When Handing Out Blame for the Manufacturing Skills Shortage, Look In the Mirror Too

For many years, some in manufacturing have been warning about the lack of qualified, motivated talent in the industrial trades. Today, those chickens are coming home to roost.

We’re in the middle of a perfect storm with regards to finding the employees to design & build our way back to prosperity. With much of our higher-paying production – and the ancillary jobs that support it – offshored in the chase for cheaper labor costs, we’re caught with our pants down. As more and more OEMs and large manufacturers are realizing the total landed costs of offshored products & services, the will to reshore manufacturing is tempered by the lack of personnel to accept repatriated work.

I hear daily from manufacturing executives, managers, and C-suite suits what a national disgrace this is. That we have to do something. That we should have seen this coming. Well, I have a message for you all right now.

You’re right, and you helped cause this mess. So what are you gonna do about it?

I want you to consider a scenario, one that I’ve seen evolve in supply chains and manufacturing ecosystems throughout the US over the last 30 years:

Around 1980, a change was taking place that I witnessed in large manufacturing companies across several industries – pharmaceutical, aerospace, automotive, and defense.

Senior engineers with years of experience were in procurement and sourcing within these large firms. Their job was to act as liaisons between their indigenous engineering groups and the suppliers that would provide the parts and compnents to ultimately create final assemblies and products. These seasoned engineers – with shopfloor, design, production, and supply chain experience – ensured that the highest quality was obtained, from the best (re: dependable) source, at the right price. They actually knew the processes that were used to create the components and parts by the suppliers. They knew the suppliers businesses. They could sniff out – and predict – trouble before it happened.

As a good friend of mine likes to remind me, NASA has a term for these types of guys: Steely-Eyed Missile Men.

But 2 things began snow-balling in the mid- to late-80s that neutered these extraordinarily valuable positions:

  • First, many of these older engineers began to retire. Perfectly understandable. Just the way things go. Except then …
  • Many, many of these large manufacturers began to see the supplier-management and sourcing positions as overhead, and they began replacing the highly talented predecessors with more and more inexperienced, inexpensive, recent graduates.

This gradual but real evolution – from recognizing and replenishing the talent these roles required to simply filling seats with procurement specialists that are motivated and measured more by myopic price points – has wreaked havoc on US manufacturing in ways you’ll never see portrayed in economic numbers or productivity statistics.

Total costs are rarely seen or appreciated by executives or the C-suite until they’re slapped upside the head with them. In the short term, they see costs on P&L sheets for divisions or departments and equate ‘improvements’ as shareholder value. That’s ‘Mission Accomplished’ to MBAs & economists.

But on the ground – within the shops and plants of their suppliers – massive waste occurs from this shift to less-qualified sourcing. Where fail-safes were in place to scrutinize tolerances, materials, ancillary processes, technology, and supplier fiscal health & prowess, price has become the primary motivator. The cost of everything, and value of nothing. Again.

There’s no question that there are many capable, talented engineers and sourcing professionals in US manufacturing in 2012. My point is, there are a heckuva lot fewer of ’em today. And it’s part of the skills problem that isn’t so easy to solve.

Don’t believe this is real? Stop in and visit with a small, competent manufacturer that’s been in business for 30 years (if you can find one near you) and ask them. I’ll bet you it won’t take much prodding to hear about their observations, the challenges, and the frustrations they see first-hand from this environment. You’ll hear that the technical savvy in the sourcing and procurement positions of their customers and prospects has declined significantly over this period.

If you choose to see this as a typical rant from an ‘old guy’ wishing for the good old days when we ‘didn’t know what WE KNOW NOW,’ that’s your prerogative.

But it’s no coincidence that the outsourcing and massive offshoring of our industrial base began at just about the same time as did our devaluation of sourcing in US manufacturing. How are you feeling now about those ‘justifiable’ initiatives from ‘back in the day?’

The fact is, we’ve over-commoditized the down-stream nodes in our supply chains in the name of lower costs, just like we offshored our production for the same, basic reason. We’ve done it via an overabundance of inexperienced sourcing agents in competition with the guy in the next cubical over who can squeeze prices down, and who don’t know the difference between electrical discharge machining and super-abrasive grinding – and don’t have the time to care. Which in turn shrinks the margins in the shops of their suppliers, thereby reducing the technical effectiveness on both sides of the fence.

In an environment like this, just who do you think these suppliers will have the money to hire, much less train?

So, thanks a lot. Your multi-million (or billion) dollar manufacturing company took the short-term view, and you now wonder how this could’ve happened?

I think it’s time we don’t just consider what caused our skills shortage and how to fix it, but also what role WE played in this degradation and how to keep it from ever happening again.

AJ Sweatt
  1. Another insightful manufacturing post!

    • Thanks so much for that, Nadra. I’d be really interested to hear what your clients think about this – pro or con. If you can pass it along to a few, let me know. Hope you and yours are well traversing the great wild wilderness.

  2. Interesting insights, AJ. Similar to what has happened in IT, of course, where we had an increased focus on Project Managers, largely to manage the projects outsourced to India and China and Vietnam (although also to manage increasing complexity in the projects themselves, I will admit). Most of these people, in my experience, have no development background or experience, but they are tasked with managing deadlines and resources regardless. So, good coders got replaced or left for greener pastures (i.e. companies that don’t outsource development work). Now when a project isn’t properly scoped or the work is wrong and the project struggles, when the spit hits the cooling fan, the project manager cannot step in to solve problems like a senior architect or team lead could back in the day.

    More recently, companies have been re-shoring IT for the past few years but they’re flooded with resumes of PMs while they can’t find qualified programmers for love or money.

    • No kidding, JF. I thought about dropping the IT analogy, but didn’t want to get too spread out. The pursuit of cheap labor and a ‘too good to be true’ cost structure has hurt a lot of industries. Cutting corners isn’t reserved to any one industry, and I’m sure you have some interesting experiences with that. Thanks for the note, brother.

  3. The ship has left. Interesting thought but you are actually speaking of what would now be a cultural change requiring bold leadership. What Board and investment community do you know of who has a vision for more than a quarter? Another thought, have you noticed what Congress has done lately? We now have a society devoid of leaders and change will have to begin at our Universities who actually started this problem decades ago. I am afraid that change will only come with great pain as we are going to have to sleep in this bed until the great mistakes of this generation are finally realized.

    • Sorry it took so long to respond, Kyle. And I hope you’re still ‘there.’

      Yep, THIS ship has left. But other ships get built & launched. While government does play a role, the fact is that US businesses do too. And that’s where the bold leadership has to come from. We’re seeing (have seen?) the consequences of chasing cheap labor and there are green shoots. And agree with your timbre that we should be skeptical. But I’m hopeful that we still have the smarts, the system, and the wherewithal to bring about & sustain the change you speak of. And it’s up to all of us to keep the pressure and focus on this (and related) issue(s) to bring some sanity back to our policies that support and protect our industrial base.

      Belated thanks to you man. Really appreciated your visit.

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