Addressing Labor Shortages in the Casting Industry
September 27, 2021
Even as we make a confident return to pre-pandemic output, economies around the world are experiencing labor shortages.
A recent New York Times article addressing transitory inflation reported that high job vacancy rates in the U.K. and European Union are disrupting supply chains in ways that affect everything from McDonald’s milkshake machines to highly engineered castings for the automotive, industrial and commercial industries here at home.
While I believe much of the recent inflation will ultimately go away, it won’t go quietly into the night. Labor cost is not transitory. The issues we are facing, namely a lack of available labor and upward pressure on wages, will continue to create economic impacts that will be felt far beyond the casting industry.
Across America, we’re seeing challenges attracting and retaining workers. Within the casting industry, 85 percent of respondents to the second quarter 2021 AFS Metalcasters Quarterly Outlook Survey cited labor shortages as a major concern.
As the CEO of Grede, I share those concerns and offer suggestions on how to address them.
4 Factors Contributing to the Labor Shortage in the Casting Industry
While the situation is complex and fluid, there are a number of factors clearly influencing the current labor challenges facing those involved in the business of engineering castings for a variety of applications.
- Government policies put in place during the pandemic to provide necessary relief created a dynamic where skilled laborers delayed returning to the workplace. When stimulus payments provided more than the standard industry wage, there was less incentive for workers to return the foundries. Now that those benefits have expired, leaders across the casting industry are hopeful the trend will reverse and an uptick in workers will occur.
- Low unemployment rates, including some as low as 1 percent in some of the areas where we have foundries, are creating an incredibly competitive labor market.
- Demand is up, but many manufacturers are not able to meet that demand through existing workforce levels. The first lever many companies pull to increase output in response to raised demand is requesting employees to work overtime hours. With an already unfavorable labor market and the previously mentioned factors, this provides another incentive for laborers to leave the workforce. It has quickly become a 100 percent turnover environment.
- Difficulty finding skilled tradesmen and women persists. This is particularly true for finding new hires who want to work in a foundry and dedicate years to becoming a master at their trade. The environment is by nature unforgiving, yet the satisfaction that comes from helping create the machines that keep America moving is equally rewarding. People who have traditionally filled this role are retiring in far greater numbers than are entering the workforce, creating an additional challenge of passing on expertise to new generations of workers.
Perhaps most troubling of all is the reality that if it cannot locate the labor it needs, the casting industry will lag in its ability to fully recover from the changes brought on by the pandemic. When we can’t hire, we can’t support increased demand. We run the risk of becoming the pacing constraint to the recovery of the post-pandemic economy.
The still tenuous labor market complicates decision-making when events outside a foundry’s control impact workflow. Such is the case with some auto manufacturers’ announcements that they may furlough workers due to an ongoing lack in the global supply of semiconductor chips.
Under normal circumstances, foundries would follow suit, shutting down to align with those closing. Today, that decision could cause workers to leave, compounding ongoing labor challenges. As a result, foundries may decide to stay open, even with depressed levels of work coming in, leading to inefficient operating costs.
Solutions for Change – How to Create Positive Outcomes in the Current Environment
Cutting costs is perhaps the first solution offered up to address the current labor shortage in the casting industry. However, traditional cost cutting, or avoidance, represent old school methodology. We have to become more contemporary around removing hard costs from our operating environments through automation.
Introducing smart automation is one extremely positive step forward. And, it’s increasingly justifiable as labor costs make automation more attractive.
Beyond automation, we must make other changes that positively affect the labor challenges facing the industry. We can:
- Offer flexible schedules, including mini-shifts, as opposed to traditional work schedules.
- Orient and train people differently so they are effective sooner.
- Understand and address employee challenges, communicating via text, quickly.
- Create a sense of belonging and contribution for workers.
- Use digital media to target recruits, attract, engage and retain workers.
- Outsource certain stages or aspects of our work, such as core, making and grinding.
- Analyze onboarding processes and identify opportunities for improvement.
- Create career paths, providing sufficient training, leadership and educational opportunities.
- Leverage workforce training grants and partnerships with community colleges to create a pipeline of labor to our foundries.
We must remain visible in the communities where we are present on social media channels and through job posting sites. Optimizing job postings and website content for search traffic, while targeting the right audiences, engages addressable workforce members faster and more effectively.
We must also emphasize not only the work and pay, but the rewarding nature of a career in the casting industry, and promote the upward mobility potential available in open positions.
The exposure in this business and an understanding of both its artistry and the reality of working in a foundry lends itself well to hiring and promoting from within. We can and should get creative with shifts so that available schedules place as much weight on personal time as work time.
While the end markets we serve don’t have an abundance of room for flexibility, we must step back and ask ourselves, what do we want to do differently to attract new employees?
Flexible scheduling could be one of the means to achieving that outcome. Better onboarding, training, communication and branding all contribute positively as well.
When will our post-pandemic recovery be complete?
This may be the ten million dollar question in our industry. Last year, I thought the pandemic ushered in challenges that couldn’t be topped. Now I realize that 2021 is even more challenging, because there are more factors that can’t be spread over an elongated time horizon.
Demand, labor availability, onshoring, supply chain issues and port management are just a handful of the factors that both influence us and remain largely out of our control.
Turning the current environment around is much like trying to turn an ocean freighter on a dime. For many years leading up to 2020, the industry was running at top speed in calm waters. Now, turbulent waters and icebergs abound.
At Grede, we are beginning to see traction on new hires from a mixture of increased wages, hiring and retention bonuses.
Our way forward will come through leaning into innovation and automation.
This is something Grede is well on the way to doing. We are readying to undertake phase one of a multiphase automation and modernization strategy that will usher in a more modern vintage of equipment that commonizes small parts and maintenance so that economies of scale can be created and the replication of technical experts across multiple sites can be minimized.
When skills and people were abundant, redundant resources were taken for granted. However, now, given our current labor shortage, we must be smarter about how we use the talent we have. By narrowing down the complexity of our equipment maintenance needs, we can free people for higher level tasks and the application of their expertise to items that are less menial.
We can free our people for innovations that will transform our industry. Who wouldn’t want to be part of that?
Cary Wood is the CEO of Grede, where he is driving innovation, growth and opportunity, and reengineering the way iron is cast across an array of industries and applications.