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Has the trend passed about caring for the environment and preventing harmful emissions?
Despite the fact that GMC is touting its new, 2024 Hummer EV SUV, starting at a cool $80,000 with a 329 range on a full battery charge, Reuters is reporting that the demand for electric vehicles isn’t keeping up with expectations. In October 2023, Honda and General Motors announced they were ending a $5 billion partnership to develop lower-cost EVs. GM says it’s to “enhance the profitability of our EV portfolio and adjust to slowing near-term growth.” Ford, too, just announced it pushed back its EV production timeline because of slower customer demand. Investors are taking notice. Automakers are thrown for a loop.
It’s not for lack of desire for electric vehicles by consumers, auto manufacturers and climate activists alike. Reducing the sting at the gas pump while helping the environment? Bring that on. Indeed, Cox Automotive Report tells us EV sales exceeded 300,000 units in the U.S. in Q3 2023. That’s record numbers.
So, what’s going on?
There are vexing factors swirling around this marketplace, colliding into a miasma of toil and trouble for auto manufacturers.
High interest rates = slowing demand
The current demand slowdown reflects the uncertain economy and the looming shadow of high interest rates (Will they go higher? Will they come down?) driving up the price of the already-expensive EVs. It’s a one-two punch. For most people, the decision to buy a car depends on the affordability of the monthly payment combined with other factors affecting their household budget. The vast majority of us are not rushing out to spend $80K on that Hummer. Maybe a more affordable model? Sure, but with sky-high interest rates driving up the monthly payment of already-expensive vehicles at the same time a pound of ground beef costs upwards of $8, people are taking a wait-and-see attitude. Maybe a gas-fueled car is a better bet right now.
Raw materials shortages for batteries = supply chain issues
As The Buzz EV News recently put it so succinctly, the raw materials that power EV batteries, namely lithium and cobalt, “aren’t exactly littering the landscape.” This, coupled with the fact that 90% of the supply chain for EV batteries runs through China, makes it difficult for U.S. auto manufacturers to realize efficient, profitable production. No one in the industry wants a repeat of the auto microchip shortage during the pandemic.
How is it all affecting auto manufacturers, and what can be done about it? At USCCG, we have a half century of experience dealing with the effects of supply, demand and the economy on many different industries. We work across the entire battery supply chain from mining to metals to battery manufacturing plants. Here’s how we see the issues playing out currently.
Auto manufacturers are doing a 180 (for now), so…
Based on the changing demand, automotive manufacturers are pulling back from EV investment right now and putting it back into traditional auto manufacturing. Even though the industry’s goal is still moving towards a 2030-2035 conversion to EVs, consumers are still buying gas-powered vehicles. Automakers need to maintain production to satisfy the demand.
…Demand and schedule planning is crucial, but…
Automakers’ backlogs need help — they have the orders and demand for gas vehicles, but are struggling to fulfill this demand and fill those orders. At USC, we happen to be the specialists in wrangling schedules, planning for demand when those sands keep shifting, and adding horsepower to teams just when they need it the most. It’s an all-hands-on-deck situation for auto makers, except…
…The skilled labor shortage is real
The new UAW contracts are driving labor costs throughout the industry, even in non-union facilities. Couple that with the ever-shrinking skilled workforce, and it puts auto makers behind the eight ball just when they need to find and retain quality, reliable employees. At USC, we’ve been focusing on this issue, helping employers train their people on best practices and optimal processes. It’s crucial now, like never before.
EV issues aren’t going away. It’s time to reshore now
Yes, the demand is slowing. For now. But auto makers are still on track for conversion to electric vehicles, and the public still wants them. But these battery and supply chain issues are still plaguing the industry.
A few facts entering into this mix: The current Inflation Reduction Act included billions of dollars in government loans to fund EV battery plants in the U.S., and also included a $7,500 tax credit to people who buy U.S.-made EVs. It also allocated $7.5 billion to fund a network of charging stations around the U.S. (That, in itself is exciting for logistics nerds like us.)
Gov. Brian Kemp of Georgia is taking advantage of this trend, creating a push for EV jobs, major manufacturers including Hyundai and Kia located in the state, and pledges to make Georgia the “electric mobility capital” of the country.
TechCrunch+ says the U.S. is in an EV battery factory construction “boom” as a result of these initiatives. In 2019, there were just two battery factories here in the U.S. Today, 30 are either planned or under construction.
What does it all mean? It means auto manufacturers need to meet current demand while keeping an eye on the future. USC can help you do that. Contact us today.
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The food and beverage manufacturing industry is facing labor shortages. While labor challenges aren’t new to the industry, the reasons for this current situation are. The pandemic brought about a seismic shift and disruption for nearly every industry, F&B included. Many companies, like Smithfield Foods and Tyson Foods, saw closures of multiple facilities. Others stayed the course but laid off employees, and as the country begins emerging into a post-pandemic new reality, some of those employees simply aren’t returning to their jobs.
There’s also the matter of older workers retiring and not enough young workers entering the industry, leaving a skills gap as those veterans take their institutional knowledge out the door with them.
Together, they add up to a two-pronged labor shortage problem. You not only don’t have enough people to get the job done, the people you do have aren’t as skilled as the ones you lost.
Let’s look at both of those prongs in more detail.
Labor shortage challenges and questions
Like many industries, F&B is getting a handle on whether changes brought about by the pandemic will be permanent. Some challenges like supply chain disruptions can go away forever, please, but other aspects, like the adaptation of workflows, processes and procedures have proven to be positive changes.
Some questions F&B processors are grappling with now:
- Our staffing levels are down. Do we really need to staff up to pre-pandemic levels?
- Our demand is increasing. Can we meet rising demand with less staff?
- Will new configurations on the shop floor to accommodate social distancing continue if and when the entire workforce is vaccinated?
- How will companies deal with potential work stoppages in the future?
- Will we adapt to more regional, less centralized facilities?
- Should we change our forecasting model from yearly to quarterly or even monthly to be more agile?
Solution: Process improvements
The answer to all of these questions is: It depends on efficiency. Some companies, when aiming to do more with current assets and employees or, especially when they’re seeking to do more with fewer employees because of a labor shortage like the one we’re in now, turn immediately to automation, machinery upgrades, even artificial intelligence. The aim is to take the human element out of the equation or reduce it dramatically, with the goal of streamlining and speeding up operations.
But is all of that upfront expense worth it?
Time and time again, clients have come to us after trying to “buy their way to profitability” through large capital investments in technology and automation, only to see that profitability disappear because of high overhead costs of those upgrades.
A better solution to dealing with this labor shortage, keeping up with rising demand, and doing it all with fewer people is to optimize your processes first.
At USC Consulting Group, we’ve helped hundreds of businesses navigate operational challenges so they can get the job done efficiently and better meet the needs of their customers. The key to doing more with less, or even doing more with your current assets, is taking a deep dive into your operations to discover ways to be more efficient. That’s one of our specialties, and we’ve been doing it for more than 50 years.
In one example, we worked with a poultry processor that experienced just this situation, making huge capital investments only to see any gains eaten up by high overhead costs.
We created cross-functional teams to evaluate the operation, highlighted the non-value-added activities and conducted analysis. Based on those findings, the teams identified waste and process variations that were causing lower yields, created improvements in workstation layouts and material flow, and conducted training sessions designed to impact yield performance. All told, we identified 300 loss points within their operation. Results?
By the end of our six-month engagement, the company saw a financial gain of $100 million, all realized without capital investments. That’s not chicken feed! Read more about it in our case study, “Poultry Processor Gobbles up Savings From Process Automation.”
Skills gap challenges
The other prong to today’s labor shortages in food and beverage manufacturing has to do with older, veteran workers leaving their jobs and taking their knowledge with them.
If you’ve got a team filled with long-tenured employees, you know what this is like. It’s one thing to train someone new on the basics of the job. It’s something else to lose your best worker who spent a career doing that job. It’s the experiences, processes, deep understanding and “this comes naturally” abilities of your people to get the job done in an intuitive way. The hard-won, trial-and-error-gleaned instincts that your senior people have absorbed from years on your front lines. That’s your company’s institutional knowledge.
When older workers retire or are laid off, that’s what you’re losing.
Skills gap solutions
There are a few tactics you can use to help close the skills gap.
Mentorship. Do you have a mentorship program in place? It can be an invaluable (and very low cost) way to transfer knowledge from your seasoned pros to your newbies.
Recorded interviews. Talk to your older employees about lessons learned on the job, hard-won experience and mistakes that taught them the right way to do things. Record those interviews for new hires to watch as part of their onboarding process.
Involve employees in process improvements. We’ve found that one of the most critical parts of enacting process improvements to create greater efficiency in our clients’ operations is getting buy-in from the front lines. Without it, we can find all the hidden opportunities for efficiency in the world but putting them into practice will be a challenge without your team on board. Getting your employees invested in process improvements from the get-go also has the added benefit of creating institutional knowledge. The younger workers were there when the process was changed, they contributed to it and they’ll carry that knowledge with them as long as they work for you.
Like many of the challenges we’ve experienced over the past couple years, silver linings can emerge from food manufacturing labor shortages and skills gaps. You can find better, more efficient operations without making huge capital improvements, and through that process, you can create institutional knowledge in your employees and close that skills gap for good.
At USC Consulting Group, we’re subject matter experts in helping companies find more efficiency out of their current assets. Learn more about doing more with the same or less resources in our white paper “Strategies for Meeting Increasing Customer Demand.”
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Once one of America’s most respected professions, truck driving now generally struggles to be seen in a positive light. Instead of being seen as a traditional, hard-working segment of the workforce, unpleasant notoriety now exists around truck drivers. In 2018, Wisconsin-based trucking company manager Boris Strbac told The Washington Post that “people don’t respect truck drivers. We are treated as the bad guys on the road by other drivers and the police.”
That perceived lack of respect from other motorists, law enforcement, and the general public is just one reason why the U.S. is in the midst of a truck driver shortage. The job is also difficult and isolating, resulting in a high turnover rate.
Employment trends within the trucking industry have wide-reaching implications. For starters, trucking is essentially the lifeblood of manufacturing logistics. Without trucking, the whole supply chain could crumble. In fact, about 71% of American freight is moved via truck, equating hundreds of millions of dollars in revenue on an annual basis. Due to the national truck driver shortage, freight prices have jumped considerably in recent years. And the trend is expected to continue, to the detriment of food suppliers and restaurants alike.
How Trucking Impacts Food Manufacturing Supply Chains
Rising freight costs within the food industry due to truck driver shortages are nothing new. The same year that Strbac vented his work-based frustrations to the Washington Post, food manufacturers began to see freight costs severely impact their bottom line. Representatives for Tyson Foods, one of the country’s largest producers of meat products, reported a freight cost increase of $250 million in a single year.
When freight costs rise, those costs are typically passed along to the consumer. According to the U.S. Department of Agriculture (USDA), national food prices in January 2020 were 1.8% higher than the previous year. What’s more, the cost of foods consumed away from home, such as in restaurants, increased by more than 3%, with fruits and vegetables seeing the largest relative price increase of all food categories.
Produce often must travel long distances to reach the nation’s restaurants, grocery stores, and cafes, and their transport is typically done via truck. And even food and beverage industry trends, such as increased demand for plant-based meat substitutes, can’t curb the damage caused by increased freight costs.
Data indicates that the truck driver shortage is a primary culprit of rising freight costs nationwide. In order to help curb those rising costs, the trucking industry may need to make changes to help bring more workers to the crippled industry.
Methods for Improving Truck Driver Health
Trucking can take a major toll on a driver’s physical and mental health. Thus, many job seekers overlook truck driving opportunities as they find the pay to be negligible compared to the work performed. Long-distance truck drivers, for example, spend a large chunk of their time on the road, and may only see their families a few times per month.
That social isolation, coupled with health difficulties such as lack of physical exercise and sleep deprivation, directly contributes to the national truck driver shortage. Reducing hours spent on the road while increasing pay may be key factors in job recruitment within the trucking industry.
Exercise is also an important consideration for prospective truckers, who need to counteract their sedentary lifestyle in order to improve their overall health. Sitting for more than six hours per day can be detrimental to one’s health, even contributing to premature death. Trucking companies should thus consider including a gym membership as part of their sign-on bonus, or provide incentives for positive health changes among employees, such as weight loss or smoking cessation.
Manufacturing Logistics, Supply, and Demand
Unfortunately, health-related measures may not be enough to spawn a renewed interest in truck driving as a career. The sad truth is that the “U.S. trucker shortage is expected to more than double over the next decade,” reports Bloomberg. Trucking companies are looking to fill in the employment gaps by recruiting more young people and women, typically underrepresented in the workforce.
But it may not be enough, leaving the U.S. manufacturing industry in a limbo. In fact, Washington State University reports that the manufacturing industry is adding jobs faster than the rest of the economy, especially within the fabricated metals, machinery, and food manufacturing industries. And as the manufacturing sector continues to rake in steady revenue, the demand for freight and trucking naturally increases.
If the truck driver shortage isn’t mitigated in the near future, manufacturers from all industries will have to look elsewhere for their freight needs. Inevitably, costs will then rise at both the business and consumer levels. Steadily rising freight costs lead to gaps in the supply chain, a fact that seems counterintuitive in a nation where product manufacturing is in high demand. It’s time for trucking industry leaders to make appropriate, forward-thinking policy changes in order to help mitigate the truck driver shortage and perhaps stop the snowballing costs of freight across the country.
For over 50 years USC Consulting Group has been guiding logistics and manufacturing companies with optimizing their supply chains and improving their bottom lines. Contact us today and we will help drive up efficiency in your operations.
This article is written by guest author Beau Peters. View more of Beau’s articles here.
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