In our last post, we drilled down on how broader trends like Labor Force Participation referenced in Post 1, are specifically impacting the Industrial Tech Manufacturing industry as well as some of the unique headwinds presenting significant challenges to manufacturers nationwide. This week we are going even deeper into the technological sophistication of production roles relative to the early Industrial Revolution and public perception and specific pain points in the industry where business leaders are struggling to fill open positions.
As you might recall, in Post 2 of this series, we explored the impact of the broad labor shortage on manufacturing with some shocking numbers about the true size of the manufacturing labor force. We showed that in over the past 100 years – while the population has more than tripled – the size of the total manufacturing labor force has only increased by about 25%. We also demonstrated that there is an argument to be made that this economic and cultural reality is manifesting itself in the depression of the Industrial Production Index (IPI) growth rate.
In this post, we are going to be making that final connection between these broad statistics and the decreasing ability of the manufacturing sector to produce economic growth by highlighting the way in which the skill gap and labor force competition for specific positions is hindering the growth of individual businesses and the industry at large. Before we begin, however, it is important to discuss the “Skill Gap” in greater detail.
You might have noticed our odd obsession with the 1920’s and wondered why we picked this period as our reference for almost every comparison and trend analysis in the previous two posts. This was done for two very intentional reasons: First, the 1920’s were – in many ways – the golden years of manufacturing because the industry was not only considered highly attractive by the public as a career, but also easily accessible given the low barriers to entry for employees. Put more bluntly, people wanted manufacturing jobs and could basically walk onto a production floor and immediately begin contributing. Second, in this period, the “revolutionary” developments made in manufacturing briefly slowed with incremental optimization of existing technology concepts – like the internal combustion engine – dominating the innovation trends of the day (think iPhone 10 vs iPhone 14). These two ideas made the operation of a manufacturing business – and ultimately the growth of the industry – much simpler than it is today. With fewer people interested in manufacturing, greater technological sophistication, and recent “revolutionary” developments, the manufacturing industry will need to adopt some more complex and innovative strategies if we hope to usher in a manufacturing renaissance during the 21st century – a topic we plan to discuss over the next post in this series.
Ok, now we can move onto the fun part where we get to talk about how cool manufacturing jobs are. As a frame of refence, consider the factory worker of the 1920’s. During this time, “Mass Production” was the name of the game and thus, the production line was adopted by many businesses in the industry. In this setting, factory workers – a demographic made up mostly by those without a college education - played a very specific and targeted role within the manufacturing process. For example, the Model T assembly line was broken down to 84 steps in which 140 workers each contributed a singular part or component to the manufacturing process – a model that ultimately led to Ford’s doubling of wages and 11% reduction in hours worked. Some of these positions on the assembly line could be as simple as nailing a name plate to the dashboard.
For comparison, BMW’s Plant Dingolfing has recently upgraded their assembly production to include digitally controlled modular systems that introduce flexible automation to their manufacturing process. Quoting the AMS article, “Instead of building the components in a sequence of individual steps as before, the production of several variants can now take place in parallel”. What this means practically for the worker is that, where there used to be jobs that could be performed with a hammer and a couple nails, employees that want to work on the production line at BMW now must be intimately acquainted with a variety of extremely intricate automation technologies that use “more software than steel”. This example indicates that we – as manufacturers – have elevated the technological competencies necessary for entry into our fields without adequately investing in the public’s familiarity and capability surrounding such technologies. With that being said, these advancements present the opportunity to make careers in the broader manufacturing industry much more interesting and fulfilling.
In Artemis’ current portfolio of Industrial Tech manufacturers, Maury Microwave, Omega Optical, and Tekscan are all hiring for Application Engineering positions – a subset of a skilled mechanical engineers that is expected to grow by another 150,000 jobs between 2016 and 2026. Application engineers operate in-between customers and operations, essentially as ambassadors for the products that our companies sell while working with production teams to define and create new products and solutions. As you can imagine, these are highly technical roles that often require – at the very minimum – a bachelor’s degree concentrated in the fields of optoelectronic engineering, RF/Microwave technologies, etc. The responsibilities of these positions include a broad spectrum of competencies from engineering & mathematical to sales & marketing.
As you can imagine, if these highly impactful positions were to remain unfilled for long periods of time, the impact on production outcomes, sales objectives, and customer satisfaction (a key tenant of every Artemis platform) could be seriously detrimental to the growth of our businesses. This reality is reflected in a broad survey of manufacturers from earlier this year that revealed that approximately 80% of American manufacturers are struggling to meet production demands due – at least in part – to ongoing labor shortages.
While the information above can be discouraging, that is not the point of this series. We’re talking about this because, as business owners, we see it as a fiduciary responsibility to our own customers and partners to be at the forefront of finding solutions – and we think we can help business owners do the same.
Over the next week, we are going to be drilling down to offer up potential solutions that can be incorporated at the industry-wide and company level, and wrapping it all up with a Multi-Part Playbook for business owners and entrepreneurs that are looking to get ahead of their competition.
As we continue striving towards our vision of buying and building deeply impactful Industrial Tech businesses that enhance global health, security, and productivity, be sure to check back and let us know what else you’d like to hear from us.