Manufacturers Turn Challenges Into Opportunities
Connecticut manufacturers say high costs and workforce challenges remain top of mind in 2024, but innovation, flexibility, and persistence has helped capitalize on opportunities.
The 2024 Connecticut Manufacturing Report produced by CBIA and affiliates CONNSTEP and ReadyCT, and made possible with the support of RSM, found 80% of manufacturers are impacted by labor shortages, with 87% saying the cost of doing business is increasing.
The labor shortage remains the greatest threat for most companies, with 33% of manufacturers reporting that the lack of skilled job applicants is the main factor hampering growth, followed by high taxes and regulatory compliance costs (27%) and the high cost of living (20%).
“Costs are going up every year,” HABCO Industries president Brian Montanari explained Oct. 2 at the 2024 Manufacturing Summit in Hartford.
Montanari joined Phoenix Manufacturing vice president of administration and compliance Martha Paluch Prou, Penn Globe president Marcia LaFemina, and RSM management consulting principal Matt Dollard to review the report.
“For us, nothing is off the table,” Montanari added. “We just have to find a way to reduce costs across the board.”
‘Bright Spot’
Connecticut’s annual manufacturing output increased 2.4% to a record $34.55 billion in 2023—representing 10.2% of the state’s GDP—including $15.85 billion in commodity exports.
Aerospace and transportation equipment remains the state’s largest manufacturing subsector, responsible for $13.86 billion in annual output in 2022—the latest available data—up 15.3% over the previous year.
Montanari noted that the Manufacturing Innovation Fund programs administered by the Department of Economic and Community Development’s Office of Manufacturing were helping small and medium-sized manufacturers businesses compete.
“I think this is one of the bright spots that our state has right now,” Montanari said.
“It affords a small manufacturer a way to experiment and see what can be,” added LaFemina.
Connecticut has invested $95 million in the MIF since its inception in 2015, supporting over 3,000 companies, creating more than 22,000 sector jobs, and retraining more than 29,000 incumbent workers.
Enfield-based aerospace components manufacturer Phoenix Manufacturing is among those companies that leveraged MIF programs, which often require matching funds from firms.
The purchase of a new wire EDM machine several years ago was made possible through the MIF’s Manufacturing Voucher Program, helping land a major customer.
Innovation
“Phoenix’s long-term strategy has been technology and now more and more automation,” Prou told the summit audience of more than 1,000 people.
She said the company invested heavily in new equipment over the past decade to help optimize processes.
Ultimately, the manufacturer replaced traditional machining centers with palletized automated systems that allow it to continue production and keep costs low.
Phoenix also took advantage of the Manufacturing Voucher Program to acquire a horizontal milling machine.
“That initial investment from the state helped us offset the project costs and offset the other things that come with just buying a huge piece of equipment,” Prou explained.
“And then we hired someone new to run the machine, so it does pay off.”
Reducing Costs
For manufacturers like HABCO Industries and Penn Globe, automation is not always a feasible option.
Instead, they look at other ways to cut costs while adopting streamlined processes wherever possible.
“We’re purchase forecasting as best as we can, out as long as we possibly can, and building up workable inventory that’s not sitting as too much cash on the floor while we’re waiting for potential orders to go through,” said LaFemina.
“It’s a bit of a gamble, but that’s how we’re approaching it.”
Montanari said HABCO is mostly in firm, fixed-price contracts where cost increases cannot be passed to customers.
He said that’s made the company hyper-focused on using Lean production principles and constantly looking for opportunities to collaborate with partners.
Leveraging Technology
Montanari detailed an order his team worked on for Sikorsky that required a greater quantity of product than HABCO is accustomed to producing.
After analyzing processes, the team discovered welding and stenciling were taking the longest amount of time.
To speed up production and save on new equipment costs, Montanari partnered with the Connecticut Center for Advanced Technology, using Microsoft HoloLens glasses to guide employees through the stenciling process.
“We went from a three-hour cycle time to a 30-minute cycle time, which for us is tremendous.”
HABCO’s Brian Montanari
“It didn’t require anybody to read a blueprint, it didn’t require anything technical, and we went from a three-hour cycle time to a 30-minute cycle time, which for us is tremendous,” said Montanari.
“It put us in a position where we were able to be successful on that first order.”
“It also created a buzz for the folks on the shop floor. It was one of our engineers doing it first, and the next thing you know, everybody wanted to try it.”
Finding Talent
Connecticut manufacturers currently employ 157,800 people, representing about 11% of the state’s total workforce.
Of the state’s 84,000 job openings, an estimated 8,000 are in the manufacturing sector.
Despite that demand, manufacturing employment declined 0.4% in the 12 months through August 2024 and the sector has recovered only 75% of the 11,800 jobs lost to pandemic restrictions in 2020.
Connecticut’s shrinking labor force illustrates the challenges faced by manufacturers and all employers. Since February 2020, the population of those working and those actively looking for work declined by 28,570 people (-1.5%).
Over the same period, the national labor force expanded 2.5%, with every other New England state except New Hampshire (-0.6%) also in growth mode.
Talent recruitment and retention is the top investment priority for 39% of surveyed manufacturers, a significant 12-point jump over CBIA’s 2023 survey.
For instance, the average annual manufacturing wage in Connecticut hit $95,470 in 2023, a 3% increase over the previous year.
Over the next six months, 27% of manufacturers plan to grow their workforce, while 67% expect employment levels to remain stable.
“We never turn down a qualified candidate for something in a hard-to-find spot,” said Prou.
“We first try to spend as much time as we can on the retention and the onboarding to make sure that we’re not just replacing people,” said Montanari.
He said HABCO focuses on cross training employees and offering opportunities to learn different skill sets.
LaFemina said paying employee medical insurance and implementing flexible work hours is “a big draw.” In the last few years she said Penn Globe changed its work week to four eight-hour days.
“Everybody is out at noon on Fridays and that makes a huge, huge difference in the mentality,” she said.
Skills Development
LaFemina is also among those who have seized on the opportunity to train people in a holistic way.
At the Manufacturing and Technical Community Hub in New Haven’s Fair Haven neighborhood, where LaFemina is the board chair, a team is training high school students in introductory manufacturing skills like shop math.
“At the end of the day, we know that there’s a missing element of basic skills before you can launch into advanced manufacturing,” LaFemina said.
MATCH pays the students minimum wage to come in and learn, with hopes they can get hired for an entry-level manufacturing position, opening a career pathway filled with opportunties.
“You all can hire them,” LaFemina said.
“And then if they want to go to college and learn more because you have the benefit to offer them, you will do those kinds of things and we’ll be there in the background to support what it is that they need.”
Support System
As manufacturing leaders discussed solving challenges, it was clear the support system they have across the state is paramount.
“We’ve got these small ad hoc networking groups that we get together and just talk about our business and try to help each other,” said Montanari.
“We’ve got these small ad hoc networking groups that we get together and just talk about our business and try to help each other.”
Montanari
For LaFemina, it was not difficult for her to build a team at MATCH who were committed to improving workforce pipelines and opportunities.
And with innovation top of mind for Prou’s team, she said Connecticut is a great place to be.
“We’ve been really happy to be able to be in Connecticut and be part of this ecosystem that offers us opportunities to be introduced and continue to touch base with the industry and where it’s going,” she said.
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