Enterprise Minnesota Magazine - June 2012
HELPING MANUFACTURERS GROW PROFITABLY
Building the Next Generation of Manufacturing Employees
Of all the items on the endless to-do lists of manufacturing owners and executives, creating the future workforce may be the most challenging – and most important.
By Kate Peterson
Though both are still in their thirties, Andrew Freyholtz and Eric Sether could be part of a dying breed of manufacturing employees if certain trends continue. While the two men followed different paths to manufacturing careers, both pursued machining early in their work lives, advanced quickly, and are now critical employees in their companies. Unfortunately, the routes they took are not always available or attractive to the next generation of manufacturing workers.
Sether was drawn to manufacturing after taking shop class in high school; he began working for M&M Precision Machining in Elk River immediately after graduating. M&M’s owners, brothers Matt and Mike James, helped train him on the machines used by the firm to do the wide variety of contract machining that constitutes the core of their business. Sether has been setting up computer numerical control (CNC) machines for several years. Matt James, M&M’s president, describes Sether as one of the company’s top machinists.
Freyholtz took a different approach to manufacturing. As he neared the end of high school, he knew he wanted to live in a rural community for the rest of his life, so he studied the employment situation and determined manufacturing was his best bet. For the next two years, he studied machining at Central Lakes College in Staples. Upon graduation, he took a job with Douglas Machine Inc. in Alexandria.
Douglas designs and manufactures custom packaging equipment, primarily for the food and beverage industry. Freyholtz began his career there at the bottom of the heap in the company’s machine shop. “I was stamping parts, tapping holes and cleaning steel,” he says. Because he’d gone to school, within a couple of months Freyholtz was working on CNC machines. That was in 2000. Since then, Freyholtz has earned another degree and a diploma, moved to a different department within Douglas, and is now a mechanical designer—creating the plans for the complex packaging equipment customers specify.
In recent years, CNC machines have become the backbone of manufacturing firms and machine shops because once programmed, they are efficient, safe, can run with little oversight and are not prone to mistakes. Experienced CNC set-up experts program specifications into a computer, which in turn tells a machine how to cut, stamp or fabricate a part.
One custom-built Douglas packaging machine has 2,000 parts that are custom designed, explains Chris Haugen, vice president of supply chain for Douglas. The parts are made of a variety of materials, including stainless steel, aluminum and plastic. “Each of these needs to be fabricated, and the majority are made with CNC machines. These parts are the heartbeat of the machines we manufacture,” Haugen says.
CNC machines play an equally critical role at M&M. Of the company’s 23 employees, all but four work on the machines in different capacities. “There are the high-end people, the set-up people who program the machine, and then the operators who keep the machines running and do the production runs. The operators still need to know how to adjust the controls,” says James.
Because of the need for knowledgeable CNC operators and programmers, Minnesota manufacturers would love a steady source of employees like Sether and Freyholtz. But finding qualified CNC operators and programmers presents an enormous challenge. Randy Pelletier is the founder and president of Pellco Machine, a contract machine shop in St. Michael that produces industrial parts. Right now, Pellco has 25 employees, and though he’s not actively seeking additional staff, Pelletier says, “If there were a good CNC machinist available, who knew our machines, I’d hire him in a heartbeat. I wouldn’t pass on him.”
Often companies hire inexperienced high school graduates, hoping to train them to run and set up the machines, as M&M did with Sether. In other cases, companies hire technical college graduates, who, like Freyholtz, typically learn quickly once they’ve started working. But, the paths Sether and Freyholtz took to careers in manufacturing aren’t as easy to follow as they were as recently as 10 or 15 years ago. Sether was exposed to machining in a high school shop class and encouraged by his shop teacher to apply for a machine shop job. Shop classes and programs at many high schools have been cut in recent years.
Many technical colleges have faced similar cutbacks. Lower enrollment in past years led some technical colleges to eliminate certain programs, including those in machining and welding, and it is difficult and costly to restore those programs once they’ve been cut. That means potential employees like Freyholtz may have fewer options and end up bypassing manufacturing altogether.
The result is a growing shortage of qualified workers, particularly in areas like machining. The impact on Minnesota companies—and their potential for future growth—could be profound.
Fortunately, the reverse is also true. Because manufacturing is so critical to Minnesota’s economy, if employers can develop a steady source of quality employees, the potential for future growth is enormous. Equally encouraging, a number of companies are taking initiatives to increase interest in manufacturing careers and help high schools and technical colleges shape courses to develop the skills needed.
How Did This Happen?
While pundits, politicians and journalists focus on the need for job creation, many Minnesota manufacturers must wonder why, when so many people are out of work, they cannot find qualified workers for the positions they have open. The answer is a yawning gap between the jobs available and the skills needed to do them well.
In addition to the shortage of CNC operators and programmers, welders and those trained in mechatronics— which combines electronics and mechanics—are also in high demand. Kevin Kopischke, president of Alexandria Technical and Community College, says new industry demands as well as changes in the education environment have aggravated, if not caused the worker shortage. “When the manufacturing business fell off, and some operations were shifted overseas, the industry really looked for ways to improve efficiency, and in some cases downsized,” Kopischke says. “As it’s been rebounding, the industry has been more efficient, with more sales per employee. As we start to rebuild the employee base, we need employees with different skills.”
In other words, those employees who were downsized when manufacturing was struggling do not have the skill sets that are needed today. You can’t simply hire those people back, Kopischke says. Unless they went back to school to update their skills, they do not have the background needed in today’s manufacturing climate.
Industry insiders say other factors have also contributed to the shortage. Pelletier says cuts in high school shop classes have taken a toll. “If kids aren’t introduced to it early on, if that seed isn’t planted at an early enough age, it’s not a career path they’re going to be considering,” he says.
One key reason kids need early exposure is the math involved in a manufacturing job. “Math is obviously a huge part of being a machinist. It’s all about numbers, and computers and programming the software,” Pelletier says.
“Maybe if they are good in shop, the shop teachers explain how important math is going to be to their career, and they stick with math a little more, and work a little harder at it, and get a little better education,” Pelletier explains.
James, of M&M, says shop classes are critical to identifying and cultivating future manufacturing employees. “When I was in high school, there was a large shop class, and once you completed a full year of the one-hour course, the next year you could take a course that was two hours of shop every day,” he says. “A lot of people went into manufacturing with that background.”
Rick Paulsen, president and COO of Douglas Machine, adds that part of the problem is inadequate support for technical colleges. While Alexandria Technical College’s machine tool program is full with a waiting list, other programs around the state have shut their programs and it’s expensive to restart them, he says.
What drove some of those changes was dwindling enrollment, Paulsen says, and that stems from a shift in attitudes. “There was the hype in the media that manufacturing was dead—that it was all going overseas. That’s when a lot of this started happening. That’s when we got away from recommending that for the sharp kids who learn better with their hands, a technical degree was the best fit,” he says.
“Career counselors started discouraging kids from going that way, so they didn’t think about manufacturing. They were sending some of the best kids in other directions,” Paulsen adds.
Even if sharp high school students show an interest, experts say parents are often an obstacle to the rewarding careers in manufacturing. “To parents, they think working in a machine shop is a dirty job—grungy, dark, smelly and bad pay. It’s 180 degrees different from that—clean, well-lit, and machinists can make a really good living,” Pelletier says.
Even if they are able to hire qualified students out of high school, manufacturers like Pelletier and James face another dilemma. Providing additional training to young workers makes them attractive to other companies, and the larger ones can often pay more than they can.
“We can train other CNC set-up guys, and we’re always considering it, but it’s a struggle,” says James. “We can train somebody, and pay them along the lines of someone who can do CNC set-up and then they have the experience that other companies want, and they get hired away.”
Pelletier faces the same problem. “We can hire somebody who’s young and hasn’t developed any bad work habits, and train them from the bottom up,” he says. “Within a couple of years, they can be setting the machines up. But it doesn’t always work out—sometimes they’ll stay for a short time and then get an offer for a dollar an hour more and leave.”
Closing the Gap
While the dearth of qualified manufacturing workers has reached a critical level in recent years, it isn’t new. Haugen says Douglas has had openings for CNC operators since he joined the company five years ago.
Pelletier recalls running an ad in a local paper a decade or so ago that said, “If you can breathe and walk in the door, we have a job for you.” He had no applicants.
As the economy rebounds, the problem is worsening, and that, combined with the manufacturing industry’s long-term experience with the skilled labor shortage, has led many manufacturers and educational institutions to approach the situation with renewed vigor and innovative strategies.
Paulsen says Douglas Machine implemented a scholarship program last year that provides students full tuition at a community college, plus a part-time, paying job while they are in school. Once students earn a degree, they are obligated to work at Douglas for at least three years. They are likely to stay even longer; Douglas is employee-owned, which Paulsen says is an extremely effective retention tool. Freyholtz explains that others who started working for the company in 2000, as he did, typically have $50 to $100 thousand in Douglas stock.
Douglas also has a generous tuition reimbursement program, which is how Freyholtz gained the background he needed to move from the machine shop to mechanical design. Pellco and M&M prefer to move employees through the ranks as well, promoting and providing additional training to those who show promise.
The problem for all these companies, though, is a small pool of entry-level employees. That’s why many have started to join together to spread the word about the quality of manufacturing careers. Among manufacturers, a common approach is engaging local high schools and technical colleges. By reaching out to these institutions, they can help shape programming, and connect with the students they hope to hire someday.
The Central Minnesota Manufacturers Association, an alliance of regional manufacturers and institutions that support the industry, coordinates a number of programs to help build the skilled workforce in future years. Pelletier, a CMMA board member, says his company has adopted a school through “Project Lead the Way,” a provider of science, technology, engineering and mathematics curriculum to middle and high schools across the U.S.
“We bring in the shop kids and tour them around, show them the software, show them how the CAD system works. They can really see how the full process works and get a good perspective on what a machine shop job would be like,” Pelletier says.
“We’ve launched a team of area manufacturers in the last six months,” says Haugen of Alexandria area manufacturers. “We’re coming up with a collaborative plan to engage high school students,” he says.
One result of the group’s efforts: the new high school in Alexandria will feature a prominently placed shop class area when the building opens in the fall of 2014. The principal of Alexandria’s Jefferson High School, Chad Duwenhoegger, explains, “We call it storefront property. In the middle of the building, there will be a commons area, and right off that area will be what we are calling the design-build area – what is traditionally called shop class. It’s right across from the performing arts theater, visible through huge windows.”
The shop class’s elevated status in Alexandria isn’t as much a response to increased student demand as it is a hope for more student focus. “We want kids to become more aware of all the career opportunities they have,” Duwenhoegger says.
Community input drove much of the building’s design, with the local manufacturing community deeply involved. “We’ve had community input in all areas, but this has been extensive input. We have an advisory committee with local manufacturers and representatives from Alexandria Technical and Community College,” Duwenhoegger says.
In addition, the manufacturing community is involved with programming. “Part of the advisory team is looking at equipment and helping develop curriculum,” Duwenhoegger says. They are taking time to restructure and change current courses that can be offered to help prepare students for careers, he adds. The group is also looking at how to attract more females to the program, and how to build math and science into the industrial arts curriculum and still meet standards. “It’s a great partnership,” Duwenhoegger says.
Industry input has also been a critical part of Alexandria Technical and Community College’s success in developing programs that attract and prepare students for manufacturing careers, evidenced by high demand for the college’s graduates. “The job market for graduates has never been better,” Kopischke says. Students in mechatronics, for example, are getting a minimum of three, but up to six or seven job offers. Some are earning $40 to $45 thousand per year right after graduation, he says.
That kind of placement success makes the college very attractive to students, driving demand beyond what some programs can handle. Kopischke says the school has the capacity for 24-36 students in the machine tool training program, depending on the machines needed for the specific classes. Now the program is full, and the college is turning students away or wait-listing them.
Kopischke credits ongoing input from local manufacturing firms, combined with a faculty that is dedicated to staying abreast of industry changes and needs, with the college’s success. “This college is built on the principle that we are committed to communicating better with the business community than any other college in the country,” he says.
At the same time, the college works with local industry to attract the next generation of employees. “One of our initiatives is called ‘Careers in Demand’ and what we did was open the doors of regional manufacturers so young people and their parents could learn about careers and then move through the plant to get an idea of what clean manufacturing is like,” Kopischke says.
Freyholtz thinks a dose of realism might help students recognize the value of a manufacturing career as well. “I teach a ninth grade religion class and I’m a volunteer firefighter, so I have a lot of interaction with young people,” he says. “You’d be amazed at how many of these kids want to live in a rural community, but their plan is to somehow work with professional sports teams.”
Citing the tendency to push all kids to get four-year degrees and do what they are passionate about, Freyholtz says, “In the ideal world, I would be a professional deer hunter—that’s my dream job. But there’s not much of a market for professional deer hunters.”
Instead of trying to find a job they are passionate about, young people should think about where they want to live, and the job market in those areas, Freyholtz says. “If you have a hundred thousand dollars in debt and a degree in sports management, you’re probably not going to be able to live in a rural area,” he says. “I have a great career and an interesting job. My wife and I have four kids, and she is a stay-at-home mom. We have 80 acres. I love my job, but it’s not my passion. My passions are my faith and family. You have to look at the whole picture.”
The success of efforts to attract and train future manufacturing employees is critical – not just for the companies who hire them, but for all of Minnesota. Manufacturing remains the cornerstone of the state’s economy, responsible for 13 percent of all jobs – nearly 300,000—according to state data published in 2010.
Manufacturing’s multiplier effect is significant, with each job supporting 1.9 jobs elsewhere in the economy. A report recently issued by the Brookings Institution shows that while manufacturing represents 11 percent of the U.S. GDP, the sector is responsible for 68 percent of spending on research and development.
The industry is also characterized by above-average wages and benefits. The average wage in manufacturing in Minnesota is $56,315, which makes it 20 percent higher than the average wage for all industries. Wages paid to manufacturing employees accounted for 16 percent of all wages paid in the state.
For some of the state’s medium and small-sized cities, manufacturing constitutes an even bigger portion of jobs. Paulsen, of Douglas Machine, says Alexandria is considered the “Silicon Valley” of the packaging equipment manufacturing industry. More than 1,000 people in Douglas County work for packaging equipment manufacturers, he says. That’s 17 percent of the county’s workforce—just in packaging equipment, not including other manufacturing jobs.
While the lack of skilled workers hasn’t impacted growth at Douglas Machine yet, Haugen says, “We have some pretty aggressive growth plans over the next five years that could be affected by the shortage of CNC machinists.”
In the meantime, the shortage does impact the company’s profitability. “We have had to outsource—we can only handle about half of the machining we do, so obviously that’s an issue that adds to cost and time,” says Haugen. “We would love to have another 30-40 machinists, especially for the off-shifts – afternoon and night shifts. CNC equipment is expensive, and we want to run it as much as possible.”
Douglas isn’t alone; manufacturers across the state have consistently expressed concerns about the skills gap. The 2011 Minnesota Skills Gap Survey, conducted by the state’s Department of Employment and Economic Development (DEED) to assess issues facing manufacturers, revealed that almost half of respondents had unfilled positions due to lack of qualified applicants. The workforce shortage was most severe in skilled production, where 58 percent had some degree of shortage. Enterprise Minnesota’s most recent State of Manufacturing® survey confirms these sentiments, with the number of executives expressing concern about the skills gap doubling between the 2011 and 2012 surveys.
But the skilled labor shortage isn’t just an issue for the moment. Participants in the DEED survey indicated that while the skills shortage has improved slightly since 2007, they expect it to intensify in coming years.
In addition, many experts are predicting a surge in manufacturing in coming years because of sweeping changes in the industry. Advances in critical processes such as 3D printing and innovative materials could fuel what the Economist recently dubbed “The Third Industrial Revolution.”
At the same time, as wages continue to rise in countries like China, and shipping costs reduce profitability, many manufacturers are bringing jobs back to the U.S., where many of the high-end manufactured products are ultimately sold. To compete for these so-called boomerang plants, economic regions will need to show they have a deep pool of qualified employees.
On the upside, the basic infrastructure is in place to build the workforce to the level needed. Clearly, employees like Sether and Freyholtz gained the educational foundation they needed before they joined the manufacturing industry. If they hadn’t, they wouldn’t have progressed in their careers as rapidly as they have.
In other words, the traditional avenues to careers in manufacturing—high school shop class plus on-the-job training and well-designed technical college programs— provide an ideal foundation for a manufacturing career. There’s no need to reinvent the wheel when it comes to creating a steady flow of work-ready manufacturing employees. Instead, these avenues just need to be reopened and filled with the sharp kids who once followed them to rewarding careers.
Manufacturers in search of skilled employees might want to consider the pool of talent available among mid-career changers, particularly those outside manufacturing. Employees who haven’t worked in manufacturing before bring other skills to the workplace, and can advance rapidly from entry-level positions.
Consider Mitch Brandsted, for example. Four and a half years ago, Brandsted took what he describes as “a leap of faith” when he left his position as the manager and operator of the McDonald’s restaurant in Alexandria because he felt he’d progressed as far as he could.
Brandsted was familiar with Alexandria-based Douglas Machine, Inc., which designs and manufactures custom packaging equipment for the food and beverage industry, because of acquaintances who worked there. He interviewed for a position and toured the company’s facilities. “I was willing to take a step back to come to Douglas, and I was willing to do it because of the potential for growth. The opportunity here is so vast,” says Brandsted, who was 35 at the time.
While Brandsted had no educational background in manufacturing, he had some electrical and mechanical experience because of the maintenance issues he dealt with at McDonald’s. “I was very interested in the electrical area,” he says. “I began work as an electrical assembler at the lowest level you can be.”
At the same time, says Rick Paulsen, Douglas’s president and COO, Brandsted brought other critical skills to the company. “McDonald’s provides excellent supervisory training and some financial business literacy training that were both beneficial to Mitch,” Paulsen says.
In the first year, Brandsted “tapped holes, ran cable and worked on schematics,” he says. He progressed quickly and was soon travelling with the machines—going with teams of Douglas employees to install and commission new machines for customers. “When we get really busy, they sometimes pull people from assembly to help out, so I went on quite a few trips,” he says.
After two and a half years in electrical assembly, Brandsted applied for a supervisor position, which he was given; he currently has 22 employees on his shift. Douglas’s investment in Brandsted’s on-the-job training is likely to pay off for many more years. “I see myself staying in this field for the rest of my career. It’s so exciting to work around this kind of stuff, and to be around such incredibly smart people,” he says.
©2012, Enterprise Minnesota. All rights reserved.Reproduction encouraged after obtaining permission from EnterpriseMinnesota. Additional Magazines and reprints available for purchase.