Survey after survey is showing the same thing – businesses need to get back to basics to create the type of work environment that attracts and keeps employees. With almost 50% of employees looking for a new job in the first half of 2023 (Solutions, 2022), creating a workplace that attracts and retains talent has shifted from an HR problem to a C-suite strategic imperative, and time is of the essence.

The current labor situation is different from any in our country’s history in one major way: there are simply more jobs than people to fill them. A recent article on Bloomberg.com summed up the result, stating, “The time has arrived when America’s demographics are conspiring against its economic ambitions.” (Donnan, 2023) This sentiment holds true, according to a 2022 Manufacturing Institute/Deloitte study reporting almost half of manufacturing executives had turned down business opportunities due to the lack of workers (Institute, 2022). The situation is not going to get better any time soon, with the Congressional Budget Office predicting the American workforce will grow by less than .2% a year through 2031 (Office, 2023).

Many employers have set their sights on finding new, leading-edge solutions to address the crisis. No doubt innovation has its place, but so does creating a mutually beneficial, healthy employer-employee relationship and workplace based on fundamentals.

In January, Gallup reported that employee engagement is at its lowest since 2015, with the biggest declines in clarity of expectations; connection to the mission or purpose of the company; opportunities to learn and grow; opportunities to do what employees do best; and feeling cared about at work. The path to drive improvements isn’t new (ask employees for feedback; make changes based on feedback; clarify expectations; share and celebrate positive results); but, Gallup does have decades of proof that it works (Harter, 2023).

Another survey’s results issued in January, this time by the Conference Board, reinforce the crucial role fundamentals play in creating a workplace that works for today’s employee. The 2023 C-Suite Outlook Survey identified four strategies to create a better workplace: prioritize employee wellness to promote physical, mental, and financial health, as well as stress management; embrace flexible work arrangements; invest in all employees’ professional development; and strengthen succession plans. (Board, 2023)

There’s more. Executive Networks’ “The 2023 Future of Working and Learning Report” points to upskilling as the most critical aspect of organizational success this year. 45% of knowledge workers and 30% of front-line workers said people are leaving their company due to insufficient career advancement or development opportunities. About 83% of HR leaders and 79% of business leaders agree skills-based training should be used as a retention tool. (Networks, 2023)

Together, these survey findings and reports tell a powerful story: businesses need to get back to basics and walk the talk when it comes to creating the type of work environment that attracts, retains, and grows skilled talent. Still, this appears easier said than done.

The Manufacturing Institute with support from Colonial Life issued a report in November called: “The Manufacturing Experience: Closing the Gender Gap.” It says: “As it stands, women make up more than 29% of the manufacturing workforce. By raising the percentage of women in the manufacturing sector to 35% of total employment in the sector, there could be 800,000 more female manufacturing employees. This would be enough to fill almost every open job in the manufacturing sector today.” (Life, 2022)

It sounds easy enough until you look at decades-old issues like pay equity. The Pew Research Center issued a report in March stating, “The gender pay gap in the U.S. persists, and in fact, has barely budged during the past two decades.” In 2002 women earned 80 cents on the dollar as compared to men. Twenty years later, the pay equity gap improved by just 2 cents, with women earning 82 cents for every dollar earned by men in 2022. (Kochhar, 2023)

Another disconnect relates to diversity, equity, inclusion and belonging (DEIB) initiatives. A survey commissioned by Indeed.com earlier this year found 49% of Black workers are considering or actively looking for another job due to unfair compensation, lack of career advancement, and lack of managerial support. Survey respondents indicate the actions companies take for DEIB (i.e., diverse hiring practices, diversity committees and awareness events) simply do not align with what Black employees want (i.e., pay transparency and equity; scheduling flexibility for work/life balance; and increased representation). (Team, 2023)

A presentation at the International Manufacturing Technology Show reinforced the disconnect. Cofounder of Thurgood Industries Darnell Epps said, “Black unemployment in our big cities is extraordinarily high, yet there’s very little outreach and recruitment in communities of color throughout our big cities. In Philly, LA, NYC…black unemployment in February was above 15%. In Detroit it was about 20%. More could be done with regard to the industry and with trade schools in focusing on those populations that have been underserved and have historic levels of unemployment and underemployment.” (Webster, 2022)

No doubt there is a place for innovations like artificial intelligence, employer/education/government collaborations, and more to address the labor crisis, but equal focus and effort should be given to getting back to the basics that create a great workplace, and really committing to drive long-lasting progress.

Good people are hard to find. Keeping them is even harder. With an estimated 2.1 million unfilled manufacturing positions in the U.S. by 2030 according to the National Association of Manufacturing, manufacturing companies of all sizes need to take action now to attract and retain employees needed for business success today and tomorrow.

Unlike in the past, today’s manufacturer is not only competing against other manufacturers of its size. The war for talent crosses all industries and organization sizes. Whether you’re up against an industry behemoth that can afford top pay and benefits or the restaurant across the street that’s matching your company’s pay for easier work, bringing your recruiting and retention efforts to a new level isn’t optional – in fact, it’s imperative.

Here are five ways other manufacturers are winning the war for talent:

1. Grow your own talent. As reported in com, when Lucid Motors needed skilled workers for a new plant, it partnered with government, a community college, and the state’s economic development team to build and equip a state-of-the-art training facility focused on car assembly. All 700 of its new employees were trained at the center and ready to work when the new plant opened. Similarly, BMW expanded an apprentice program to four community colleges; opened new training paths for high school seniors; and invested $20 million on a new training center for professional development and technical training. (Keaveny, Chris. “To Address Labor Shortages, Manufacturers Must Become Talent Creators”. 2022. IndustryWeek.com.)
2. Don’t look in the usual places. Everyone else is already doing that. As reported by MITSloan, “Amsted Rail, a manufacturer of systems and components for freight and transit railcars, is collaborating with a program called c.stars, which puts young adults with a high school diploma or GED through a 14- to 16-week training program followed up by job placement.” (Stackpole, Beth. “Practical ways to tackle manufacturing’s labor crunch.” 2022. MITSloan.MIT.Edu.) Rather than a general job posting site, check out FactoryFix.com’s recruiting automation solution to gain access to a community of 700,000+ manufacturing workers.
3. Consider “second chance” hiring. As reported by the National Association of Manufacturers, JBM Packaging and Saint-Gobain found engaged and productive employees who would stick around by starting programs to recruit and hire individuals with criminal records. The majority of these employees fill entry-level positions, but about 10% have mechanical, machinist, and other technical skills – that doesn’t even get into the potential tax credits through the Work Opportunity Tax Credit or WOTC. (NAM News Room. “How Manufacturers Should Pursue Second Chance Hiring.” January 2023. org.)
   
4. Explore how technology can help you get more work done with fewer people. As reported on com, robotic arms can perform assembly line work; autonomous guided vehicles can transport materials through warehouses and on factory floors; 3D printing has significantly reduced the time required to create design solutions; autonomous machine vision solutions can track, sort, count and do visual quality inspections; and AI-powered systems can connect and manage the manufacturing process from start to finish. (Gow, Glenn. “The Labor Shortage Is Killing American Manufacturing. Here’s How AI Can Bring It Back to Life.” August 2022. Forbes.com.)
5. Be willing to change. As reported by the Triad Business Journal, at the least, pay needs to be at the marketplace median. Consider novel benefits that are genuinely meaningful to today’s workforce. Let go of outdated policies and practices. Create a workplace people want to be part of. Once you’ve made all of these updates, consider reaching out to ex-employees and letting them know what you’ve learned, how you’ve changed, and how valued they’ll be if they come back. (Brannock Jr, R. Michael. “Manufacturers. It’s Time to Get Serious About Talent.” October 2022. Bizjournals.com.)

For additional insights and assistance recruiting and retaining talent, contact RBT CPAs’ affiliate, Vision Human Resource Services. For accounting, audit, business advisory, and tax services, reach out to your local RBT CPAs office.  We’re the largest accounting firm in the Hudson Valley and we believe we succeed when we help you succeed. Give us a call today.

While the state of U.S. manufacturing for year end 2022 and the start of 2023 doesn’t look great, data seems to point to New York manufacturers facing tougher times than others. In general, 2022 ended up better than most thought it would but worse than they had hoped. The picture – based on January data – is somewhat dimmer for New York manufacturing, for at least the first half of 2023.

The S&P Global U.S. Manufacturing PMI for December was 46.2 (seasonally adjusted), a decrease from 47.4 in November the first time it fell below 50 since June 2020 and a decline in the sector’s health driven by weak demand (attributed to economic uncertainties and inflation), which drove output and new order contractions. By January 2023, it was slightly higher, showing contraction easing but factory activity falling for the third straight month. New orders, output, and inventories were down. Sales were subdued and demand was weak. Input costs and output charges were increasing even though supplier delivery times were stable and input buying contracted. Still, business confidence was up with hopes of stronger demand ahead, greater supply chain stability, and new product investments. (Trading Economics. “United States Manufacturing PMI.” https://tradingeconomics.com/united-states/manufacturing-pmi)

CFO.com reports: “The silver lining in all this, if there is one, is that December data showed cost burdens softening — the most since July 2020. ‘Respondents said lower prices for fuel, metals, and oil-related products dampened the overall upturn in operating expenses,’ according to S&P. Selling prices to customers also slowed at the fastest pace in two years because manufacturers passed through savings in an effort to stimulate sales amid the strong dollar.” (Ryan, Vincent. CFO.com, “December’s 64.2 Manufacturing PMI Shows Industry Contracted.” January 4, 2022. https://www.cfo.com/risk-compliance/supply-chain/2023/01/manufacturing-contraction-pmi-purchasing-managers-index-sp-weak-demand/)

According to January’s Empire State Manufacturing Survey, manufacturing activity in the state saw a big decline. As noted in the report issued by The Federal Reserve Bank of New York (The Fed), “The general business conditions index fell 22 points to -32.9, its lowest level since mid-2020 and the fifth worst reading in the survey’s history.”

• 44% of respondents indicated conditions worsened during the month, while 11% saw improvements.
• New Orders Index dropped 28 points to -31.1.
• Shipments Index dropped 28 points to -22.4.
• Unfilled Orders Index decreased to -14.3, so more orders were getting filled.
• Delivery times were unchanged.
• Inventories Index was steady at 4.5, “pointing to a small increase in inventories.”
• Employment growth stalled.
• The average workweek shortened.
• Input price increases slowed dramatically.
• Selling price increases moderated.

The report also states: “Looking ahead, firms expect little improvement in business conditions over the next six months.”

How are manufacturing companies responding? The 2023 BDO Manufacturing CFO Outlook Survey identifies the strategies survey participants indicated they are taking to build resilience in 2023, including 48% taking Inflation Reduction Act clean energy incentives; 39% cost optimization/reduction; 36% digital transformation; 25% restructuring or reorganizing; and 21% are focused on understanding tax implications of business decisions. (Note that two of the five actions relate to tax planning and strategy.)

While you focus on what you can do from a manufacturing point of view to ride out these uncertain times, remember you can count on RBT CPAs accounting, tax, audit, and business advisory professionals to help your business develop and execute a tax plan to help build overall business resilience. We’ve been serving manufacturing companies in the Hudson Valley and beyond for over 50 years and believe we succeed when we help our clients succeed.

To learn more about creating a tax strategy that promotes resilience, give RBT CPAs a call today.

Handing over the reins to a family business should be a source of pride, accomplishment, and peace of mind; unfortunately for many, it results in family strife, erodes wealth, and leads to business collapse. So, how do you protect your family and a business you – and maybe even a few generations before you – spent life building? A strategic, well-thought-out, and executed succession plan is key.

At its simplest, a succession plan is a way to set up the next generation for success by defining how to transition management and ownership of a business. In Deloitte’s Business Succession Planning collection, it’s noted that a succession plan can drive business growth, lower taxes, set the stage for retirement, and preserve family harmony. It is also anything but simple.

According to ScholarWorks, 90% of the global economy is represented by family businesses; unfortunately, 70% of those have a first-generation failure rate. The goal of a succession plan should be to understand, preserve, and grow the business’ value and pass it on.  Without a strong succession plan, families break up and go to court. Performance and reputation suffer, while disruption, conflicts, and uncertainties arise.

Enough said? Don’t rush to name your next CEO or get your estate planning underway just yet. While you may have the best of intentions, a succession plan involves a lot more than that. It could include a CEO job description, governance, and future strategic business plans while accounting for different skills and interests of new leaders, business context, and the changing marketplace and business environment.

A succession plan may define the process for planning; choices of entity structure, valuation, and financing; talent assessment, development, and compensation; estate planning including gift taxes, life insurance, and investments; and balancing business needs and family concerns to drive success. FamilyBusinessMagazine.com’s 9-step roadmap for succession planning suggests also addressing business transition, business strategy, risk assessment and contingency, and organizational business management planning.

An EY survey of large, longstanding family businesses around the world revealed that “they lay the groundwork for new leadership long before succession occurs” by defining who is responsible for succession; focusing on preparing the next generation; nurturing an entrepreneurial culture, and attracting top talent.

As reported in Harvard Business Review, “Just as a business must reinvent itself as markets shift, so must a business family reinvent (or at least thoughtfully revisit and refresh) its ownership and leadership model.” It suggests doing a few things in advance of making succession decisions:

• Articulating family dynamics and how they’ve changed since the start of the business (or transition from the last generation).
• Learn from other business families about how they managed the transition, who helped them, what worked and what didn’t, and any other advice they may have.
• Respect tradition but don’t be trapped by it; be open to new ideas and leave behind outdated preconceptions.
• Take time to let your plans evolve. Regularly review, update, and change directions when necessary.
• Be transparent and maintain open communication with all interested parties so there’s a shared view of the future that family, employees, and communities can buy into.

Remember, succession planning is a long-term, ongoing process – not an event. A successful succession plan can fill a need brought on by a variety of planned (i.e., retirement) and unplanned (i.e., health issues or death) events. Finally, the best time to put a plan in place is before it’s actually needed.

For more information on taxes, estate planning, and accounting in general, contact RBT CPAs, which has been serving Hudson Valley businesses for over 55 years.

The new lease accounting standard – ACS 842 – took effect for private and non-profit organizations for fiscal years starting January 1, 2022 (or 2023 for non-calendar year-end entities). While that means at the earliest your organization must account for all leases on your financial statements by the end of this year, there’s a lot of work to be done to meet the new standards. If you haven’t started, now is the time. If you wait until year-end, it will probably be too late.

First, a number of departments/functions may be affected by the change. This includes accounting, tax, real estate, equipment leasing, procurement, treasury, information technology, and legal. Consider creating a task force with representation from all impacted areas to put together a project timeline and plan.

Second, there are several activities you’ll need to complete, from policy development to data management and extraction to technology design, workflow, implementation, and more.  Perhaps one of the biggest considerations is whether you should be adopting a technology solution to automate identifying lease language, monitoring, bookkeeping and more, which is something we strongly recommend.

So, if you haven’t already started, you need to catch up now.  Waiting for year-end is not an option. If you need a refresher or to get reacquainted with ACS 842, following is an overview (originally published by RBT CPAs in August 2021 and updated for manufacturing companies).

RBT CPAs has partnered with Trullion – a lease management software company – to use modern technology to streamline the process. If you are interested in learning more about how this may benefit your organization, give us a call.

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Did you know that, in a matter of months, your leases will be accounted for differently due to the new lease accounting standard? While previously only capital leases were recorded on the balance sheet, effective for fiscal years beginning after December 15, 2021, all leases will be on the balance sheet. That translates to January 1, 2022 for calendar year entities, and fiscal 2023 for non-calendar year end entities.

What does this mean moving forward? It means all manufacturing organizations need to make sure they have a thorough handle on all of their leases that are for longer than 12 months, including those related to real estate and operations. Especially if your organization has been leasing more equipment or space, the number of leases you may need to review and track could be quite large. Now is the time to review and evaluate contracts.

The new definition of a lease under ASC 842: “A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.” This slight change means that all contracts should be evaluated to determine if they fall within the scope of this new criteria. Contracts that were previously considered leases may no longer meet the lease criteria and vice versa. Be mindful of lease language when you are reviewing your contracts.

There will still be two categories of leases. The leases formerly known as capital will now be called finance leases. The classification criteria remain essentially the same as under the existing standard; the only major difference is the elimination of the bright-line percentages.  All leases that do not meet one of those criteria will be classified as operating.

If a lease contract includes a non-lease element, that non-lease component must be accounted for as a separate contract distinct from the lease itself. For example, the cost of an equipment lease that includes a maintenance contract must be allocated between the two elements and accounted for separately.

Lease liabilities for operating and finance leases will all be accounted for in the liability section the same way capital leases currently are: split between current and long-term. The offset to the liability will be a right of use (ROU) asset. There will be two lines: a ROU asset – operating lease line, and a ROU asset – finance lease line. These ROU assets are all long-term.

The new standard was designed so that there should be minimal impact to your income statement. Operating leases will continue to be recognized as a straight-line expense over the life of the lease. Finance leases will continue to be frontend loaded because the interest is higher at the beginning of the lease than at the end.

The most significant impact will be on the company’s current ratio. Because the ROU assets are all long-term, but the lease liability is split between current and long-term, the current ratio will be negatively impacted. This change will be particularly important for entities with debt covenants that reference the current ratio. If you have significant operating leases that may create an issue with your debt covenants, connect with your bankers now.

Ultimately, it’s important that both the borrower and the lender understand that this is a reporting change, not a change in a company’s financial situation. Having this conversation early on instead of waiting until the last minute will avoid confusion, and a lot of headaches.

Even though summer has started, OSHA never takes a vacation. Here are a few highlights of Federal OSHA activities you may want to keep on your radar.

OSHA’s Heat Illness National Emphasis Program (NEP)

Federal OSHA’s Heat Illness NEP is leading the way to prevent heat-related illnesses and injuries at work.  On days when the heat index is 80 degrees F or higher, Federal OSHA intends to do field inspections; ask employers about heat hazard prevention programs; and assess the potential for heat-related illnesses and injuries. It will prioritize inspections for complaints and employer-reported hospitalization for heat hazards, while also conducting random inspections of employers in 70 high-risk industries on days when a heat warning or advisory is issued.

To protect your employees from heat-related dangers, educate them about heat-related illnesses; provide rest breaks, shade, and cold drinking water; and develop a heat illness prevention plan. Indoors, make sure cooling fans, air conditioning, and adequate ventilation is available. If you’re interested in doing more or learning more, here are some OSHA resources to help you get started.

OSHA starts process to update rules for occupational lead exposure.

According to recent research, adverse health effects from lead exposure can occur at lower blood levels than recognized in OSHA’s lead standards. Recognizing this, OSHA published an Advance Notice of Proposed Rulemaking to revise the standards and is seeking public input to help prevent harmful health effects in workers exposed to lead. The public is invited to comment on blood lead level triggers for medical removal protection; medical surveillance provisions; exposure limits; and provisions for personal protective equipment, housekeeping, hygiene, and training. Submit comments online by August 29, 2022 (refer to Docket No. OSHA-2018-0004). 

Proposed recordkeeping rule has state support.

OSHA’s proposed reporting rule for injury and illness has the support of 17 state Attorneys General. The proposed rule would require certain high-hazard industry establishments to electronically submit more information from Log of Work-Related Injuries and Illnesses plus Injury and Illness Incident Reports annually and to include company name on submissions. The Attorneys General believe this will help employees and consumers take workplace safety into consideration when deciding where to work and what to buy, while empowering states to target enforcement. They are also encouraging that the proposed rule cover all workers (not just employees). If you have some thoughts about this matter, now’s your chance to be heard. Submit comments via the Federal e-Rulemaking Portal.

While you’re working hard to keep your employees, customers, and the public safe and healthy, you can depend on RBT CPAs to ensure your audits, financial statements, taxes, and more are healthy and beyond scrutiny. What’s more, our Human Resources Services division is available to assist you with all employee-related matters, including OSHA. To find out more about what we can do for you, give us a call today.

How much of a profit did you make on each item produced yesterday? Last week, month or quarter?

Tracking and evaluating your production costs on a regular basis can help inform everything from your pricing and marketing strategies to sales, staffing, process improvement opportunities, and other factors affecting your profit margin and success.

According to the National Federation of Independent Businesses’ (NFIBs’) April 2022 Optimism Index, business conditions are at their lowest in almost 50 years.  Inflation is a problem for over 30% of respondents. Nearly 50% have job openings they can’t fill. Profits are down thanks to the higher material costs, weaker sales, lower prices, and higher tax and regulatory costs. Pessimism about anything getting better in the second half of 2022 is high.

While it would be understandable to declare your business at the mercy of so many external influences, regularly tracking and evaluating production costs can help you have more control over profits, productivity, efficiency, and more.

Quickbooks Intuit defines production costs as total expenses – like costs for labor, materials, machinery, rent and other overhead – incurred to produce a product or service. They impact pricing, cash flow, and profit or loss.

To calculate total costs, add fixed costs (which are the same regardless of how many products are produced and include things like rent, utilities, insurance, and monthly salaries) to variable costs (which change depending on production volume, raw materials, packaging, shipping, and more). So, if fixed costs are $30,000 a month and variable costs are $70,000, total production costs are $100,000. If you made 10,000 units, the production cost per unit is $10 ($100,000/$10,000).

When you can manage to maintain or even reduce production costs without compromising quality, you can maintain or increase profit margins and business success.

Consider:

• Tracking and analyzing your production numbers regularly. By watching your production costs, you’ll know when expenses change and how they may affect sales and profits, so you can proactively adjust – production, pricing, marketing and more – as needed.
• Negotiating and shopping around for materials and services. With raw material shortages, supply chain issues, and dramatic price swings for fuel, putting extra effort into managing costs can have a big impact on your bottom line. You may find your suppliers will negotiate, especially if you’re a long-term, dependable client. Explore potential discounts that may be available in return for longer contracts, bigger orders, and cash payments.
• Evaluating every step in the process for efficiencies. Eliminate anything that does not add value, including excessive packaging which can drive up shipping costs and waste. Schedule equipment maintenance to reduce issues and downtime.

Perhaps one of the best things you can do is invest in software.

Software can help all your processes and systems talk and feed each other to help with enterprise resource planning (ERP). As an added benefit, you can track productivity by person and align training and incentives accordingly. Yes, it’s a big time and money investment, but when there are so many headwinds, being armed with the type of insights and information an ERP system can provide may just be what you need for long-term success.

There is one other thing you can do to promote success – choose RBT CPAs to handle all your accounting and auditing needs. Contact us to find out why we’re the Hudson Valley’s leading accounting firm and one of the top 250 nationwide.

Why cybersecurity risk is growing in construction.

The war in Ukraine is closer than you think.

Recently, the  White House warned malicious attacks could be just a few keystrokes away, making it critical for local governments and businesses to close their digital doors, put their shields up, and protect people, data, and infrastructure from the disruption a cyberattack can cause.

Cybersecurity managing risk in the information age

By 2027, investments in manufacturing cybersecurity are projected to reach almost $30 billion to protect and ensure the safety of plants, machines, and organizations.

In fact, the U.S. Cybersecurity & Infrastructure Security Agency (CISA) – a component under Department of Homeland Security control – has identified several manufacturing industries “crucial to the economic prosperity and continuity of the United States,” including manufacturing of primary metals; machinery; electrical equipment, appliances and components; and transportation equipment. A cyber attack in any of these could cause disruption at a national level and across other industries.

According to the Association of Equipment Manufacturing, no person or organization is immune to cyber security threats in manufacturing and everyone is responsible for helping prevent them.  2022 cybersecurity risks include some of the more well-known tactics like ransomware (a malicious software that locks and encrypts computer files until a ransom is paid) and phishing (enticing a reader to click a link, download an attachment, or reveal personal information).

Just as technology has become more sophisticated, so have cyberattacks.

Digital technologies in smart factory initiatives are facilitating more complex cyber threats. In a study of manufacturing industry cybersecurity, Deloitte and the Manufacturers Alliance for Productivity and Innovation (MAPI) uncovered numerous operational, financial, and strategic risks related to Operational Technologies (OT) like logic controllers, distributed control systems, embedded systems, and industrial IoT devices. Manufacturers aren’t prepared for potential cyber threats and need an enterprise program designed to identify, protect against, respond to, and recover from attacks.

Cybersecurity risk aware manufacturers use industrial control systems (ICS) to monitor and control machinery, production lines and other physical processes. To enhance business processes, capabilities, and ability to compete, today’s manufacturers are connecting their operational technology (OT) systems with their information technology (IT) systems to boost productivity and operate more efficiently. While offering many positives, they also attract cyber criminals expert in exploiting vulnerabilities to compromise ICS integrity and data.

The U.S. National Institute of Standards and Technologies National Cybersecurity Center of Excellence (NCCoe) just released a new Cybersecurity Practice Guide, entitled, Protecting Information and System Integrity in Industrial Control System Environments: Cybersecurity for the Manufacturing Sector (Special Publication 1800-10) to help organizations detect and prevent unauthorized software installation; protect ICS networks from harmful applications; detect unauthorized use of systems; monitor network traffic; leverage malware tools; and more.

Stay in the know and help shape the conversation and solutions by joining the NCCoe’s Manufacturing community of interest, where business professionals and advisors meet monthly via teleconference to share insights, technical expertise, challenges, and more. To express your interest in joining, email manufacturing_nccoe@nist.gov.  For additional insights and information about cyber threats, see Why You Need to Update Your Cybersecurity Now.

While you’re focusing on cybersecurity, let RBT CPAs give you peace of mind that your taxes, auditing, and accounting are covered. Give us a call; we’ll do the rest.

If you’re thinking the whole reshore discussion may have been a knee jerk reaction to supply chain issues immediately following the start of COVID, think again.

While you’ll find some sources still questioning whether reshoring is the right move for U.S. manufacturing over the long-term – especially because of our shrinking talent pool and high wages (as compared to some other countries), most of the data and discussion continues to show reshoring picking up momentum in the U.S., including New York.

Right after the start of COVID in 2020, offshoring’s drawbacks became evident – the U.S. had a hard time securing personal protective equipment and ventilators. The supply chain model had a major issue: there were no contingencies for a major issue like a pandemic. A bigger, brighter spotlight highlighted one possible solution: reshoring.

Reshoring is when an organization brings manufacturing and related services back to the U.S. from overseas. (This is a complete 180 from the 1970s, when companies sent U.S. manufacturing offshore in droves to reduce costs and drive profits.) It impacts numerous industries: automotive, aerospace, chemicals, communications, IT hardware, medical devices, pharmaceuticals, semiconductors, and more.

According to the nonprofit Reshoring Initiative, 2021 was on track to show a 38% increase in U.S. reshoring jobs over prior year.  What’s more, more than 1,800 companies reported new reshoring and foreign direct investment (FDI) for the year.

The Future of Commerce report, a commissioned study conducted by Forrester Consulting for Shopify, show manufacturing delays are among the top three supply chain concerns brands expect to deal with in the coming year. So, no one’s expecting the discussion to go away; in fact, it will likely intensify.

In New York (NY), a 2021 survey conducted by the Center for Economic Growth (CEG) and Siena College Research Institute (SCRI) found that 44% of manufacturers in the state are planning to or have already started to reshore supply chains or production operations; the percentage jumps to 59% among Downstate manufacturers (in NYC, Long Island and mid-Hudson).

What about concerns related to talent costs and availability?

They’re legit. We have a shrinking labor pool. There are not enough high-tech workers. And our wages are higher than those of many other countries. Yet, it doesn’t seem to be a dealbreaker.

Overall, the advantages of reshoring – from having a smaller environmental footprint, faster response times, and greater control over the process and products to workforce development and community development and increased ability to innovate and differentiate – seem to outweigh potential hiring and pay challenges. There are also a growing number of solutions to address the skills gap, from building talent pipelines in partnership with local schools to  automation, AI, cloud computing and more. In fact, high-tech solutions not only help businesses work more efficiently, but also create the high-tech environment that attracts top talent with good jobs.

So, where to next? Here are some options:

• Stress test to identify supply chain vulnerabilities and alternatives.
• Take advantage of free resources specifically designed to help manufacturing companies in New York.
• Stay in the know with information and tools to help you make smart decisions.
• Reach out to local colleges and universities to explore developing talent pipelines.
• Watch for legislative changes that can impact funding (i.e., the CHIP Act).

Of course, RBT CPAs is always here to help you with everything accounting- and tax-related. Give us a call.

A committed and productive labor force is essential to any industrial operation yet the manufacturing industry, typically employing between 10-499 employees each, has been understaffed in their factories.

Ironically, while unemployment is in the millions so are job openings. Manufacturers have been operating with these job gaps while meeting customer demand, amounting to millions of U.S. dollars annually. An analysis of The U.S. Bureau of Labor Statistics (BLS) Monthly Labor Review demonstrates this contrary state of affairs: while there is depletion in growth and an overall decrease in labor force participation rates, simultaneously, they project total employment rate growth in 2024 will reach 160.3 million. Economists predict that today’s substantial labor force shortages are a long-term economic trend they must overcome to attract and retain workers to meet demands.

The on-going waves of the Covid-19 pandemic are easy to blame for labor market interruptions.

According to Reuters, “Lack of affordable child-care, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect.” Further, the pandemic has accelerated changes to technology and the way work gets done. However, the workforce shortage and talent gap did not begin with the pandemic–it already existed and will continue to do so.  Before the pandemic, in February 2000, reportedly, there were 82 unemployed workers per 100 job openings; currently, there are roughly 65 unemployed workers for every 100 job openings.

Specifically, in manufacturing, the largest sector in the goods-producing field, less people are going into the profession as it’s been a struggle to attract workers as well as retain workers.

Manufacturing jobs fell from 10.7% in 2004 to just 8.6% in 2014 and is projected to fall even further, to 7.6%, by 2024. This decrease is by far the largest over the 2014–24 period. BLS’s 2018 Monthly Labor Review attributes the decline of manufacturing employment to “A skills mismatch—the gap between the skills workers have and the skills employers need….” The change in skills required to perform new tasks in manufacturing contributes to the persistent decline in the manufacturing industry since 2000. In 2015, BLS also said, “In the past, many manufacturing jobs were considered low skill and had fewer educational requirements than other types of jobs. Over the last few decades, manufacturing plants have become more automated, thus requiring skills that are more technical.” For example, engineers, computer programmers, and software developers are more sought after by manufacturers, as are people to design and run the machines. These jobs require different manufacturing skills and usually require a higher level of education.

Most importantly, higher productivity output is predicted and requires less employees, yet recruiting and retaining employees remains critical.

Manufacturing production output, according to BLS’s 2015 report is “…expected to grow 1.9% annually to reach almost $6.6 billion in 2024, up from over $5.4 billion in 2014. The negative impacts on existing employees due to staffing shortages will impact the positive outcomes predicted. CNBC notes that workers left positions for better positions in a tight job market. Workers opt to shift into positions with higher pay and better working conditions to increase their work-life balance. Thus, maximizing and supporting the existing workforce and attracting new talent is necessary in 2022.

Manufacturers must not surrender to these inconsistent forces impacting their business. Consider adjusting to the current conditions to attract and retain top talent with these tips:

• Offer premium pay and hiring bonuses
• Give shift-work choice options using a mobile app
• Incentivize with more time off
• Consider knocking down hiring barriers such as drug tests or criminal records
• Support the amendment to the Pell Grant program to expand eligibility to training
• Invest high-school-level technical programs as a pipeline system
• Optimize technological tools to track operations and automate
• Create virtual tours and escape rooms to demonstrate some of the skills needed for modern manufacturing

RBT hopes businesses can adapt and regain control. If you’d like to know more, our dedicated team is here to help develop a personalized long-term strategy for you. Additionally, if you would like to submit topic ideas for future articles our team produces, please feel free to contact us at TLideas@rbtcpas.com

Source Links:  Source Links: Reuters, Thomas Net, BLS, BLS, BLS, CNBC, Ogletree, Bloomberg