Two frequent challenges I hear about from manufacturers is the skills gap and the need to become more agile in an increasingly demand driven world.
These challenges are often approached as separate problems within a company. HR is working on improving the company’s recruiting and retention efforts. Operations is focused on process changes such as shrinking batch sizes and reducing changeover times to increase agility.
Recently I noticed a pattern in my customers who were experiencing above average results in both of these areas. These companies are in a perfect storm of HR and operational challenges and their only way out was to dramatically redefine how they manage their workforce.
This perfect storm of challenges consists of a customer base composed of retailers who are driving smaller, more frequent shipments to reduce their own inventory costs and risks. Secondly, these manufacturers’ products are seasonal so they have significant volume variations at different times of the year. Third, the demand for their products is driven by the weather and therefore completely unpredictable from year to year. Finally, they each face significant foreign competition keeping prices and margins low.
Let me share with you two of the many techniques they employ to stay competitive and profitable in spite of this tough environment:
One difference I noticed from the typical manufacturer was that there is an overt effort to design the process around the skills of the people rather than just production efficiency. They separate higher skill operations and lower skill operations. They do this to manage their skilled workforce challenge. The skilled employees are difficult to replace and as a result must be kept employed permanently. During the slow season these skilled employees staff both high skill and low skill positions. During the busy season the skilled lines have the ability to ramp up capacity based on the number of people on the line. The skilled employees then move to this line as required and temporary employees backfill the low skill lines. The operations on the low skill lines are designed so each can be learned in just a few hours.
But even with this ability to flex up and down, the delta in product demand is such that the company doesn’t need 40 hours a week from the skilled employees during the slow season. How does the company retain the skilled employees when there’s only 32 hours of work for months on end? One company employs banked hours. This allows the company to use overtime during the busy season without incurring increased costs. During the slow season employees take the banked overtime off. The benefit to the employees is that the company employs them full-time and pays them a steady paycheck year round. Rather than feasting during the busy season and then fasting during the slow season, the employees are paid regularly which has helped with their personal budgeting.
A second technique one company employs is to look beyond traditional temporary workers. While some companies have filled their temporary ranks with employees that have no better option, others have found a better way. One company has a plant in the Midwest. Their busy season occurs in the fall and winter. This turns out to be the same time that local farmers have some time on their hands. I don’t think anyone can argue that there are harder working and more innovative employees than farmers. The farmers also enjoy the change of pace in terms of regular hours and the ability to work indoors. This symbiotic solution has benefitted both employees and employer while controlling labor costs and inventories.
In these companies, HR and Operations work very closely together to create a blended workforce that provides for the agility to ramp up and down as demand requires but also provides a desirable workplace for both skilled and temporary employees. Manufacturing pays some of the highest wages of any industry. If you are having trouble hiring and retaining skilled or temporary employees, it might be time to rethink who you are hiring and how you are managing them.