As rising interest rates, poor economic conditions and an ongoing talent shortage continue to plague manufacturers, optimism among industry leaders remains low, according to a new industry report.
The latest Sikich Industry Pulse: Manufacturing and Distribution found that more than half of manufacturers (57 percent) rated their optimism about business prospects over the next six months at a seven or lower on a scale of one to 10. While still on the lower end of the scale, it is slightly higher than last year’s report published in March 2022 when 53 percent of manufacturing leaders rated their optimism a seven or lower on a scale of one to ten. When asked about factors contributing to the low optimism, three main challenges were cited:
- 36 percent cited interest rates;
- 27 percent cited economic conditions; and
- 26 percent cited labor shortages.
Compounding these challenges, manufacturers have had to increase wages to meet labor costs and support employees through an economic downturn. More than half (53 percent) of manufacturers reported increasing wages by 5 percent to 8 percent in the past 12 months, and 22 percent have increased wages by 9 percent or more. Thirty-six percent of manufacturers reported that wage increases over the past 12 months were significantly higher than increases over the past five years.
On a positive note, nearly half of the survey respondents (43 percent) reported consistent or increased customer demand, and 34 percent noted improvements to the supply chain. In comparison, in October 2022, 43 percent of manufacturers reported supply chain issues.
“While manufacturers are working through turbulent economic conditions, customer demand remains consistent – putting an even bigger strain on labor challenges,” said Jerry Murphy, partner-in-charge of manufacturing and distribution services at Sikich. “Manufacturers that invest in talent strategy differentiators today will be able to meet customer demand and weather the economic storm, setting themselves up for long-term success.”
To keep up with consumer demand, manufacturers are focused on talent acquisition. Half of manufacturers plan to increase their workforce within the next 12 months. Of those companies, two-thirds plan to increase their workforce by more than 5 percent, and nearly 20 percent plan to increase their workforce by more than 10 percent.
Manufacturers also reported that talent acquisition is easier than it was this time last year. While only 20 percent of manufacturers can fill an open role in less than 30 days, 79 percent said they could fill open roles in the same amount of time or faster than last year. Factors contributing to improved hiring efforts include a larger available talent pool (reported by 77 percent), enhanced compensation and benefits packages (reported by 31 percent) and streamlined recruitment and hiring processes (reported by 26 percent).
“In addition to increasing wages and benefits, we’ve seen some manufacturers get creative when it comes to their talent acquisition strategies,” said Laura Fischer, a managing director on Sikich’s human capital management and payroll consulting team. “Offering alternative work schedules, strengthening employer branding initiatives and working with external recruiters are all effective strategies to attract and retain a high-performing workforce.”
One area where manufacturers can improve their talent strategies is pay transparency. As defined by WorldatWork, pay transparency is the degree to which employers are open about what, why, how and how much employees are compensated and to what degree they allow employees to share that information with others. Less than one-third (32 percent) of survey respondents already have or plan to have pay transparency policies in the next 12 months. Further, of manufacturers located in states with proposed pay transparency legislation, only 28 percent have or plan to implement pay transparency policies.
“As manufacturers look to increase their workforces to meet customer demand, pay transparency is an effective way to attract talent and exude a forward-thinking, inclusive culture,” added Fischer. “Especially as more states propose regulations, manufacturers that move towards pay transparency today will be better prepared to maintain compliance in the future.”
Sikich surveys manufacturers and distributors multiple times throughout the year on a range of business topics to create industry benchmark data. In March, Sikich surveyed more than 130 executives from manufacturing and distribution companies across sectors including industrial equipment, wholesale and distribution, metal fabrication, food and beverage, apparel, footwear and textiles, and transportation.
The latest Sikich Industry Pulse: Manufacturing and Distribution report can be read here.
Photo courtesy 1620 Workwear
