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Manufacturers Bullish on 2018, But Foresee Workforce, Leadership Challenges

by Jeff Moad

Man and woman working in industrial manufacturing settingManufacturers enter 2018 highly optimistic about the current and forecast business outlook and inspired to push forward with strategic, Manufacturing 4.0 initiatives that they believe will deliver a wide range of benefits, from greater agility and efficiency to the ability to predict and avoid supply chain disruption.

Manufacturers enter 2018 highly optimistic about the current and forecast business outlook and inspired to push forward with strategic, Manufacturing 4.0 initiatives that they believe will deliver a wide range of benefits, from greater agility and efficiency to the ability to predict and avoid supply chain disruption.

At the same time, however, many manufacturers are increasingly worried that an already-significant workforce shortage is only getting worse and that it could undermine their growth opportunities.

These were key themes presented by a panel of five manufacturing leaders and industry experts who participated on a January 16th webcast and discussion sponsored by the Manufacturing Leadership Council. The session, part of the ML Council’s ongoing Critical Issues Debate series, was titled “Hot Trends for Manufacturing in 2018,” and speakers included:

  • Chad Moutray: Chief Economist, the National Association of Manufacturers
  • Scott Erker: SVP U.S. Operations, Development Dimensions, International
  • Brad Heath: Founder & CEO, VirTex Enterprises
  • Dennis Hoeg: VP & COO, North America, Nexteer Automotive
  • Carolyn Lee: Executive Director, Manufacturing Institute

NAM’s Moutray said that, going into 2018, U.S. manufacturers’ business outlook has become dramatically more ebullient, influenced by factors such as strong global demand and tax reform. A recent NAM survey, in fact, showed that 94.6 percent of manufacturers are somewhat or very positive about their company’s outlook heading into 2018. That contrasts with 77.4 percent who said the same heading into 2017 when offshore competition and economic uncertainty depressed optimism and capital spending.

A somewhat weaker U.S. dollar, Moutray noted, is helping to stimulate offshore demand for American-manufactured products, a trend that is expected to continue through 2018. U.S. manufacturers are seeing strong demand particularly from European customers, Moutray said.

The NAM survey also showed that optimism about business conditions and recent tax cuts have inspired 62.9 percent of manufacturers to say they plan to increase capital spending. And hiring is on the upswing, with manufacturers adding an average of 16,000 workers per month to their payrolls in 2017, Moutray said. Manufacturing employment has increased by 1 million since the end of the last recession, rising to 12.54 million, Moutray reports.

While those added jobs haven’t fully replaced the 2.3 million lost in the recession, they have set the stage for what seems to be emerging as a full-scale workforce shortage in manufacturing. According to the Manufacturing Institute’s Lee, growth and a coming wave of baby boomer retirements mean that manufacturers are expected to need to fill upwards of 3.4 million jobs by 2025. The Institute has estimated that, at current rates, only about 1.4 million of those jobs are likely to be filled, leaving a gap of 2 million manufacturing workers.

Manufacturers are already feeling the squeeze. Eighty four percent of manufacturers have told the Manufacturing Institute that they believe there is a talent shortage in manufacturing. And Moutray said NAM’s most recent survey shows that, for the first time, “attracting and retaining a quality workforce” was rated as the top business challenge by manufacturing heading into 2018, replacing other challenges such the cost of healthcare, taxes and regulation, and the cost of raw materials.

The negative image of manufacturing in the eyes of many parents and other Americans contributes to the workforce shortage, noted Lee. But leadership shortcomings at many manufacturing companies also undermine efforts to increase the manufacturing workforce.

“The boss is the reason most people accept a job, and the reason most people leave a job,” said DDI’s Erker. Only 26 percent of manufacturers responding to DDI’s most recent survey rate the quality of their companies’ leadership as high, Erker said. That compares to 32 percent in other industries who say leadership quality at their jobs is high. The quality of leadership in front-line supervisory positions is particularly low in manufacturing, Erker reported.

Manufacturing leaders tend to rate particularly low with regard to competencies such as digital literacy, leading virtual teams, the ability to lead virtual teams, and intellectual and cultural curiosity. Manufacturers wishing to upgrade their current and future leadership ranks, said Erker, should start by conducting a rigorous diagnostic on individual leader strengths and weaknesses, then develop and implement plans to close the gaps.

Manufacturers also need to begin thinking differently about the types of individuals they promote into leadership roles. Rather than focusing on technical skills or promoting those who are “next in line,” Erker said, manufacturers should target individuals with next-generation leadership capabilities such as 360 thinking and the ability to lead digital transformation.

Manufacturing leaders on the call said they are beginning to feel the workforce shortage. Nexteer’s Hoeg said attrition at his company is too high, particularly given the tightening labor market. The automotive manufacturer is exploring ways to make new hires effective as soon as possible.

And some manufacturers see in emerging M4.0 technologies opportunities to improve productivity on the plant floor and, thereby, ease workforce shortages. VirTex’s Heath, for example, is exploring the use of augmented reality devices to more easily display work instructions on the plant floor, enabling workers to learn faster and become productive sooner.

At the same time, manufacturers such as Heath say they increasingly see M4.0 tools such as big data and advanced analytics, collaborative engineering and supply chain management tools, and virtual and rapid product prototyping platforms as offering them an opportunity to deliver greater value to customers and differentiate themselves in competitive markets. In the case of VirTex, an electronic manufacturing services provider, such M4.0 tools are helping the company provide a full range of design, production, fulfillment, and post-sales services to customers across a wide range of industries and that increasingly require rapid response from their suppliers.

VirTex, for example, is making significant investments in big data and analytics tools to drive more real-time, data-driven decision-making and, through dashboards and visualization, get data out to customers faster.

The company is also taking advantage of lower-cost sensors to add intelligence to shop floor equipment to receive real time updates and status reports. And VirTex is beginning to look to modeling and artificial intelligence tools to better understand how its supply chain works and even to predict and avoid risk.

At Nexteer, in addition to focusing on safety, quality, productivity, and efficiency in 2018, the company continues to execute on a M4.0 strategy that, Hoeg said, is leading to a much more granular understanding of the factors that affect product quality and manufacturing performance. While the company has extensively updated its manufacturing execution, traceability, warehouse/inventory, quality, and maintenance management systems in recent years, the focus now is on leveraging data from all of those systems to pinpoint even small issues that may cause significant quality challenges.

Ultimately, said Hoeg, Nexteer believes the M4.0 investments it will continue to make in 2018 will enable it to identify best practices within its global manufacturing network and implement better, standardized solutions to frequently-faced problems. And that, said Hoeg, will lead to a more proactive approach to problem-solving and reduced lead times.

Those kinds of improvements should allow manufacturers such as Nexteer to respond faster to rapidly-changing market conditions and, to take advantage of what, heading into 2018, appear to be promising economic conditions.

The blog originally appeared on the Manufacturing Leadership Council website. Reposted with the ML Council’s permission. DDI is a member of the Manufacturing Leadership Council.

Jeff Moad is the research director and executive editor at Frost & Sullivan’s Manufacturing Leadership Council. He is also a Frost & Sullivan Associate Fellow, and director of the Manufacturing Leadership Awards Program.

Interested in learning more? Download DDI's A Leader's Guide to Manufacturing 4.0 now.

Posted: 30 Jan, 2018,
Talk to an Expert: Manufacturers Bullish on 2018, But Foresee Workforce, Leadership Challenges
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