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The Labor Crisis in Food Manufacturing

Dec 19, 2019 10:49:23 AM / by Harpak-ULMA

Increase and update packaging automation technology to alleviate labor concerns and cost.

The past year has seen historically low unemployment rates which means the availability of labor is scarce. Low unemployment combined with high turnover rates has created an environment in packaging and manufacturing with rising costs. The current job economy is the perfect opportunity for your company to plan to advance automation.

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In a study by PMMI, over 50% of the companies polled say labor is the costliest element of manufacturing.[1]Factors that lead to labor costs include labor availability and costs associated with turnover rates and training for new employees. According to the U.S. Department of Labor the unemployment rate is at a low 3.6% as of October 2019, causing labor scarcity.[2] Perhaps more concerning for labor are the separation rates within the entire workforce and manufacturing. In 2018, 41.4 million U.S. employees voluntarily left their job according to a study from the Work Institute. In other words, 27 out of 100 employees quit, which is an 8.3% increase since 2017 and up 88% from 2010. If this trend continues there will be a 35% turnover rate by 2023.[3] Within manufacturing the separation rate has steadily increased. In 2014 the separation rate was 24.1% followed by 25.6%, 27.2%, 30.6% in subsequent years and has steadily climbed to as high as 32% in 2018.[4]

In Minnesota, a report from the Office of the Legislative Auditor said meatpacking plants turnover were over 40% and exceeded 70% in a few plants.[5] Employee turnover and separation are especially costly to employers. According to a 2012 study the Center for American Progress, workers who earn less than $50,000 annually show a cost of turnover at 20% of their salary.[6] This percentage is relevant because the mean salary for a production worker is $34,490 as of May 2018.[7] According to those figures, it costs employers nearly $7,000 to train a new production employee.

To combat an unstable labor force companies are turning toward automation.  An article from the National Provisioner Independent Processor argues that non-value-added labor needs to be eliminated and replaced by automation.[8] In the long term, automation will be a net job creator with an emphasis on careers that are highly technical and skilled, while limiting the number of low-skilled employees. This would help stabilize the workforce. Most of the industry does plan to advance automation in response to the difficult labor economy. According to the 2017 Trends Shaping Meat, Poultry and Seafood from PMMI, 96% of companies plan to advance automation in the next 3 to 5 years.[9]

While automation is coming, there are obstacles. Perhaps most obvious is the expense and large investment needed. Some other factors include lack of skilled and qualified labor to work with the new automation, barriers with IT and OT, and implementing cybersecurity. There is also the need to be efficient with the space on the plant floor.[10]

Automation may be a large capital cost but 2 of 3 companies interviewed in a study done by Ritson for PMMI Automation Conference and Expo forecast capital budget increases in the next 24 months as of May 2018. Companies site loss of labor as one of the major reasons driving investment in manufacturing automation.[11]

The Electrical Engineering Portal lists some benefits of automating including employee and labor improvements.

  • Automation usually causes an increase in labor productivity and production rate which mean greater output per hour of labor input.
  • Automation mitigates the effects of labor shortages and reduces costs by substituting non-value-added labor.
  • Not automating may prove more costly in the long run.[12]

Depending on the output level and capital budget, it might be beneficial to consider a step-by-step ‘Roadmap’ approach to increase line-automation to see where the greatest benefit lies. For example, in 2020 a company could add upstream automated machines and 2021 it can add downstream automated equipment. Investing in state-of-the-art automated solutions with Harpak-ULMA can combat an unstable labor force, increase productivity and reduce costs.

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To learn more about how the brand-new G. Mondini Platformer can help your labor concerns, click here for a free consultation today. 

Topics: Turnover, Separation, Manufacturing, Unemployment, Budget, Labor, Automation, Packaging Machines

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