The manufacturing labour market is tight right now. Analysts are saying that there are ten million manufacturing jobs across the globe that currently remain vacant due to the skills gap. How are you filling the gaps in your manufacturing workforce?
Many OEMs (original equipment manufacturers) with production facilities are looking to hire at the moment, but they are struggling to find the right staff.
The statistics are stark - Make UK say 36% of vacancies in the UK manufacturing sector are unfilled because candidates just don’t have the appropriate skills, qualifications or experience. They estimate £21 million a day was lost in output in 2022 due to unfulfilled vacancies in the sector.
So, if you are looking down the barrel of a skills shortage and seeing its daily impact on your productivity and ability to compete - you must be wondering whether outsourcing could solve the problem for you.
Can outsourcing alleviate your staffing crisis?
Of course, the logical question is, if the labour market is tight, surely outsourcing partners (EMS providers) are also struggling to hire? This is true, but EMS companies are agile. Whilst not immune from the problems affecting everyone else, they are built to solve problems by having a flexible and highly-trained workforce moulded through years of investment in employee development.
The smartest companies have regional hubs of expertise around the world, so they can access the skilled labour they need in the most efficient way, while still delivering locally according to customer demand.
When the going gets tough for in-house producers with limited facilities and ability to scale, EMS companies come into their own.
5 benefits of outsourcing in a tight labour market
1. Reduced cost of hiring
Recruiting in a tight labour market is tough. Companies have to put extra effort into attracting candidates, and successful ones often spend the most money on advertising, which can soon add up to significant sums, especially for higher-level positions.
Alternatively, partnering with recruitment agencies is an efficient way to hire candidates, but this is also an expensive option. The specialist services provided by agencies come at a premium as the quality of candidates put forward is expected to be higher to reduce time although there's still no guarantee the OEM will find a perfect match.
Whichever way you choose to hire in-house, the cost is guaranteed to be more than if you outsource the same job—and that’s not considering the time and effort it will take to find the right candidate. The interview process alone can put OEMs under considerable pressure, a situation that can be exacerbated when candidates do not turn up for interviews, something that seems to have become increasingly common post-pandemic.
And when you do find and hire the right candidate, there are continued costs of staff onboarding and training. Again, this process is expensive, and senior members of staff must dedicate their time to developing their new hires. The high percentage of new staff that leave during the first six months often means the high costs can be for nothing.
Outsourcing can significantly reduce, if not eliminate, these costs. Of course, the exact figure depends on how much the OEM works with their EMS partner, but the opportunity cost of not outsourcing specific areas can be huge.
2. No need for increased benefits
Needless to say, in a tight labour market, candidates are not satisfied with just getting a job—this is not 2009. Not only will salaries be higher, but companies must also offer advanced benefits packages to attract and retain the right talent.
Additional perks include private health and dental insurance, increased pension contributions, gym memberships, more holiday entitlements, and a slew of other extras. Keeping up with what benefits packages the market demands can detract from your main objective—developing your products. And the expense of such generous packages can negatively impact your bottom line.
However, EMS providers have to constantly ensure they have a big enough workforce to meet their customers' demands. Therefore, they invest heavily in human resources and ensure they have sufficient staff to be an agile, problem-solving solution.
As this cost is part of EMS companies’ business model, OEMs that outsource do not have the hassle of worrying about benefits packages to the same level —or the cost of offering them.
3. Greater flexibility
OEMs looking to scale need many people with a host of technical skills. But employing a workforce with every necessary skill is an inefficient use of resources and probably economically impossible.
Instead of compromising on what internal resources you need to hire, outsourcing allows you to have a much larger talent pool permanently available. This enables OEMs to be much more flexible in applying their resources. EMS companies' business models are agile; therefore, partnering with one allows your business to adapt to foreseen and unforeseen situations.
For example, it is much easier to respond to sudden increased demand if you have an EMS partner. Economies of scale also mean that this will cost less than if you try to scale in-house.
4. Ability to meet demand
Every OEM wants to sell more units, but (if you keep things in-house) it’s always important to be careful what you wish for. When there is an increase in demand, every new challenge is magnified. A tight labour market squeezes productivity, space becomes an issue, the lack of technology hampers processes, and customer relations become strained.
This is when the real problems start because OEMs can easily fall into one of two easy traps: it is either impossible to meet customer demands or the quality of the service slumps. Both can seriously affect customer satisfaction and do long-term damage to reputations.
But there is no need to struggle. EMS providers are built to manage spikes in demand. Due to their mix of customers and market sectors, EMS companies are more elastic and better able to flex their capacity. Common inventories across customers ensure materials are more readily available, and their investment in cutting-edge technology allows them to scale easily at no additional cost to their OEM customers.
EMS providers exist to take care of the very problems OEMs face when demand increases.
5. Focus on your core competency
A tight labour market could mean less talent to grow your business. But OEMs could also see this as an opportunity to focus on what they do best in-house and outsource the rest. This strategy will ensure they do not stray from their core competency—what makes the business money.
Electronics manufacturing is increasingly driven by technology and requires ever more expertise. Therefore, attempting to increase your involvement in this area through hiring, training, and retaining staff may be difficult to justify.
Conclusion
Most savvy OEMs outsource at least part of their production but some still keep certain elements in-house due to a perceived risk of 'letting go'. Tight labour markets are the perfect environment to outsource even more parts of the process for which you might have hired in-house during looser times.
EMS providers have a flexible and highly-skilled workforce and invest heavily in developing their employees. They offer an experienced and reliable pair of hands to help OEMs scale and allow them to focus on what they do best. The right EMS company should be a partner that creates an environment of innovation and collaboration with its customers. This type of relationship will ensure it is easy for OEMs to transition to outsourcing even more of their processes and reaping the rewards—whatever the labour market is doing.
