Manufacturers Need Workers. Funding Large-Scale Training Programs May Be the Answer

Optimistic – that’s the word many manufacturers are using to describe their economic view of the next 12 months. According to the National Association of Manufacturers Q3 Manufacturers’ Outlook Survey, 90 percent of respondents are positive about their own company’s outlook over the next year. The expected growth rate for production and sales is 4.5 percent, while the growth rate for capital investment over the same period is expected to be 2.7 percent.

But that doesn’t mean manufacturers aren’t facing tough challenges. Second only to rising healthcare costs, attracting and retaining a quality workforce was cited by 72 percent of respondents as their biggest overall business challenge. And that’s a hefty concern.

The manufacturing workforce has been impeded by two “waves” over the last 25 years –offshoring and automation with digitization. While more manufacturers are bringing jobs home today, the reality is that there is a gap between the existing available workforce and the skill sets necessary to meet the requirements of these positions.

Some progressive manufacturers, including some of our own customers, are responding to this challenge with big investments.

One example that’s received national attention is BMW’s U.S. manufacturing operations in Spartanburg, South Carolina. The company invested $1 billion in two years to increase the plant’s capacity to 450,000 vehicles, increase employment to 9,000 associates and add production of the new X7 line. Part of the company’s investment has been in the BMW Scholars Program – an opportunity for students earning a manufacturing-related degree to obtain tuition assistance, go to class full-time and work part-time at BMW Manufacturing. This program is a partnership with three local technical colleges in South Carolina and is successfully helping reinvigorate the region’s economy.

PrimeRevenue customer Michelin North America, also located in the upstate South Carolina corridor, offers something similar – the Michelin Technical Scholars Program, which provides opportunities for select students to develop hands-on work experience (with competitive pay) while earning their degree in Mechatronics, Mechanical Engineering Technology (or Electronics Engineering Technology). Another customer, Mann + Hummel, has also made significant investments in educating a rising workforce through collegiate alliances in North Carolina.

To be effective and produce qualified workers who can close the skills gap that plagues many of today’s manufacturers, these programs demand significant capital investment. Educational partnerships, scholarships, on-the-job salary and wages, facilities and equipment…the list of projects that require funding goes on. For many manufacturers, new debt or cuts in other areas is not a viable solution.

This brings me back to a point my colleague, PrimeRevenue CFO Nathan Feather, made in a recent blog post entitled “Making the Case For Mavericks.” What do you do when your company needs not just a few million dollars, but $500 million or $1 billion? What happens when substantial funds have to be routed to critical problem-solving investments?

For many manufacturers, such as Michelin, AGCO and Mann + Hummel, the answer has been a supply chain finance program. Improved control over cash flow has enabled them to unlock billions in working capital – money that has been used to solve big business challenges. I should also note that it’s not just these large businesses that have benefited – their suppliers have also realized the transformative power of more control over their cash flow.

Manufacturers today have a lot of reasons to be optimistic – even in the face of challenges like attracting and retaining workers. A sizeable investment in this area today could change the landscape of the manufacturing workforce.