The manufacturing industry is facing a dual challenge: high worker turnover and an aging workforce. As experienced employees approach retirement, the industry must contend with the loss of valuable expertise while simultaneously struggling to retain younger workers. This article dives into these pressing issues, exploring the impact of an aging workforce and high turnover in manufacturing, and offering strategies to mitigate these challenges.
The Aging Workforce: A Ticking Time Bomb
As the manufacturing workforce continues to age, the industry is on the brink of a significant retirement wave with far-reaching consequences. Currently in the U.S., nearly 25%¹ of the workforce in manufacturing is aged 55 or older, with many expected to retire within the next decade. This trend is not limited to one region; countries like Japan and Italy are experiencing even more pronounced shifts in their workforce demographics (see image below²). The aging workforce poses several challenges, particularly the loss of institutional knowledge and decades of expertise that are critical to maintaining operational efficiency.
By 2030, 150 million jobs globally will be held by older workers², highlighting the profound impact this shift will have on the world economy and how organizations manage their workforce.
The impact of an aging workforce goes beyond the loss of experienced employees; it underscores the urgent need for effective succession planning and reskilling initiatives within organizations. Without these measures, companies risk losing critical operational knowledge, which can result in decreased productivity, more frequent errors, and ultimately, a negative impact on profitability. Tackling these challenges is crucial for ensuring the sustainability and long-term success of organisations.
Worker Turnover in Manufacturing: A Costly Challenge
High employee turnover is another significant challenge facing the manufacturing industry. Manufacturing workforce turnover rates are higher than in many other industries, with the latest studies indicating that the turnover rate can exceed 40% ³ annually. This high turnover is costly, leading to increased recruitment and training expenses, decreased productivity, and disruptions in production schedules.
The skills shortage could lead to economic losses of up to $454 billion by 2028⁵, not only due to unfilled positions but also because of a lack of the right skill sets to meet market demands. While this data focuses on the U.S., the broader implications of skills shortages are already being felt worldwide.
Predicting Recruitment and Training Needs: Staying Ahead of the Curve
Effectively managing an aging workforce and high turnover requires proactively predicting recruitment and training needs. By analyzing workforce demographics and turnover trends, manufacturers can anticipate labor shortages and plan ahead to ensure they have the right talent to meet production demands.
Data-driven tools and analytics are essential for accurately forecasting recruitment needs, identifying patterns in employee turnover, and forecast future workforce requirements based on current trends. By understanding these patterns, companies can prioritize recruitment efforts in areas where they are most needed, reducing the risk of labor shortages.
Similarly, anticipating training needs is crucial for maintaining a skilled workforce. As older workers retire, there is a risk of losing valuable skills and expertise. To mitigate this, manufacturers should invest in continuous training programs that not only upskill current employees but also prepare them to take on new roles as they arise. By proactively addressing training needs, companies can ensure a smooth transition as the workforce evolves.
Building Versatile Teams: The Key to Workforce Flexibility
In an industry that is constantly evolving, having a versatile workforce is essential. Building versatile teams means creating a group of employees who are cross-trained in multiple skills and capable of taking on various roles within the organization. This adaptability not only strengthens workforce sustainability but also mitigates the impact of turnover and retirements.
To achieve this, manufacturers should implement cross-training programs that help employees broaden their skill sets⁶. For instance, a machine operator could be trained in basic maintenance, or a production worker could acquire skills in quality control. Cross-training not only increases the value of individual employees but also reduces the organization’s reliance on any single worker, enhancing overall resilience.
Additionally, versatile teams are better equipped to manage fluctuations in production demand. Employees who can move between roles enable companies to respond swiftly to market changes or unexpected disruptions, such as supply chain challenges or sudden increases in orders. This flexibility is a significant asset in maintaining smooth operations and consistently meeting customer expectations.
Enhancing Job Satisfaction: Keeping Workers Engaged
One of the most effective ways to reduce turnover and retain skilled workers is by fostering job satisfaction and engagement. By creating a positive work environment where employees feel valued and supported, manufacturers can boost morale, loyalty, and retention. Key strategies include recognition programs, regular feedback, and offering opportunities for professional growth, along with competitive compensation and benefits.
Empowering employees by involving them in their own career development and decision-making processes, as well as encouraging creativity, can further enhance their sense of ownership and commitment to the company. When workers feel engaged and appreciated, they are more likely to stay loyal, significantly reducing turnover rates.
Leveraging Yelhow’s Alex: A Solution for Workforce Sustainability
In the face of these challenges, manufacturers require innovative tools to manage their workforce effectively. Yelhow’s Alex is a powerful solution designed to address not only worker turnover and an aging workforce but much more. Alex provides a comprehensive suite of features that help companies predict recruitment needs, facilitate training and upskilling, and manage workforce demographics—ultimately making organizations more resilient.
Alex helps manufacturers analyze workforce data to predict when key retirements are likely to occur and identify which areas may face the most significant labor shortages. This predictive capability allows companies to plan their recruitment and training efforts more effectively, ensuring that they are always prepared to meet production demands.
With Alex, companies can identify and map the expertise within their organization, facilitating the transfer of knowledge from retiring workers to younger employees. This ensures that critical skills and expertise are retained, allowing manufacturers to build resilient and versatile teams capable of adapting to changing needs.
Alex enhances employee engagement by providing greater transparency into their professional development and training opportunities. It allows employees to stay informed about their entire training process, from start to finish, giving them a clearer view of their growth and potential.
By using Alex, manufacturers can enhance their workforce retention programs, reduce turnover, and create a more sustainable workforce for the future. It not only helps companies navigate the current challenges but also prepares them for the evolving demands of the manufacturing industry.
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Conclusion: Preparing for the Future of Manufacturing
The manufacturing industry is at a pivotal moment, facing significant challenges. However, by implementing effective strategies and leveraging innovative tools like Yelhow’s Alex, companies can turn these challenges into opportunities for growth and sustainability. The key to success lies in proactive planning, knowledge transfer, and creating a work environment that attracts and retains top talent. By addressing these issues head-on, manufacturers can ensure a bright future for the industry, even as it undergoes significant demographic shifts.
References
1 – “How are employers responding to an aging workforce?” (Working Paper by Robert L. Clark and Beth M. Ritter for the National Bureau of Economic Research, Working Paper 26633, January 2020).
2 – “Better with Age: The Rising Importance of Older Workers” (Global Study by Bain & Company, 2023).
3 – U.S. Bureau of Labor Statistics, March 06, 2024 – Table 16.
4 – “Taking charge: Manufacturers support growth with active workforce strategies” (Article by Deloitte Research Center for Energy & Industrials and The Manufacturing Institute, 2024).
5 – “2018 Deloitte and The Manufacturing Institute Skills Gap and Future of Work Study” (U.S. Study by The Manufacturing Institute and Deloitte, 2018).
6 – “How the Food Industry Is Using Cross-Training to Boost Service” (Article by Sarah Kalloch, Amanda Silver and Zeynep Ton, published on Harvard Business Review, 2023)