Why some manufacturers aren't bemoaning the skills gap

More than half of U.S. manufacturing companies reported a "severe shortage of highly skilled qualified applicants" in a 2014 survey conducted by Accenture and the Manufacturing Institute. If you include companies that reported a "moderate shortage," that percentage climbs to more than three-quarters of respondents. While that may be sour news for the economy as a whole, some companies have found a way to make lemonade. One of them is Phillips-Medisize, a contract manufacturing organization (CMO) headquartered in Hudson, WI, with a global footprint serving the medical device and pharmaceutical industries.

We keep hearing from our customers that it's difficult to find experienced quality people and that talent is hard to find, said Phillips-Medisize President and CEO Matt Jennings during a press conference at the MD&M East exhibition and conference in New York City earlier this month. Forty-three percent of U.S. manufacturing companies had unfilled positions for more than six months, and the situation is only marginally better across the pond, where 26% of companies surveyed by Manpower Group reported a lack of qualified engineering talent. To be fair, it's not just a dearth of skilled labor that has gutted the ranks of engineers among manufacturers; some of the misery is self-inflicted, even if it is rationalized by a changing economic environment.

"OEMs can't afford to keep on large design teams, giving them busy work to do in between projects," said Jennings. That's where companies such as Phillips-Medisize can offer a solution. "We manage 100 or so projects at any given time, and they last anywhere between 18 to 48 months," said Jennings. Phillips-Medisize has had to increase its pool of engineers, accordingly. "In 2012, we had 50 engineers in preproduction. Today, it's more than 450." It's a safe bet that none of them have time to dedicate to pet projects while they're on the clock.

The CMO landscape has shifted in other ways, as well, to meet customer demand. Consolidation has been a constant since the beginning of this decade, as evidenced by the Phillips-Medisize merger in 2011 and Jabil's acquisition of Nypro in 2013. This will continue, said Jennings, as OEMs seek to simplify supply chains. As part of this streamlining process, CMOs will be pushed into what Jennings calls, "up leveling. Companies that are making components will need to start doing subassemblies and companies doing subassemblies will need to manufacture finished devices," said Jennings.

Equally important for CMOs that want to be consequential in the medical manufacturing space is having a global footprint. The ability to design and manufacture for local markets—China for China is often the shorthand for this dynamic, even though it applies to other developing markets—is a key requirement among OEMs, said Jennings. Not coincidentally, Phillips-Medisize operates 14 facilities throughout the United States, Europe, Mexico and China, and has design centers in Wisconsin, California and the Netherlands.

In the course of the press conference, Jennings noted that plastics remain the "heart and soul of innovation for Phillips-Medisize," and that integrated advanced injection molding, automation and quality systems represent a key value proposition of the company. "The integration of these three pillars helps our customers get their products to market faster," said Jennings. In the years ahead, he added, more and more of those products will be biologics based.

More than 1000 biologic molecules are in development, noted Jennings, citing a report that projects global biologics market revenue to hit $291 billion by 2020. "Approximately 50% of those drugs in the pipeline will require some kind of delivery device," said Jennings, a technology where Phillips-Medisize, with its expertise in plastics and injection molding, is well positioned.

A $650 million company, Phillips-Medisize is not about to rest on its laurels. Jennings intimated that he "would be elated if it built another plant or two in the next couple of years. But I'm not announcing that," he added quickly, with a slight twinkle in his eye.

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