The skills gap is one of the biggest challenges facing manufacturers today—but what if there was a way to overcome it and fill jobs more effectively and easily? In fact, such a method exists, and it’s called “adaptive skills” development.
Timely topic: The Manufacturing Institute’s inaugural Workforce Summit in Cincinnati, Ohio, covered this topic last month, in a session led by two EY partners. Here’s what they had to say.
- “What are adaptive skills? It’s exactly as you would expect: they’re skills that help an individual learn and expand their capabilities to meet an ever-changing job function, business market [or] home environment,” EY Americas Business Consulting Leader Lisa Caldwell told the audience.
- Developing and leveraging these skills, which include communication and problem solving, helps companies retain a broader workforce, according to a recent joint EY–MI study that built on earlier research from EY and Oxford Said Business School, Caldwell said.
- This is particularly important today, as the U.S. workforce could have a shortage of 2.1 million manufacturing jobs by 2030 if the skills gap is not addressed, according to a joint Deloitte–MI study cited by Caldwell.
Manufacturing-specific skills: In their study, the EY and MI identified three specific adaptive skills “that were highly relevant to the manufacturing industry,” said EY People Advisory Services Partner Stephen Fuller during the session.
- Root-cause analysis: The ability “to understand what the root of a problem is, what the data needed to make a decision is,” as Fuller put it.
- Systems thinking: It’s “all about … asking questions. ‘Who does this? Where does this go? How does this work? When does XYZ occur?’”
- Creative reasoning: The key here is the ability to consider problems from unusual perspectives, said Fuller.
Lessons learned: Caldwell shared some of the major study takeaways that manufacturers can use.
- Create an adaptive culture: “[B]uild a culture that … empowers, a culture that wants collaboration, a culture that encourages and recognizes people who speak up, who bring forward ideas.”
- Parlay adaptive skills into new career paths: “If we build career paths and we define the skills and the capabilities that are needed for those career paths, focusing on adaptive skills as much as the technical skills, I think we have something that could really attract people to want to not only come but stay in manufacturing.”
- Invest in individualized learning: This can include rotating jobs, mentoring, shadowing programs and leveraging technology to create experiential learning for employees, said Caldwell.
- Add adaptive skills to your hiring strategy: “It’s really important that we have classroom training and virtual training that isn’t just slides up on a screen, but is very immersive for people and lets them actually feel and experience … what we’re trying to teach them.”
The last word: Ultimately, closing the skills gap “all starts with skills and infusing adaptive skills into your role profiles,” Fuller said. “[Use] it as a way to connect people to learning experiences that are meaningful for them. That’s ultimately the formula for success.”
Miltec UV operates at the cutting edge of the manufacturing industry, developing new UV lamp systems for curing inks and coatings for everything from optical fiber to soup can lids. But after a tax law change went into effect in 2022, the Maryland-based manufacturer found that R&D became much more expensive—hampering its investments and tamping down its growth.
- Until the beginning of 2022, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. Starting this year, however, a tax law change requires businesses to spread their deductions out over a period of five years, making it more expensive to invest in growth and innovation.
We spoke with Miltec UV President Bob Blandford to understand how the change was impacting his company and consumers in the United States and around the world.
The impact: Because the law changes the way businesses have handled investments for decades, companies like Miltec UV are having to grapple with a significant new cost that they had not anticipated previously.
- “Absent congressional action, we’re gonna get hit hard,” said Blandford. “Our taxes are going to go up dramatically. That’s cash getting sucked out of the business. So that’s going to get pretty ugly.”
A critical moment: Miltec UV is facing this challenge at a time when its leaders believe an exciting new opportunity is right around the corner. The company has developed a new technology for lithium-ion batteries, which could be used for next-generation electric vehicles.
- Over the past 11 years, Miltec UV has developed manufacturing electrodes used in these batteries, which will allow manufacturers to reduce costs and eliminate the toxic solvents used in existing battery manufacturing processes.
Yet, the new tax change threatens to place significant burdens on their development of this technology.
- “The problem is in the auto world; once they say go, it’s about a five-year process,” said Blandford. “They have to prototype, prove it, test it, then make the batteries. And during that time, we need to support R&D and support the business. So amortizing R&D over five years is a showstopper.”
- “We’re at a critical place now—we’re so close to commercializing it—and now we’re having to pay more taxes out,” said Blandford. “It hurts.”
A burden for employees: If not reversed, the harmful tax change will eat into profits, which Blandford is concerned may impact important benefits for employees. Earlier this year, Miltec UV signed on to the NAM Manufacturers Retirement program—an association-wide 401(k) retirement and savings plan—as a way to improve benefits for employees. The program, which has resulted in cost savings for employees, has proved extremely popular, he added.
- However, “The tax change will have a tremendous negative impact on cash flow, so everything will be on the table,” including retirement benefits, Blandford said.
- “Our team is important to us, and the last thing we want to do is have a negative effect on paychecks and benefits,” said Blandford. “This absolutely will have a spillover effect on every part of the business.”
The last word: “Miltec funds 100% of the company’s R&D costs through the profits of its commercial business as opposed to outside investment,” Blandford said.
- “Spreading the R&D deduction over a five-year period means that each year we will now face a higher tax burden due to the inability to immediately deduct R&D expenses. That is real money that is desperately needed to stay competitive with employee salaries, benefits and even to support new R&D positions that we now are trying to fill.”
Get involved: The NAM has deployed a digital R&D Action Center that manufacturers can visit for critical R&D policy updates, industry stories and an opportunity to engage directly with their members of Congress: https://www.nam.org/protect-innovation/
The NAM took its competitiveness agenda on a media tour last week. In appearances on CNBC, Bloomberg and Yahoo! Finance, NAM President and CEO Jay Timmons called for policy moves that will benefit manufacturers and the U.S. as a whole.
Immigration and workforce: Timmons noted that despite the addition of 14,000 jobs in November, manufacturing continues to see a workforce gap of about 830,000 every month. But there’s a solution we’ve been overlooking, he continued.
- “We have 100,000 Ukrainians we invited here,” Timmons told Yahoo! Finance anchor Seana Smith. “We have 100,000 Afghans that we invited here. But we don’t give them the ability to work. We don’t give them a work permit. They’re in line, waiting to get that work permit. That’s just crazy. We have 200,000 people that could work today if we could just get through the bureaucracy.”
Talent: “Right now, things are very good in the sector, and I think it portends for a bright future for the economy,” Timmons told Michael Santoli on CNBC’s “Closing Bell.” However, filling open jobs remains a top priority.
- “The National Association of Manufacturers and the Manufacturing Institute have a ‘Creators Wanted’ campaign [that’s] trying to inspire that next generation, trying to bring more women into the workforce, trying to bring veterans into the workforce, working on second chance hiring,” Timmons said. “We’re doing everything we can to attract folks into the sector, and I think we’re being successful in doing that.”
Keep the change(s): Timmons also discussed the need to keep in place the tax reforms of 2017, some of which expire at the end of 2022. These changes have enabled many manufacturers to invest in their businesses, raise wages and grow.
- “We have had four consecutive years of record wage growth in the sector. That has been made possible … by the tax reforms enacted in 2017,” Timmons said on Bloomberg’s “Balance of Power.” “We have had record investment, record job creation and record wage growth because of those reforms that were made.”
- However, “[i]mmediate expensing, interest deductibility and the research and development tax credit are all coming to an end at the end of this month,” Timmons continued. “We need Congress to renew that to be able to keep those great reforms of 2017 in place.”
In response to advocacy by the NAM and the Kentucky Association of Manufacturers, the Securities and Exchange Commission has granted privately held companies temporary relief from a punishing new rule interpretation that would have required them to expose confidential financial information to the public.
The background: In 2020, the SEC finalized a rule designed to increase disclosure obligations for companies issuing over-the-counter equity securities (“penny stocks”). The following year the SEC published a new interpretation of the rule, to take effect in January 2023, which broadened the disclosure requirement to include private companies issuing corporate bonds.
- Late last month, following an emergency petition for interim relief from the NAM and the KAM, the SEC granted a two-year stay of the new interpretation—so private companies will not face the new public disclosure obligations until January 2025.
- Corporate bonds can only be purchased by large institutional investors (which already have access to issuers’ financial information), not retail investors, so the risks of fraud that spurred the 2020 rule are nonexistent in this market.
A victory—for now: “This is a win for private and family-owned manufacturers raising capital for job-creating investments and planning for growth,” NAM Senior Director of Tax and Domestic Economic Policy Charles Crain said.
Damaging effect: The NAM recently released a study showing the significant economic damage that would result from forcing private businesses to disclose confidential and proprietary financial information publicly. Among the key findings:
- The U.S. economy would lose 30,000 jobs per year in the early years after the new interpretation takes effect, rising to 50,000 lost jobs per year after five years and 100,000 lost jobs per year after a decade.
- Companies would face decreased liquidity and higher capital costs, including an increase in borrowing costs of up to 13%.
What we’re doing: The NAM and the KAM have filed a petition for rulemaking calling on the SEC to reverse course by clarifying—either by rule or exemptive order—that corporate bond issuers are not required to make public financial disclosures.
- The NAM and KAM have also asked Congress to protect manufacturers from the damage the new interpretation would cause.
The last word: “A two-year delay is a step in the right direction, but the SEC must act to permanently reverse this novel and misguided rule interpretation,” Crain said. “Especially at a time of rising interest rates, the bond market needs stability and manufacturers need low-cost and efficient access to capital.”
The negotiation and implementation of robust, new trade agreements are an essential part of a manufacturing competitiveness agenda. As we head into a new year, the NAM is pressing for the kind of strong rules and partnerships the industry needs.
Forging new trade agreements: The NAM is urging policymakers to negotiate a series of substantial new trade pacts that strengthen trade ties with U.S. allies and other trading partners and expand on open trade in general. Important initiatives include:
- Negotiating regional accords, including the Indo-Pacific Economic Framework and the Americas Partnership for Economic Prosperity, which support manufacturing jobs in the U.S. by including key provisions that open markets, strengthen U.S. innovation and technology leadership, raise global standards and establish best-in-class trade rules; and
- Reengaging in trade agreement talks with the United Kingdom and Kenya and exploring trade agreements with additional markets in Latin America, Africa and beyond.
Enforcing existing pacts: The NAM is also pressing for the comprehensive enforcement of existing U.S. trade agreements—including the full implementation of the United States–Mexico–Canada Agreement and the U.S.–China “Phase One” Trade Agreement. As a strong supporter and advocate for the USMCA, the NAM is advocating the reversal of Mexican and Canadian policies that are against the letter and spirit of the agreement.
- In June, NAM President and CEO Jay Timmons laid out a series of challenges that manufacturers in the U.S. are facing in Mexico, telling the Biden administration: “Failure to prioritize enforcement of these commercial challenges will undermine the long-term credibility of the USMCA.”
Implementing a comprehensive China trade strategy: The NAM has long advocated for a comprehensive strategy for the U.S. trade relationship with China. While the U.S. and China have moved forward with important conversations, the Biden administration should implement a clear China trade and economic strategy that can strengthen our ability to compete economically with and in China, as well as hold China accountable for its behaviors.
- “The U.S. must develop, and strategically use, a full playbook of legislative and enforcement tools to pressure China to stop its discriminatory economic policies and level the playing field for manufacturers and workers in the U.S.,” NAM Vice President of International Economic Affairs Ken Monahan told the Office of the United States Trade Representative in September.
- Monahan also urged the immediate launch of a “comprehensive, transparent and robust Section 301 tariff exclusion process with meaningful retroactivity” to ensure that such measures aren’t undermining efforts to strengthen manufacturing in the U.S.
Next steps: “Manufacturers need open global markets to ensure that we benefit from the same principles that we seek here at home: nondiscrimination, fairness, equal opportunity and competition,” said Monahan. “As we look to 2023 and beyond, the forging of ambitious new U.S. trade agreements, robust enforcement of our existing accords and the implementation of a comprehensive U.S. trade strategy toward China will be vital as we advance that agenda.”
At a time when attracting and retaining talented employees is more important than ever, offering a retirement plan can make a critical difference. But for manufacturers like Winton Machine Company, a tube and coax fabrication manufacturer based in Suwanee, Georgia, the cost of a plan can create a real challenge.
- “It’s really difficult as a small manufacturer, because you’re competing against benefit packages that are given by large companies,” said Winton Machine CEO and co-owner Lisa Winton.
That’s why, when the company came across the NAM’s Manufacturers Retirement & Savings plan, they knew they were onto something good.
A tailored plan: The Manufacturers Retirement & Savings Plan, offered in partnership with Principal Financial Group® and HUB International LLC, is a multiple employer plan that is available to all NAM members and designed to cover all 14,000 member companies. Companies of all sizes can participate, which creates new financial opportunities for and offers more security to the millions of men and women who make things in America.
A trusted approach: Winton appreciates that the program offers a product she can trust—and that her employees can rely on. Because the plan comes vetted and designed by the NAM, she can feel confident that she and her employees are invested in a high-quality offering.
- “I have a hard enough time understanding what funds to put my 401(k) in,” said Winton. “I depend on a financial advisor who’s an expert in that area. So my employees, a lot of them are in the same position as I am.”
Useful resources: The NAM’s plan also comes with a range of exclusive tools designed to help manufacturers understand their investments so that they can make the most of the opportunities available to them.
- “There’s great online resources, and we’re also able to share those videos on the premises with our people,” said Winton. “We’ve had one-on-ones, we’ve had group trainings. We’re looking forward to . . . having a financial advisor come and meet with our employees and talk to them, encourage them to put more money in their 401(k), but also help educate them on what’s happening with their money and how to invest it better.”
Accessible support: Winton Machine emphasized the value of the plan’s support system, which answers questions from employees and company leaders.
- “It’s been very, very easy,” said Winton. “I have one point of contact, which is really important. I don’t have to go and call a 1-800 number if I’ve got an issue.”
The bottom line: “The [NAM retirement] plans are new, they haven’t been around that long, and they offer a lot of opportunities for us to share costs and also really understand your funds and understand what you’re paying for,” said Winton. “I think I have a much better overall product now at the same price or less.”
Digital manufacturing is built on just five “cornerstones”—and the work done in those areas in the next decade and beyond will largely determine the success or failure of key aspects of manufacturing’s technological future, according to the Manufacturing Leadership Council, the NAM’s digital transformation arm.
The MLC says that developments in electronics, computer systems, communications technologies, software and cyber infrastructure will have a direct impact on advancements made in human-machine interaction, automation and robotics, and autonomous operation. We break these down below:
Electronics: Intel predicts that by 2030 it will be able to incorporate 1 trillion transistors on a single semiconductor chip.
- Manufacturers will need that kind of power to enable computer systems and software to process much larger data volumes as they connect more plant equipment and people within their business ecosystems.
Computer systems: Manufacturers should expect a changing computer landscape as biological, physical and digital systems converge to offer more options.
- Quantum computing and nanocomputing offer potentially greater computational ability, which will allow manufacturers to process more data faster.
- Meanwhile, traditional computers will become lighter, thinner and more flexible. Different user interfaces, such as voice recognition, will progress.
Communications technologies: The years ahead will see manufacturers adopt 5G-based networks, which offer higher bandwidth and lower latency than prior technology.
- Communications technology suppliers are already working on 6G networks, expected to become commercially available in 2030.
Software: Next-generation software applications, in addition to web and mobile capabilities, will support voice, wearables, touch and AR/VR to a greater extent than ever before.
- These applications will be driven increasingly by artificial intelligence.
Cyber infrastructure: The cyber infrastructure that has been in development for the past two decades has allowed for separation between data and physical computing sources (i.e., cloud computing.)
- Looking ahead, an infrastructure that brings together data from all sources with business and technology tools will facilitate innovation, R&D, operating models and business growth.
Manufacturing in 2030 Project: Ride the Power Curve is just one of the megatrends identified by the Manufacturing in 2030 Project, a future-focused initiative of the MLC. For details on more megatrends, industry trends and key themes for Manufacturing in 2030, download the MLC’s new white paper “The Next Phase of Digital Evolution.”
Automation isn’t just changing the manufacturing industry; it’s enabling human-centric progress in tackling the industry’s workforce crisis.
In action: As part of the Automation Fair in Chicago last week, more than 15,000 attendees got to see how manufacturers—and companies like Rockwell Automation—are providing solutions to the shortage, which could reach 2.1 million unfilled jobs by 2030, according to research from the Manufacturing Institute (the workforce development and education partner of the NAM) and Deloitte.
- Rockwell Automation brought the Creators Wanted Tour, a project of the NAM and the MI, to its Automation Fair, giving students, parents, educators and manufacturers the chance to see firsthand how digital transformation and new technologies are supporting careers and opportunities in modern manufacturing.
- The tour’s much-heralded immersive experience, along with displays and programs featuring experts from the MI and the Manufacturing Leadership Council (the digital transformation division of the NAM), gave attendees insight into the pathways and support available in the industry.
- FactoryFix, the official recruiting partner of Creators Wanted, was also on hand to showcase its manufacturing talent platform for job seekers—and manufacturers searching for a one-stop recruiting solution.
Changing perceptions: Creators Wanted aims to shrink the workforce gap by dispelling myths about automation and attracting the next generation to manufacturing jobs. It’s seeing impressive success, MI President Carolyn Lee said during a session at the event.
- “Today 40% of parents have a positive perception of manufacturing,” Lee said, citing a recent joint Deloitte–MI study. “And what we’re finding is that parents see these are durable careers with great possibility and opportunity, and they’re encouraging their children to consider them.”
Digital help: “Digital is going to help manufacturers deal with their workforce issues because it’s going to not only help change the perception of the industry, but create new jobs going forward, particularly in math-intensive areas like data analytics and artificial intelligence,” said MLC Vice President and Executive Director David Brousell.
- Brousell cited the MLC’s “Manufacturing in 2030 Project,” saying, “We have to think about digital transformation as human-centric digital transformation—because we’ve got to bring the technology and the people together simultaneously to have an effective transformation.”
Impressive results: Since it began just more than a year ago, the Creators Wanted Tour has seen more than 8,000 students pass through its immersive mobile experience, where more than 75% of attendees leave with a significantly improved view of manufacturing.
- More than 510,000 students and career mentors have also signed up to learn more about modern manufacturing careers.
- Creators Wanted has recruited successfully both mentors and mentees for the mentorship program of Women MAKE America, an MI initiative that aims to close the gender gap in manufacturing.
- The Automation Fair offered more than 150 interactive sessions on the newest industrial solutions and best practices, and more than 200 companies exhibited across 200,000 square feet at Chicago’s McCormick Place.
Media mentions: The fair and Creators Wanted’s presence drew a slew of media coverage, including from “Morning in America” with Adrienne Bankert, “The John Howell Show” on WLS-AM, Univision Chicago and suburban Chicago’s Daily Herald.
- In addition, the Daily Line published an op-ed on the future of manufacturing by NAM President and CEO Jay Timmons and Rockwell Automation Chairman and CEO and NAM Executive Committee member Blake Moret.
The last word: “As the world’s largest company dedicated to industrial automation and digital transformation, Rockwell is always looking toward the future of manufacturing,” Moret said. “Campaigns like Creators Wanted are critical to recruiting the best future talent to create a thriving workforce.”
Another large labor union has voted to reject the rail deal brokered in part by the Biden administration, moving the industry closer to a strike, according to CNBC.
Split decision: Two of the largest railroad labor unions in the United States went separate ways during their contract ratification votes, which were announced on Monday. The Sheet Metal, Air, Rail and Transportation Workers – Transportation Division voted against the proposed agreement by a slim margin, while the Brotherhood of Locomotive Engineers and Trainmen voted to ratify it.
What it means: This latest action raises the likelihood of a rail work stoppage in early December. In total, 8 of 12 unions have now ratified the tentative agreement concluded in September while the rank-and-file membership of 4 unions have rejected it.
- Should one union choose to go on strike, the broad impact would cripple the national freight rail network.
The impact: The railroad industry and major shipping groups have found that a strike would likely cost around $2 billion per day, also according to CNBC. It would affect every major rail operator.
- “The American Chemistry Council, which represents companies including 3M, Dow, Dupont, BP, Exxon Mobil and Eli Lilly, said a rail strike would impact approximately $2.8 billion in chemicals cargo a week, and lead to a GDP decline and renewed inflation.”
- “Other industries, from agriculture to retail, have warned of the economic risks of a strike.”
Next steps: Negotiations will continue through a cooling-off period that runs until early December. If a deal is not reached by 12:01 a.m. EST on Dec. 5, a strike could occur. The NAM and others have urged Congress to take action under the Railway Labor Act and pass legislation that would avert a strike if railroads and rail unions cannot reach such a deal.
What we’re saying: “Manufacturers are disheartened by today’s news on the further unraveling of rail negotiations,” said NAM President and CEO Jay Timmons. “It’s clear that Congress, both Democrats and Republicans, must be prepared to work together immediately to avert a rail strike and prevent further damage to our supply chain.”
Manufacturers face a minefield of legal and compliance issues every day—and too often, in-house counsel are forced to navigate some of the biggest issues affecting the industry alone.
The NAM’s Legal Center sought to change that dynamic at the first-ever Manufacturing Legal Summit, which took place Nov. 15–16 in Washington, D.C., where in-house counsel from manufacturing companies across the nation had a unique opportunity to convene and learn about the latest pressing challenges across the legal and regulatory landscape.
“The summit offered real-world, practical advice that will help in-house manufacturing counsel deal with their legal and regulatory challenges,” said NAM Chief Legal Officer and Corporate Secretary Linda Kelly.
Kelly and NAM Deputy General Counsel for Litigation Erica Klenicki told us more.
Exploring issues: The summit covered a range of topics, including the following:
- National Labor Relations Board: A session led by NLRB board member John Ring and labor law experts from Fisher Phillips provided critical insights on the priorities and activities of an aggressively pro-labor NLRB, and how manufacturing employers can prepare for the many significant legal changes coming in the weeks, months and years ahead.
- Supply chain: A panel centered around supply chain challenges, featuring the perspectives of GE Appliances’ vice president and general counsel and including an array of experts from the law firm Foley & Lardner, covered issues like supply chain due diligence and drafting contracts to prepare for inevitable supply chain bottlenecks.
- ESG: A panel of experts from McDermott, Will & Emery that also included Brunswick Corp. Executive Vice President, General Counsel, Secretary and Chief Commercial Officer Chris Dekker explored how the ever-evolving concept of ESG is affecting both public and private companies—including what manufacturers should expect from the Securities and Exchange Commission’s forthcoming climate disclosure and human capital management rules.
- Supreme Court: Another session covered the impacts of last year’s Supreme Court decisions and the likely outcomes of this year’s cases on issues of importance to manufacturers and the general public alike.
- Product liability: This panel featured in-house counsel from Johnson & Johnson, The Sherwin-Williams Company and Toyota North America, along with experts from the law firm Shook, Hardy & Bacon, discussing recent efforts by the trial bar to circumvent the traditional limits of product liability law. The panelists laid out the types of bad-faith product lawsuits that manufacturers often face—and how manufacturers should approach them.
- Drugs in the workplace: Especially at a time of legal ambiguity around marijuana, it can be challenging for employers to make and enforce rules about drug use. This session led by workplace legal expert Matt Nieman of Jackson Lewis laid out helpful approaches to creating a modern drug-free workplace.
- Cybersecurity: As cyberattacks against manufacturers rise, it’s important for lawyers to understand their responsibilities around protecting confidential company information and preventing breaches. Thanks to the expertise of representatives from Miller Johnson, a member of the Meritas network, participants learned about these topics through the lens of an attorney’s ethical obligations.
Building relationships: In addition to practical and engaging content, the event also offered participants opportunities to connect with one another and with the NAM legal team.
- “One of the many goals was to build a network, and there was a lot of enthusiasm for that,” said Kelly. “The event also brought greater visibility to the work of the Legal Center and helped show the legal departments of member companies how the NAM can be an effective partner.”
Convening talent: More than 120 participants registered for the event, comprising in-house counsel representing large and small manufacturers from every industrial sector, as well as legal experts from top law firms across the country.
- “This is the first time this group was in a room together,” said Klenicki. “It’s a group that faces a lot of the same pressures, so having everyone in the room together thinking through these issues was extremely valuable.”
A representative reaction: “The event brought together a terrific collection of manufacturing CLOs and senior law department leaders to discuss legal issues of importance to manufacturers,” said Dekker. “The informative and timely content was presented primarily by panels that included outside attorneys and in-house counsel ensuring the advice was actionable and practical.”
An annual affair: The Manufacturing Legal Summit will return Nov. 7–8, 2023, in Washington, D.C.
- “Being in the nation’s capital, where law and policy unfold, hearing from experts on these issues—it’s an exciting experience,” said Klenicki.