TL;DR
- Workers are resigning in droves, taking hard-earned knowledge and experience with them which is especially critical in the manufacturing industry
- Newer, typically younger workers do not have the legacy knowledge and are not willing to tolerate outdated technologies of the past
- Investment in technologies for knowledge and insight creation, sharing, and collaboration will reduce the impact of this generational transition
- Focusing on 3 areas will help accelerate digitization: unifying data, extracting insights from it, and finding ways to operationalize and share across workflows
Much has been written about “The Great Resignation” with millions of Americans quitting their job every month. While unemployment is similar to pre-pandemic levels (4.2% in November 2021 vs 4% pre-pandemic), workforce participation still lags behind pre-pandemic levels, 61.8% as of November 2021, ~1.5% below pre-pandemic levels. That is the equivalent of approximately 5 million workers who left the workforce during the pandemic. The explanations are diverse, including health concerns, lack of child-care, pandemic-relief benefits, self-employment, burnout, and simply new opportunities with better pay.
Source: US Bureau of Labour Statistics: Impact of the COVID-19 pandemic on The Employment Situation for December 2021
The Impact of the Great Resignation
The impact of The Great Resignation has varied across the economy. Of course, industries like healthcare, travel, and hospitality have been affected significantly. Others, such as technology, have been impacted, but in different ways, with growth and burnout driving employment trends. So, how has this impacted the manufacturing industry? From the data and from recent conversations with 30+ manufacturing companies, we see several impacts.
First, on the production floor, we have seen multiple situations of very high turnover, with production workers able to find a new role for $1, $2, $3 more per hour just walking across the street to another facility. Supply chain disruptions, as well as the pandemic’s whiplash impact on manufacturing, have caused sudden demand increases, when combined with rising inflation, which has led to rapidly increasing pay in many markets in order to attract and retain workers, with accompanying turnover for others.
Compounding this, a strong stock market and soaring home values are giving higher income senior employees more options – i.e., retire rather than go back to work. Compared with before the pandemic, there were 3.6 million more Americans who left the labor force and said they were not planning to return, with those aged 55+ accounting for 90% of that increase. Of the ~5 million workers that have left the workforce during the pandemic, 70% are over 55. This has a disproportionate impact on the manufacturing industry, where 25%+ of the workforce is 55+, with workers age 55+ representing close to 40% in some sectors such as machine tool manufacturing.
Source: US Bureau of Labor Statistics
Numbers never tell the full story
Numbers never tell the full story
Many manufacturers are dependent on “tribal” knowledge concentrated in a few employees who have been with the company or industry for 25 or 30+ years. This is at all levels of the organization – from the senior account manager to the senior field service engineer to the senior production manager to the maintenance superintendent. Further compounding this is the fact that many manufacturers lag behind other industries in digitization and workflow automation which would help alleviate the dependence on tribal knowledge and manual processes.
Lastly, these turnover and brain-drain challenges are being compounded by changing expectations of younger workers who have a higher expectation of digitization. One study showed that 2/3 of millennials and Gen Z considered an organization’s embrace of technology and innovation as an important factor when choosing an employer. Another study indicated that 80% of Gen Z aspiring to work with cutting edge technology. Yet another study concluded that technology must meet a certain standard, otherwise younger workers will not stay. Multiple recent discussions with manufacturing leaders have reinforced this, with younger employees pushing back on cumbersome processes that require significant (and potentially unnecessary) manual data entry, time-intensive compilation, and outdated technologies for collaborating and sharing with other team members.
So, what can manufacturers do about it?
Accelerating digitization efforts will help mitigate the risk of key senior employees leaving along with making tasks more attractive to younger workers. This can also help lower costs, increase productivity and enable the organization to better serve its customers. While many manufacturers are heading down the digitization path, the progress is much slower than in other industries. There are more legacy systems, silos of data, and manual workflows. Industrial OEMs should focus on 3 areas in their digital acceleration efforts: data unification, deriving insights from data, and then operationalizing those insights in digitized workflows.
Bringing data together and addressing data quality issues establishes the foundation for digital acceleration. Leveraging analytics to derive insights from this data and making those insights accessible and incorporated into digital workflows helps to overcome the resource challenges facing manufacturers. Much of the tribal knowledge traditionally held by a few high-tenure employees can now be made available more broadly through both the data and insights. This enables employees to be onboarded faster and come up to speed faster on complex customer relationships, application knowledge, or product specifications. It also enables broader coverage with fewer people by not being dependent on human experience historically gained through years in a role or organization.
Taking those insights and incorporating them into digital workflows, enables both faster training as well as greater productivity and quality in those workflows. Examples include digitizing the spare parts ordering process, equipment inspections, field service, and even creating targeted hunting lists for proactive sales outreach. In the past, these processes have been very manual and highly dependent on experience, preventing them from becoming truly scalable and repeatable. In addition to driving productivity and efficiency, younger workers will be more attracted to the digitized and data-powered versions of these workflows.
Are ERPs or CRMs the instant solutions for Digitization?
While an ERP and a CRM are key parts of a manufacturer digitization strategy, they are not a magic wand solution to every problem. In many situations, data unification and data quality need to be addressed before the benefits of a new ERP or CRM will be truly realized. As well, in too many situations, we have seen manufacturers try to implement a generic CRM ‘platform’ that supposedly will solve all of their problems. Of course, they quickly find that their employees struggle with a generic platform and often still need to go back to multiple legacy systems or implement workaround processes to get to the right data to resolve issues.
The time is now. There are no instant solutions for digitization. Leveraging purpose-built technology with partners who have domain expertise can help greatly accelerate and de-risk the digitization of manufacturers. To successfully navigate the people transition that is already happening, manufacturers need to act now, and for many, with greater urgency than in the past.