is truly for everyone and anyone. The MGI survey reports that this workforce is incredibly diverse in terms of age, gender, education, and income level. You have a place here.

Although people choose on-demand labor for different reasons, the study reveals that those who choose to earn their primary living as an independent worker are highly satisfied with their work. Not ready to commit to the lifestyle? The study also reports that those who are classified in the casual earner category, meaning they supplement their primary income with this kind of work, are also more satisfied than those with traditional jobs. Higher satisfaction includes categories such as overall work life, hours worked, independence, atmosphere, empowerment, creativity, flexible hours, and recognition.

With a wide variety of viable choices of work opportunities on Veryable’s online platform, job satisfaction will only continue to rise. Using an on-demand labor model such as Veryable could allow you to earn the supplemental income you’ve been hoping to improve your finances. Additionally, the study reveals that millions of workers in traditional jobs desire to make the switch to independent work. What’s holding you back?

If you want to join the millions of people already in the on-demand labor pool, Veryable is the place to be for manufacturing, logistics, and warehouse work. Download the app on your iPhone or Android device by registering at www.veryableops.com. For more information on the McKinsey Global Institute’s survey, view their report here

The New Tax Reform might benefit YOU as a Veryable Operator

After President Trump’s new tax reform was implemented this past February 2018, being an independent contractor might be the best option for you this year.

For the longest time, W-2 employees paid lower taxes compared to independent contractors and also received more benefits, but not anymore! The tax new law offers a more direct benefit for independent workers.

You might be wondering how does the new tax reform benefit independent contractors? Well, the new tax law lets “independent” workers deduct 20% of their income before paying the new, lower individual tax rates signed into law by President Trump.  As an independent contractor, this will significantly reduce your federal taxable income. The pass-through deduction can easily save you thousands of dollars overall in taxes.

The new tax reform is likely to encourage more people to make the switch from employee to independent contractor.  Switching from employee to independent contractor is being considered a top strategy to maximize your future tax deductions. In fact, Intuit, the maker of Turbo Tax, predicts the gig economy will almost double to 7.7 million workers in 2020.

On previous blog posts, we’ve talked about the many benefits of working as a Veryable operator and being an independent contractor.  Now, with the new tax reform, the benefits just keep adding up. If you are already a Veryable operator, the new tax form will make you love your work even more than you already do; however, if you still aren’t, now is the time to make the switch to an independent contractor and start to enjoy all the benefits.

If you are tired of working for someone else and you’re ready to make the switch once and for all, become a Veryable operator today!  You can get started today by downloading the mobile App from our website: www.veryableops.com.  You can also download directly from the Apple store or Google Play, or complete our Web Form if you’re away from your phone.  For any questions, please feel free to reach out to the Veryable recruiting team at (214) 310-0424.

Hidden among the other 37%

The November jobs report released last week showed another step in the right direction for the U.S. economy as unemployment rate fell to 4.6%, the lowest level since 2007.  The economy added 178,000 jobs in November continuing the momentum that has kept unemployment rates steadily at or below 5% throughout 2016.  The primary factors behind the unemployment rate improvement in November: number of jobless workers decreased, number of people with jobs increased, and the total size of the labor force decreased.  Yes, that third point counts as a “good guy” in the calculation – that the size of the labor force decreased.

The labor force participation rate fell to 62.7% in November, the lowest number since 1978, and has been on a consistent downward trend over the last 10 years.  Economists project this number to continue to decline by approximately 0.2% per year over the next 10 years as the number of retirees, i.e., Baby Boomers, outpace the number of new entrants into the workforce.  The labor force participation rate is often an overly politicized statistic, and the Chicago Tribune points out in a recent article that a focus on labor-participation drop is a losing battle.  While we agree that most of the underlying dynamics relate to inevitable demographic shifts in the U.S., no one can argue that there are some problematic issues imbedded within the data.

Prime-Age Male Labor Force Participation

In June, The Atlantic released an excellent article called The Missing Men shortly after the White House released a report called The Long-Term Decline in Prime-Age Male Labor Force Participation.  Both the article and the government report highlight an unfortunate trend among working age men – that they are not working as much anymore.  As shown in Figure 1 below, labor force participation rates for prime-age men has been on a steady decline since a high of 98% in the late 1950s, now coming in around 88-89%.  Among prime-age men, this number is less than 80% for those that did not graduate from high school and less than 85% for those with high school degrees but no college.

Figure 1

The Atlantic explored four potential, and often cited, hypotheses behind this trend: Are they in school?  Are they on disability?  Are they stay-at-home dads?  Are they in prison?  While statistics show that each of these have been on an upward trend over the last few decades, The Atlantic article concluded that these four factors alone were not sufficient to truly explain the phenomenon.  As explained in The Atlantic:

“But behind all of these trends, there is a larger story: the decline of sectors [historically] dominated by male workers. In 1954, the highwater mark for male participation, the manufacturing and construction sectors accounted for nearly 40 percent of all jobs.  Now, after the long decline of manufacturing and the end of the housing bubble, they account for just 13 percent.  These are jobs that men without a college degree can count on, and they’re much rarer than they used to be.  The White House report notes that ‘when the share of state employment attributable to construction, mining and to a lesser extent manufacturing are higher, more prime-age men participate in the labor force.’  In other words, men are more likely to work in areas where the state directly subsidizes employment in male-heavy occupations.

But the private sector is shifting toward work that has historically been done by women. There are four occupations expected to add more than 100,000 jobs in the next decade: personal care aides, home health aides, medical secretaries, and marketing specialists.  All of them currently have more female workers than male.  ‘Some of the decline in work among young men is a mismatch between aspirations and identity,’ Lawrence Katz, a professor of economics at Harvard University, told me last year. ‘Taking a job as a health technician has the connotation as a feminized job. The growth has been in jobs that have been considered women’s jobs—education, health, government.’”

Mismatch Between Aspirations and Identity

Professor Katz’s remarks reminded me of a question that was recently posed to me: “Why do people believe manufacturing is better than services?”  My short answer was that it would be inappropriate to describe one over the other as “better.”  That said, there are some inherently positive externalities about manufacturing that should be acknowledged as significant and worth preserving.

In addition to the purely economic benefits of a strong manufacturing sector, there is a real sentimental aspect that promotes honorable behavior: one that tends to lie in nostalgia of a prior generation.  Many Americans can remember a father, mother, or grandfather that came home from a long day at the plant, and feel a sense of pride and admiration toward that person.  These family members were often first generation immigrants or had no higher-level education, yet they were able to return from a hard day’s work carrying the pride of building something; being responsible for a tangible product that people used and depended on.

These are reasonable aspirations for today’s prime-age workers.  Communities are better off when workers can take pride in building something meaningful like a car, jet engine, or steam turbine instead of a latte.  At Veryable, we believe that emerging developments in Digital Manufacturing techniques and solutions are about to re-introduce these opportunities to the U.S. worker.  To see how you can capitalize on these opportunities, please view our website: www.veryableops.com.

Megatrends: Future Impact on Operations

If you poll any CEO today and ask him or her “what keeps you up at night?” chances are you will get a response that relates to at least one of a small number of “global megatrends.”  These megatrends represent the large scale transformative developments that are currently reshaping the global economic and commercial landscape.

PwC defines five specific megatrends:

1) Demographic Shifts

2) Shift in Economic Power

3) Accelerating Urbanization

4) Resource Scarcity

5) Technological Breakthroughs

While each of these has a significant impact on all facets of a business, this blog will explore the specific impact on labor for core operations such as manufacturing.

More information on megatrends, in general, or results of the annual PwC CEO Survey, you can visit the following pages: PwC Megatrends, PwC CEO Survey

Demographic Shifts

Countries across the world have very different demographic trajectories.  For most of the developed world, birth rates are declining and life expectancies are increasing.  Other regions, young and growing, are creating larger labor forces and attracting many blue-collar jobs overseas.

On the surface one would infer that the demographic shifts in the U.S. would present an excess of work opportunities in manufacturing as an aging population leaves the workforce, but this has not been the case.  The draw toward lower cost labor abroad and technology-enabled productivity advances have displaced more jobs than have been vacated by demographic changes.  In addition, would-be retirees, still reeling from the last recession, have remained in the workforce holding back some mobility for the next generation of manufacturing workers.

The real challenge for manufacturers will arrive in the next 5-10 years as the final wave of Baby Boomers exits the workforce and leaves a substantial hole in the labor market.  Companies need to be planning ahead on how to attract a new wave of workers to manufacturing, specifically the Millennials.  Like every subsequent generation, this group (to generalize) has a unique set of priorities and needs – many of which value freedom, flexibility, and individuality.  As discussed in a prior blog called An Evolving Workforce, we believe that a new labor paradigm is the key to assimilating this important group of future manufacturing workers.

Shift in Economic Power

Realignment of global economic activity is currently transitioning growth regions from centers of labor and production to consumption oriented economies.  Globalization gives rise to new competition from new geographies and sources and different competitor profiles are emerging rapidly.  In addition, competing versions of capitalism, nationalistic sentiment, and planned economies create an uneven and unpredictable global playing field.

The impact here lies around maintaining a robust manufacturing strategy and supply chain resiliency in light of a tremendous amount of geopolitical uncertainty.  Establishing distributed operational footprints has never been more important and accessible, but potential risks continue to mount as well.  As a result, operational footprints must be assessed and restructured these days in shorter time increments to avoid exposure to changing economics, political policies, purchasing power, and demographics.  Higher frequency restructuring demands lower cost to scale, thus more flexibility around labor supply management.

Accelerating Urbanization

The United Nations Department of Economic and Social Affairs estimates that over 50% of the world’s population will be living in cities by 2030, up from 30% in 1950.  While much of the urban population growth is expected to take place in developing countries in Asia and Africa, developed nations will also experience the phenomenon as they progress more toward primarily services oriented economies.

The effects of accelerating urbanization are already being felt by a large percentage of manufacturers through their efforts to recruit talent.  Many manufacturing facilities in high cost countries reside outside of urban centers, either on the periphery or within smaller communities.  In fact, many smaller communities owe their conception to the one business that set up shop and attracted jobs to the area.  Many modern day “company towns” still exist.

Over the next decade, manufacturers will be forced to adapt to accelerating urbanization.  Either they will need to restructure their footprints to better align to higher concentrations of potential labor or find innovative ways to attract, pool, and/or share labor within a wider geographical bound.

Resource Scarcity

The growing global population and demands for energy will continue to increase the importance of securing resources domestically and internationally via strategic relationships.  These concerns will likely introduce more conflict and political tension, as well as an increased level of regulation.

While much of this concern applies to security of supply on the raw materials side, the impact extends to manufacturing labor in terms of the market’s response to new challenges, e.g., the creation of new industries and disruptions of existing industries.  These changes accelerated by the introduction of new disruptive technologies.  The micro economic power shifts will need to be fueled by a responsive blue-collar workforce: one that can be mobilized quickly and scaled in finite increments with minimal upfront capital.

Technological Breakthroughs

The combination of the internet of things, mobile devices, data analytics, cloud computing, and automation is about to rapidly transform the manufacturing sector.  We will discuss the impending technology disruption in more detail in a future blog, but digital manufacturing solutions are already entering the market that will have a profound impact on manufacturing labor.  Joe Kaiser, CEO of Siemens, commented on the future of the manufacturing workforce saying that “remaining human resources will need different skills than workers used to have… people will still be in the factory, but they will be doing different work than they used to.”

What is on the horizon is massive redistribution of operational intelligence.  What used to be acquired through training and shop floor experience and hosted in the minds of operators is being harnessed and managed in operational intelligence platforms.  These platforms have the ability to control equipment, send real-time alerts, manage shop floor priorities, deliver real-time work instructions, etc.

As Mr. Kaiser alludes, manufacturers must anticipate how this will transform the tasks and responsibilities of the individual.  At the same time, workers will be forced to acknowledge the shift and embrace a new paradigm that is combatable with the changing environment.  At Veryable, we believe this introduces a transformative opportunity, not a threat, for the labor force.  That is, leveraging the operational intelligence embedded in companies to create a more fluid market of work opportunities: one that requires fewer training hurdles, provides workers with real-time operator enablement tools, and allows workers the flexibility to maintain multiple simultaneous work relationships and opt in at their discretion.  We call this the on-demand economy for manufacturing.

For more information about the on-demand labor for manufacturing and warehouse applications, please view our website: www.veryableops.com

An Evolving Workforce

Manufacturing Technology and the Impact on Human Capital

In a recent interview with Strategy+Business, Joe Kaiser, CEO of Siemens, commented on the future of the manufacturing workforce saying that “remaining human resources will need different skills than workers used to have… People will still be in the factory, but they will be doing different work than they used to. Reskilling workers is a lot of hassle.”

Mr. Kaiser was referring to the effect of new developments in manufacturing, often described as Industry 4.0, Digital Manufacturing, or IoT for Manufacturing, and how businesses will need to adopt human resources strategies accordingly.  Technology will continue to enable businesses with better tools and intelligence to meet more demanding customer needs, and labor will need to have a complementary level of flexibility.

Opportunity to Change the Equation

At Veryable, we see this not as a threat, but as a major opportunity for the manufacturing workforce as a whole.  Embedded intelligence into the production process means shorter training periods for workers, more dynamic work experience, and potentially more options for workers.  Plants and warehouses will still need people to operate them.  This opens up the door for on-demand labor, where temporary staffing becomes the new normal versus the exception, and the worker is no longer held hostage to a single trained skill, a single plant, or a single company.

The On-Demand Labor Opportunity

On-demand labor for manufacturing will give workers the freedom to choose where to work, how much, and when.  Veryable staff can essentially create their own personal value propositions based on the type of work offered, proximity to their homes, how much the operations will pay them, etc.  Considering the changing demographics of the labor market, we believe this model appeals more to today’s workforce that places a high premium on choice, variety, and work-life balance.

The fact of the matter is that the manufacturing sector needs new generations of workers and new generations need manufacturing to rebuild a strong middle class.  This is the right time for an on-demand labor model for manufacturing and we believe that there is a tremendous amount of potential imbedded in the labor market that needs to be channeled back into this sector.