Manufacturing Industry Outlook: 4 Ways to Improve Skills, Supply Chains, and Visibility

After the roller-coaster ride of the last few years, manufacturers are eager to shore up supply chain volatility, retain and upskill talent, and lean on technology to be better prepared for transformative events.

Two manufacturing employees wearing hard hats in a warehouse

In light of recent transformative events—global supply chain snarls, landmark infrastructure investments, and geopolitical tensions—many manufacturers are focused on ways to boost resilience. That means gaining more visibility into their fluctuating supply chains, and investing in training and upskilling their workforce. 

While there are continued challenges, including a still-tight labor market and trade uncertainty, manufacturers are also feeling more optimistic in recent months. In the National Association of Manufacturers’ (NAM) latest Manufacturers’ Outlook Survey, 68.7% of respondents reported feeling positive about their company’s outlook. That’s still lower than the historical average, but 2.5% higher than in December 2023. 

To overcome challenges and capitalize on growth opportunities, many manufacturers are feeling bullish about digitization—understandable considering that 83% believe smart factory solutions will transform the way products are made in 5 years, according to Deloitte

However, transformation investments are only as valuable as the data foundation upon which they’re built. With a unified technology backbone, which integrates finance and HR on one platform where AI and continuous innovation are built into the core, manufacturers not only meet increasing demands of Industry 4.0, but they also face challenges that arise in workforce management, operations, and the supply chain. 

Here’s a look at four major trends shaping the manufacturing industry in 2024 and beyond. 

1. Unified Data Is Critical to Digital Transformation

From product inventory to worker engagement levels, manufacturers have no shortage of data about their operations. But what do they often lack? Enterprise-wide, real-time insights. 

Many manufacturers are operating with siloed systems and error-prone spreadsheets that make it tough to leverage the up-to-date, organization-wide data they need for planning and growth. That’s why future-focused leaders are turning to cloud-based systems that use a unified data core to create a single source of truth for the entire organization. With one source for financial, people, and operational data, everyone can access real-time insights to make sound decisions.

Workday AI Helps Boost Learning at Arrow Electronics

 

Such was the case for Sumitomo Heavy Industries, a multinational manufacturer of precision machine tools, that was experiencing rapid growth in multiple global locations, each with its own processes, data, and digital maturity level.

“We were facing several major challenges around our ability to address the growing need for actionable data and insights, including the need to be GDPR compliant,” says EMEIA CHRO Joris Blommaerts

Additionally, to shift from a product-oriented way of working to a market-focused one, Sumitomo Heavy Industries needed to bust its data silos to “access the real-time data and regional reporting that we simply didn’t have at the time,” Blommaerts explains. Implementing a new human capital management platform provided the unified data access the organization needed to be successful.

Here’s why: Companies with higher interoperability—applications that easily share data and correspond with one another—grow revenue six times faster than their peers, an Accenture analysis shows. These companies also tend to have higher supply chain efficiency and worker productivity, and a better ability to reveal new ideas “that can advance value creation and competitiveness,” the Manufacturing Leadership Council reports. 

Quality, holistic data is also paramount to harness AI- and machine-learning-enabled technologies and to continue the march toward Industry 4.0. The Manufacturers’ Outlook Survey shows that manufacturers that have adopted AI and machine learning (ML) in some form are reaping the benefits in multiple areas, including:

  • Operational efficiency (31%)
  • Predictive maintenance (23.1%)
  • Product design and development (16.9%)
  • Quality control (16.6%)
  • Employee training (14.8%)
  • Supply chain efficiency (13.8%)

“AI and machine learning are no longer the future, they are here now, and it’s easier than it’s ever been to see the promise and the potential that’s been there for years,” says Workday CTO Jim Stratton. But to fully capitalize on the technologies, manufacturers will need to prioritize data management.

Manufacturers have made great strides in innovating and adopting new technology, but success has come with a drawback: a widening skills gap for manufacturing workers in a tough—although improving—hiring market.

2. Solve for Talent Gaps With Upskilling, Skills-Based Hiring

Manufacturers have made great strides in innovating and adopting new technology, but success has come with a drawback: a widening skills gap for manufacturing workers in a tough—although an improving—hiring market, and an aging workforce. And that’s nearly universal—an EY survey finds that 65% of manufacturers struggle to fill open jobs because of constantly changing required skills.

A growing workforce skills gap is compounding historical labor woes brought on by shortfalls in both retention and recruiting. As aging workers retire (nearly one-quarter of manufacturing workers in the U.S. are 55 years of age or older), they take with them valuable institutional knowledge and on-the-job training that leaders are struggling to backfill. 

And it’s not just frontline workers who lack the necessary skills and training to keep pace with the demands of Industry 4.0—supervisors and managers also need to be upskilled as digital requirements deepen. For EMEA manufacturers, 43% report a shortfall in “capabilities to work with large data sets/data science” as their number one stumbling block toward embracing a more tech-forward future, according to a Workday-sponsored IDC survey

In response, nearly two-thirds of manufacturers named upskilling as the top way they’re addressing labor shortages, according to a Manufacturing Leadership Council survey. And almost 60% say they’re doing so by creating or expanding internal training programs, per NAM.

At Sumitomo Heavy Industries, that has meant doubling down on workforce-optimization initiatives such as continuous learning, competency development, and success planning, Blommaerts says, giving the organization a “great overview of exactly where our talent lies.”

Meanwhile, aerospace and power company Rolls-Royce’s engineering function has taken a skills-based approach, asking employees to complete a profile to match their skills to new opportunities.

“This is generating a lot of skills data that we can use in the future to understand the full skills of our people, not just their qualifications or what jobs they have done before,” says Alex Kyte, global head of talent at Rolls-Royce.

A skills-based approach to workforce management helps ensure that workers are ready for whatever challenges and opportunities new technologies bring, be it working alongside a robot or leaning on AI to create efficiencies for rote procedures. By applying analytics to data such as skills assessments, recruiting applications, and labor market data, manufacturers can spot existing or looming skills gaps and optimize their plans to meet their organization’s needs.

Quality, holistic data is paramount to harness AI- and ML-enabled technologies and to continue the march toward Industry 4.0

3. Path to Retention Runs Through Employee Experience

The top concern for manufacturers this year isn’t an unfavorable business environment (58.9%) or rising healthcare and insurance costs (58.2%), but rather the ability to attract and retain workers (65.2%), the NAM survey reveals. 

Here’s why that matters: Along with keeping down recruitment and training costs, retaining skilled employees is critical to positive outcomes, NAM reports, including: 

  • Maintaining production levels to satisfy growing customer demand
  • Responding to new market opportunities
  • Supporting new production development and innovation
  • Implementing new technologies

The bedrock of any retention effort starts with improving the employee experience such as workplace culture, career development opportunities, schedule flexibility, and access to frictionless digital tools. For 80% of manufacturers, increased compensation—in the form of wages, benefits, salaries, and overtime—has helped improve employee recruitment and retention, the NAM survey shows. 

Flexibility is another area where manufacturers can make inroads. Young workers in particular are clamoring for more flexibility, with 63% of manufacturing workers ages 18 to 24 citing it in a Deloitte survey as their top priority. 

By transforming to a cloud-based scheduling system, underpinned by AI, managers can create dynamic schedules that balance labor demand with worker preferences and availability, giving workers more flexibility and control. And on the backend, managers get a real-time view of labor spending, productivity KPIs, and workforce analytics. Workday research shows that manufacturers that use employee-first scheduling tools with their frontline workforce report lower turnover than the historical average.

Of course, scheduling is just one component of the employee experience function, and companies who have provided a fully integrated mobile solution to their workforce have reaped the benefits in employee engagement. Chemical producer and distributor CHT Group moved from a largely paper-based process to a mobile-first approach and now considers HR a “business enabler,” helping to recruit and retain young talent. 

“Through smart HR services, we create a work environment at CHT Group where people love to work, are fully engaged, and give their best,” says Rainer Hallenberger, group vice president, HR and corporate development, CHT Group.

Companies with higher interoperability—applications that easily share data and correspond with one another—grow revenue six times faster than their peers, an Accenture analysis shows.

4. Smart Supply Chains Are Boosting Resilience

Manufacturers’ supply chain worries have eased, but more than one-third say supply chain challenges are still one of their biggest concerns, NAM found. 

To help ensure they can handle the next disruptive event, a whopping 76% of manufacturers are adopting digital tools to gain enhanced transparency into their supply chain, streamline supply chain workflow, and improve supplier communication, Deloitte reports. Some are also embracing AI, metaverse technology, and digital twins to build stronger, more efficient, and more innovative supply chains. 

The reality is that in the next handful of years, manufacturing supply chains likely will look very different than they do today. And so forward-looking organizations are working to simplify their supply chains and gain a better understanding of them. 

A full 72% are also redesigning their supply chains to maximize the benefits of being more digitally driven, the Manufacturing Leadership Council reports, to “improve real-time visibility and traceability across the end-to-end supply chain, tracking what is being produced, by which partner, in what quantity, where it is located, and when it is due.”

By investing in technologies built for interoperability—those that support enterprise applications working together with a unified source for data, consistent security, and a composable architecture—companies can achieve previously unreachable levels of adaptability and resilience in times of change. This technology helps manufacturers connect insights from their supply chain, forecasted demand, and workforce management. 

And by harnessing the predictive abilities of AI and ML technologies, manufacturers can also make more informed predictions about market trends, customer expectations, looming supply chain issues, and talent and skills needs. All of which will allow them to correct course when market conditions change.

To learn more about how Workday helps manufacturers keep up with ever-changing demands, visit workday.com/manufacturing.

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