Impact of cost pressures on the manufacturing workforce
It’s a commercially-driven sector, which has always operated under incredibly tight margins. However, nowadays, these margins are being squeezed even further. In fact, the Chartered Institute of Procurement and Supply recently reported that manufacturing input costs have risen at one of the quickest rates since their records began. Higher prices on the high street are the result.
The legislative cost pressures
At the same time as tackling these sector-specific forces, manufacturers also need to tackle the same cost pressures that all employers face as a result of recent legislative changes. For example, earlier this month the national living wage rate increased. This will continue to rise over the coming years, in line with the Government’s aim to deliver a national living wage of £9 by 2020.
Added to this, many larger manufacturers now have to pay the new apprenticeship levy. Under this new legislation, every UK employer who has a wage bill of more than £3 million will pay a 0.5% levy on their annual pay bill. As our recent apprenticeship levy whitepaper outlined, all employers – manufacturers included – should look at how they can use the levy to develop the skills of their workforce, so that they can more successfully grow their businesses, become more competitive and increase their productivity.
How the workforce needs to adapt
In this environment of compressed margins, manufacturers must ensure their workforce is nimbler than ever before. It’s a bit like goldilocks and the three bears. If the workforce is too large, manufacturers risk wasting money on paying unrequired staff. But, if the workforce is too small, they risk not having the people they need to meet critical production deadlines. Neither of these scenarios is acceptable. So, as price pressures mount, manufacturers need to ensure their workforce is ‘just right’.
Of course, the problem is ‘just right’ changes from one week to the next, in line with production requirements. As a result, it’s critical that manufacturers have processes in place to ensure their workforce is agile enough to quickly ramp up and down in line with changing business needs. Effectively utilising contingent workers will be key here.
Manufacturers also ought to focus on reducing workforce turnover. Workforce churn is expensive, and it’s a cost that the sector really doesn’t need right now. Furthermore, high attrition can lead to business instability, which can negatively impact production timelines and create further cost pressures. Our research found that 30% of UK jobseekers are always looking for their next job move. So companies need to create a culture that people don’t want to leave. Branding and trust are critical components of this.
What’s next for manufacturing?
Cost pressures in manufacturing aren’t going to go away anytime soon. They’re caused by complex, multi-faceted issues, many of which are somewhat out of the control of manufacturers themselves. Having said that, as I’ve outlined, there are straightforward steps which employers can take to ensure their workforce is as productive as possible, and money doesn’t fall through the cracks.
That’s where Manpower can help. We know how to match workforce numbers with business needs; we’ve been doing it for over 60 years. Our process is all about maximising productivity, without sacrificing on quality. That means we’re perfectly positioned to access the talent your business needs, whether you need a handful of people for a special project or an entire workforce.
If you’d like to discusses how we can help your business, feel free to contact me directly on Michael.Matthewman@manpower.co.uk.