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Corporate Executive Survey Commentary: Labor Costs No Longer Paramount

The cost of labor can sometimes be replaced by increased automation, but employees with a higher skill level are still needed.

Q1 2014
The first two factors in the new rankings for Corporate Survey parallel what we are hearing from our clients. Availability of skilled labor is of high importance to the majority of our manufacturing clients. We are hearing more and more that skilled labor is becoming scarce, and many companies have to be creative in recruiting those individuals whom they can quickly train and grow into key positions.

Highway accessibility, logistics, and transportation costs are also a critical factor. As fuel costs rise, companies are thinking ahead to where their customer base will be located (either consumer or other companies) and how best to position a manufacturing or distribution facility so it will continue to be located central to customers and not outside a logical delivery route.

The movement of the labor costs factor from first to third in the rankings is a reflection of a tight labor market. The immediate concern is finding a skilled work force; the cost of labor can sometimes be replaced by increased automation. As robotics becomes less expensive, we are finding companies looking for additional ways to automate, thus reducing the number of overall employees, but still needing employees with a higher skill level.

We were surprised by the drop in the ranking of energy costs from 6th in 2012 to 10th in 2013. Many manufacturing companies will increasingly demand lower energy costs to compete and reshore production from overseas. We continue to hear that maintaining low-cost energy is paramount for our client’s ongoing success.

The available buildings factor did move from a ranking of 8th in 2012 to 6th in the 2013 survey. This is due to a dwindling supply of quality existing facilities. As the real estate market tightens, this factor could rise in the rankings for 2014.

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