The COVID-19-crisis has wreaked havoc on the manufacturing industry. As demand fell, supply chains fractured, and shutdowns brought production to a screeching halt, revenues have plummeted industry-wide. For some manufacturers, the response is straightforward: enacting across-the-board layoffs. For others, the issue is more nuanced. The dilemma: how can we reduce labor spend now, without crippling our ability to bounce back sooner rather than later?
It’s a big question, with few fast or easy answers. Because EPAY serves the manufacturing industry, we’d like to help you explore them. After we review the current picture and the most common cost-cutting strategies, we’d like to tell you about pair of opportunities that may help you in your quest for strategic workforce planning.
If you want to understand the impact potential cost-cutting moves will have on your business long-term…to learn what your peers are doing…and to hear data-based recommendations from an expert economist and industry thought-leaders, this is for you.
By the Numbers: COVID-19-related Job Losses in Manufacturing
Needless to say, it doesn’t help that the manufacturing industry was in a slight recession in 2019, before the pandemic hit. According to the Bureau of Labor Statistics, 1.3 million manufacturing jobs were lost between March and April 2020, lowering the industry headcount to 11.4 million workers. About two-thirds of those losses occurred in durable goods.
However, May brought some unexpected good news. According to the BLS’ recently-released May jobs report, manufacturing employment rose by 225,000, with gains evenly split between durable and nondurable goods. Whether this is the start of a trend remains to be seen. It seems many manufacturers are holding their breath.
Case in point: according to NAM’s Second Quarter Outlook Survey, just 33.9% of manufacturing respondents reported a positive outlook for their companies—down a jarring 75.6% from the previous quarter and the most dismal response since first quarter 2009. In addition, nearly 47% of survey respondents indicated that they anticipate employment losses over the next 12 months.
However, layoffs aren’t the only way to reduce labor costs—and in fact may hamper a manufacturer’s ability to recover. In an industry where workforce skill is often critical to success, it’s important to carefully consider the long-term ramifications of any workforce changes you make.
Alternative Labor Budget-cutting Strategies for Manufacturers
Right now, many manufacturers are mulling—and in some cases, have already enacted—a number of cost-cutting strategies, including:
- Implementing furloughs, with or without benefits
- Eliminating contingent and gig labor
- Reducing work hours for hourly-paid employees
- Eliminating overtime
- Declaring a hiring freeze
- Requiring mandatory vacation
- Offering early retirement packages
- Delaying or canceling 2020 wage increases
- Temporarily freezing bonuses and reducing commissions
- Make company-wide or executive-level salary cuts
But how do you know what one(s) to choose? And gauge the effect they will have on your operation?
Request a Complementary Predictive Modeling Feedback Session
One way to forecast how specific cost-savings moves will impact your business is to engage in predictive modeling.
Predictive modeling uses existing workforce metrics to calculate the financial impact of various scenarios on your business—i.e., how much will you save by enacting a hiring freeze, versus canceling wage increases? It allows you to experiment with various approaches until you get your numbers where you need them to be, while identifying what makes the most sense to do.
If that sounds good to you, but you don’t know where to start, start here. We’re offering manufacturers a free, no-strings modeling feedback session, courtesy of our HCM analytics team and our partner, the Human Capital Management Institute
Here’s how it works: request a session, and we’ll send you a short intake form asking for a few key metrics. Once we receive your answers, our team will run some basic modeling, then set up a call to review the results. This will help you identify targeted areas where you can reduce labor spend, while incurring minimal long-term damage.
For More Insights, Attend Our Executive Roundtable for Manufacturers
In addition, we will be hosting a virtual executive roundtable, Paradigm Shift: Reengineering Your Workforce for the COVID-19 Era and Beyond, on Wednesday, June 24 at 11am CST.
We invite you to join Dr. Steven J. Davis, an applied economist at the University of Chicago and our panel of industry thought-leaders as we explore solutions for shrewd workforce planning in this era of COVID-19. We’ll also be sharing the results of a new industry-specific leadership survey that identifies how other manufacturers and service businesses are responding to the crisis and the specific steps they’re taking.
We hope you’ll take advantage of this opportunity to gain insights on one of the most pressing issues facing manufacturers today.