How can manufacturers remain profitable in the face of a skilled labor shortage?

A combination of in-person work, low unemployment, and high industrial demand has turned a pre-pandemic labor shortage into a current-day labor crisis for industries that rely on specialized skills. The manufacturing industry has been among the hardest hit as the skills gap widens.

Grassi’s 2024 survey of food and beverage manufacturers in the NYC metropolitan area found that an astounding 90 percent have concerns about staffing. Among them, companies that grew profits in 2023 were likelier to have implemented strategies to mitigate staffing risks. Nearly 60 percent credited improved employee productivity as a primary driver of profitability.

These high-performing manufacturers use the most effective staffing strategies, including converting temporary workers into full-time positions, changing shift schedules, offering bonus incentives, and implementing flexible schedules.

Of course, these solutions come with a price, and unsurprisingly, the high labor cost was the most common concern reported by respondents this year. Savvy business owners recognize that staffing strategies must be offset with cost-saving tactics to remain profitable.

When we spoke with the owners of these companies, several key themes emerged. First, prioritize employee retention to minimize the exorbitant costs of recruitment, training and understaffing. This can be achieved by recommitting to employee development, enhancing the employee experience, and offering a comprehensive benefits package.

It is also important to ensure that critical employees can envision their role in the business’s future. Succession planning is not only about planning the owner’s exit but also about paving the way for the next generation of leaders. Communicating the succession plan, identifying critical roles, and preparing your successors are essential to employee retention, which promotes engagement, investment, and long-term stability.

In this labor environment, it is unsurprising that investing in automation and improving operations were among the most common profitability strategies. Rising labor costs and shrinking talent pools require companies to run operations as efficiently and accurately as possible. Some of the most effective technology drivers of productivity and profitability cited were ERP systems, programmable logic controllers, automated batching systems, online point-of-service (POS) programs, electronic engineers, and robotic process automation (RPA).

Despite the industry trends toward technology adoption, a third of respondents cited automation and technology as challenges, which were just as high as staff recruiting and retention–one of the main challenges this technology intends to solve. This signals the importance of selecting and implementing the right technology effectively.

While these strategies reflect trends in the food and beverage sector, they can be used by any manufacturer struggling to combat the skilled labor shortage. Combined with the other operational and financial strategies uncovered in the survey, workforce management will continue to propel the rising revenues and profits most respondents experienced last year.

Overall, businesses understand that they must invest in their assets to increase profits. Eighty percent of respondents expect to increase capital spending this year, which should be equally true of their most significant asset–human capital.

To download a complimentary copy of the 2024 State of Food & Beverage Manufacturing report, please visit

Robert E. Grote Robert E. Grote is a partner at Grassi and leader of the firm’s Manufacturing & Distribution Practice. With more than 30 years of experience in public accounting, tax planning and management consulting services for the M&D industry, Rob has grown the practice to become the second largest industry group in the firm. In his role as M&D Practice Leader, Rob leads a team of... Read full bio

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