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2019 Manufacturing Outlook: Glass Full but Jobs Empty

Jan. 9, 2019
Our annual Manufacturing Survey shows optimism about the future, but prospects of finding and keeping needed workers are less rosy.

When it comes to manufacturing in the new year, the food industry is optimistic, with many looking forward to increased hiring, output and capital expenditures.

That’s the most significant takeaway from Food Processing’s 18th annual Manufacturing Survey, an online poll taken in the last quarter of 2018. The mood is so optimistic, in fact, that getting enough labor — both skilled and unskilled — is one of the biggest concerns.

Asked about staffing plans for 2019, a near-majority – 48 percent – said their companies planned to add to the workforce, while another 33 percent said they will probably maintain current staffing levels. Only 13 percent indicated that they will reduce their workforce this year.

But getting these workers is going to be a problem in at least some places. One respondent wrote that his company’s highest priority will be “maintaining a solid workforce. We have had other companies recruiting in our parking lot.”

In that respect, food parallels other manufacturing sectors. Shortages of both skilled and unskilled labor are one of the biggest problems for U.S. manufacturing as a whole. According to an analysis by Deloitte, “Over the next decade, nearly three and a half million manufacturing jobs likely need to be filled and the skills gap is expected to result in 2 million of those jobs going unfilled.” Deloitte attributes this to retirements and economic growth, the latter of which it predicts will add 700,000 jobs.

Our survey reflects those growth predictions. An overwhelming 79 percent of respondents said they expect production at their plants to increase this year, while only 1 percent predicted a decrease. With regard to capital expenditures, 44 percent said they expected them to rise at least somewhat this year; only 8 percent anticipated a reduction.

Worker woes

But getting the labor required to sustain this growth is another matter. “Skilled worker recruitment” came in fourth in the list of top concerns in our survey (behind “food safety,” “cost control” and “worker safety”).

We didn’t ask about unskilled labor, but one of our respondents brought it up spontaneously: “Lower skilled manual labor is in short supply and is a key part to our business and meeting production demands.” This echoes what we found in our previous Salary & Job Satisfaction Survey (Nov. 2018), where three-quarters of respondents perceived a worker shortage, and 21 percent said it was “constraining our capacity.”

This outlook on growth probably contributed to our respondents’ state of mind for 2019. Thirty percent said they were “very optimistic,” and another 45 percent said “somewhat optimistic.”

The increasing complexity of food processing machinery is a major factor behind the shortage of skilled labor. That’s been going on for a while and is not likely to change, says Stephen Dombroski, a senior manager with software vendor QAD and a former executive with ConAgra Foods.

“What I have noticed is some of the modernization of processing equipment has been there for some time,” Dombroski says. “That’s one thing food and beverage companies haven’t skimped on. They will buy the expensive blenders that are computerized.”

In many cases, when it comes to worker skills, food companies prefer to do it themselves. Presented with a list of training strategies, a large plurality (43 percent) said they were “expanding in-house technical training.” Another 26 percent said they were “adding in-house engineering capabilities.”

In addition, when asked about strategies to optimize asset use, the most popular response was on-the-job training to expand the skills of maintenance workers. The second-ranking response, interestingly, was “routine maintenance duties are being assigned to machine operators.” The next most popular responses had to do with recruitment: “Additional maintenance technicians are being hired” and “personnel skilled in electromechanical systems are being recruited.”

Dombroski says internal training is common: “Many food companies actually do a very good job of internal training as automation increases.” One respondent, however, sounded a note of despair: “We seem to lose them as fast as we train them.”

As for unskilled labor, that’s likely to remain a problem, especially with the current immigration situation affecting the labor pool, says Phil Kafarakis, president of the Specialty Food Assn.

“I think there are a number of industries across the nation that rely on entry-level, unskilled labor,” Kafarakis says. “Traditionally, those positions are often filled by immigrants to the U.S. It’s not radical to say that limiting immigration hurts these businesses, so, for the food industry, it looks like we’re in for some challenging times.”

Dombroski says one key to engaging, and keeping, workers in unskilled positions is to make them realize that although their jobs may seem mundane, they’re still important. Even a worker who sweeps the floor needs to know that not sweeping properly could result in regulatory sanctions – or worse.

Such an employee should be told, “‘Your role is hugely important, and not just to us, but in keeping the food supply safe,’” Dombroski says. “I’ve noticed that companies are starting to apply that philosophy to their employees, to stress the importance of some of these jobs.”

Safety first

Food safety came in as the major concern of 2019. Asked which strategies they intended to pursue to ensure safety, the most frequent response (with multiple ones permitted) was “employee training,” cited by 74 percent. This was followed by “third-party certification,” at 44 percent; and “more or improved sanitary equipment” and “improved sanitary design of equipment,” both at 39 percent.

The Food Safety Modernization Act (FSMA) has inspired changes in many of our respondents’ plants. Just over half said they have altered their documentation or record-keeping procedures to comply with FSMA. In addition, 40 percent said FSMA has inspired them to improve traceability in their supply chain. This is an improvement that probably will be increasingly driven by retailers and others at the end of the chain, such as Walmart, which informed its leafy greens suppliers in September that they will have to start certifying their shipments with blockchain technology by the end of January.

Other FSMA-inspired improvements include: increasing or improving product testing (34 percent); altering sanitation procedures (30 percent); and installing equipment with better sanitary design (21 percent).

One respondent noted that his company had a plant under construction and that FSMA “changed plans for facility approach.” Other write-in responses included “compliance training,” “sanitary transport,” “moved us toward quality software to manage all the current programs” and “label changes to all items.” (Another 25 percent reported that FSMA has not required their companies to do anything differently.)

Recalls are the highest-profile events related to food safety, and 9 percent of our respondents reported experiencing one. Most of those, 26 percent, said no real health issue was involved and that the recall constituted erring on the side of caution. Twenty percent said the issue was mislabeling, and 18 percent said their recalls involved “biological, chemical or foreign materials.” The product in question was recalled before reaching stores or restaurants in 5 percent of cases. One respondent wrote simply, “Supplier had issues.”

Fingering digitization

Digital technology has long been perceived as one of the most important ongoing trends in the food industry. Asked about digitization, however, most of our respondents (57 percent) named arguably its most mundane aspect: replacing paper with electronic records. The next most popular responses were replacing analog with digital devices (38 percent), shifting from local servers to cloud computing (34 percent) and providing more remote access to machine controls (34 percent).

“Electronic records” and “control systems” came in fourth and fifth, respectively, in rank of where our respondents expect capital spending to occur in 2019. The first three were “replacement of older equipment with items of better sanitary design,” “packaging equipment” and “plant and worker safety.”

Dombroski says the drive to improve, technologically and in every other way, is an inevitable consequence of the diversification of American food. As SKUs proliferate, as companies try harder to cater to consumers’ individual preferences, they will have to become more adept and sophisticated.

“There were three brands of frozen pizza when I was a kid,” he says. “You can now get venison, guava, mint pizza, thin crust, thick crust, deep dish, Chicago-style—I mean there’s 7,000 SKUs of pizza, because consumers’ tastes are changing. All of these trends like technology are now translating into the food industry. Companies are making more product, they’re transitioning products in and out, and that’s impacting the entire supply chain, all the way from distribution to the grocery stores.”

Who Answered the Manufacturing Survey

Our 2019 Manufacturing Survey, conducted online in late 2018, garnered 223 responses from food & beverage industry professionals. In terms of what is manufactured, the most common categories were baked goods, at 11 percent; and meat/poultry/seafood and further processed foods/specialties, at 10 percent each. In number of employees, the most frequent range was 101-500, at 33 percent, followed by 51-100 (17 percent) and 11-50 (16 percent).

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