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Manufacturing Skills Shortage Creates Challenges, Opportunities for Digital Transformation

12/12/2018 By


Manufacturing has a shortage of skilled workers, and year by year it is expected to grow to about 2.2 million unfilled jobs over the next decade, according to a study that has been tracking the gap for almost two decades.

The shortfall in workers who can handle the technical nature of manufacturing and its digital transformation could cost the U.S. economy $2.5 trillion over the next 10 years, says the 2018 study by Deloitte and the Manufacturing Institute.

As one manufacturing executive said in the study, “With the positive turn in the economy, we don’t have enough job candidates with the right skills and work ethic to fill our openings, and this is making it difficult for us to accept the orders our vendors are asking us to complete.”

The study reports that 51% of executives said their biggest challenge arising from not filling those positions is maintaining or increasing production levels to satisfy growing demand.

Manufacturers have experienced difficulty in hiring key personnel for years following the Great Recession, with the average time to fill a position rising to 100 days in 2018, from 70 in 2015. But positions already in very high demand (operational managers and skilled production workers, like welders and equipment operators) are anticipated to become up to three times harder to fill over the next three years.

One of the most notable shifts since the 2015 Deloitte skills gap study was that manufacturers cited “shifting skill sets due to the introduction of advanced technology and automation” as the No. 1 source of hiring shortages, fueled in part by the adoption of technologies like robots, machine learning and artificial intelligence by half of the manufacturers surveyed by Deloitte.

To combat the shortage, HR executives and hiring managers will need to prioritize new skills and tools associated with digital transformation and balance cost savings with investments in training, technology and talent retention while making the most of their existing sources of knowledge and skills, according to the report.

Deloitte and the Manufacturing Institute have tracked skills and employment in the manufacturing industry for over 17 years by engaging executives, industry leaders, public officials and education experts to understand the changing manufacturing landscape. The 2018 study contains online survey data from more than 400 respondents as well as analysis of secondary data and economic projections from Deloitte.

Changing Skill Requirements

Employers indicated that STEM degrees aren’t needed for production jobs, but what is needed is the ability to interact digitally with connected machines on the production floor.

Manufacturing executives surveyed said the most in-demand skill sets they saw increasing in the next three years were digital skills — working with tools and technology, computer and programming skills for automation, and critical thinking abilities, driven largely by the trends towards integration of automation and advanced technology associated with digital transformation. Of those skills, critical thinking associated with creativity, problem solving and attention to detail will grow well beyond past demand as automation and technology free humans from repetitive manual tasks and employees are asked to understand and maintain increasingly complex production systems.

As that complexity grows, employees also will need digital skills to effectively use online collaboration systems like instant messaging and employment based social media along with other advanced assistance tools like voice assistants and augmented reality vision that enable real-time visual overlays of relevant data in the field or on the production floor.

As job seekers in manufacturing remain limited, respondents in the study indicated that hiring and HR managers are reducing their strict adherence to factors like years of experience or highly specialized skills in favor of adaptable employees who learn effectively on the job but come with more robust digital skills and pragmatic approaches to manufacturing and business challenges.

Executives also will need to continue to adapt to the “open talent ecosystem” of service providers, gig workers and talent networks that have seen tremendous growth in the past five years. Over 40% of workers are now engaged in some form of alternative work arrangement that allows greater flexibility for the employee but can make investment and training programs more difficult to implement and justify.

Nancy Zenger of Visier, a business intelligence provider not associated with the study, notes the value of analytics when making decisions for investment in training:

“Before pouring resources into new programs, it is important to identify where your organization will gain the most advantage from strategic learning programs. What is a critical skill set today may soon become obsolete due to new technology, or what is merely a nice-to-have skill now may become critical when business priorities shift.

“This kind of strategic planning can’t be accomplished with isolated metrics like learning completions or learner satisfaction scores. Instead, it requires a rich analysis of data from within and outside of the learning function, combined with a razor sharp focus on business goals and an eye towards the future.”

The study mentions a short-term solution to address the worker shortage — increase salaries and signing bonuses.

Having competitive wages is often raised as a simple solution to filling positions quicker. And 75% of executives surveyed in 2018 said they had offered higher pay to skilled workers; also,  66% said offering higher pay had a moderate impact to very high impact on retaining skilled workers.

High pay can be a double-edged sword, however, as 66% of executives also reported skilled workers leaving to accept a higher paying position. In the end the study says, higher pay increases costs quickly across the entire employment pool without addressing the broader long-term skills shortage, forcing executives to use a wider toolset when seeking to fill their most important positions.

Bridging The Gap

As the skill shortage continues, executives are looking for smart ways to increase their investment in existing resources and prepare existing and future employees for the needs of tomorrow, the study says.

In-house training using digital technology is becoming increasingly common, appreciated for increased efficiency and lower costs when digital assets reduce personnel and the time required to introduce new information and train workers on the job.

Public-private partnerships are working to connect the pool of potential workers at educational institutions with the knowledge and resources of manufacturers through long-term partnerships and industry associations to prepare students for the new challenges and opportunities they will face through digital transformation, and the introductions can start well before students arrive at college.

Jay Flores, a global STEM ambassador at Milwaukee-based Rockwell Automation not part of the study, told Karen Haywood Queen of Smart Manufacturing magazine: “At a young age, students are curious, they’re asking questions. They haven’t yet said, ‘I’m not a math person,’ so we want to get them before they have those doubts or they lose that passion for learning and curiosity.”

Many executives in the study also report taking measures to reduce the impact of retirement of highly skilled and knowledgeable workers — with 9.2% reported creating targeted roles for older workers, who can offer a competitive advantage in training new workers and using their deep knowledge of existing practices to supplement strategic and operational planning in manufacturing and across organizations as a whole.