6 Ways to Tackle Labor Productivity Decline in Manufacturing (2019)

One of the pressing challenges facing many developed and developing economies is how to maintain a competitive manufacturing industry. The answer to this question begins with labor productivity.
Labor productivity is the average output of a production facility. These three factors contribute to how productive a facility is:

  • Skilled workers, training and specialization of existing and future workforce;
  • New technology automation, robotics, IIoT
  • Capital investment physical capital in savings or investment

The focus of this article is how to tackle stagnant or declining rates of labor productivity in the US through a sound understanding of the modern causes and available solutions.

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The Importance of Labor Productivity

In a study cited by Industry Week, manufacturers around the world were asked what factors contributed most to the success of the industry and countries from Brazil to China, Germany to India to the US ranked labor productivity (74%) at the top. When asked how to improve labor productivity, industry cited training and education of existing workforce with 68.2% followed by investment in technology at 63.3%.
In short, the skills and supply of skilled workers is a competitive necessity for manufacturers around the world, both for developed economies and those who have historically relied on cheap labor as a differentiator. Followed by new technology to enable the workforce, supply chain and operations to run more effectively.

Reviving the Manufacturing Workforce

Workforce shortage in US specifically is bad and projected to worsen. In a joint report released by Deloitte and the Manufacturing Institute, they summarize the predicament in US in the following way: “Over the next decade, nearly 3 ½ million manufacturing jobs likely need to be filled. The skills gap is expected to result in 2 million of those jobs going unfilled.”
Some of the contributing factors to the workforce shortage are an ageing workforce, poor quality perception of the industry, and a widening skills gap.

1. Addressing the Skill Gap

With an ageing workforce and shortage of workers comes another challenge: a lack of specialized workers capable of interacting with increasing technological sophistication.  Remaining competitive globally means simultaneously investing in the education and “upskilling” of current workforce while ensuring the next generation of workers is sufficiently capable. The German apprenticeship model has been gaining momentum in the US over the last few years for its ability to balance theory and practice. Expansion of such programs will be the key to bridging the dire skills gap.

2.  Maintaining an Ageing Workforce

Almost 30% of workers in manufacturing will retire over the next 10 years. When they do their knowledge and talent will go with them. In an effort to keep workers around longer and transmit their knowledge most effectively, BMW famously launched the “Today for Tomorrow” program. Over the last decade, BMW saw remarkable improvements in the productivity of their ageing workforce thanks to strategies that have since been implemented in BMW facilities globally. Other manufacturers will need to take note and follow their lead to prolong the tenure of seasoned employees with strategies for effective handovers.

3. Improving Public Perception through Outreach and Rebranding

Over the last decades, popular opinion in the US was that secure, high wage jobs with good benefits are found with a 4-year college degree. This view is reflected in the fact that only 3 in 10 US parents would encourage their children to pursue a career in manufacturing for fear of poor job security and dissatisfaction. However, the statistics show that the average manufacturing worker in the US earning nearly $20,000 more annually than in other industries and employees generally feel they have many educational and career opportunities. A change of perception is in order.
Outreach programs and rebranding efforts need to be a part of a manufacturer’s long-term strategy. This involves better communication and rebranding efforts to make manufacturing “cool” again, further integration with technology in the day to day user applications and operations at the facility. Automating menial tasks and giving employees the power to analyze data and problem solve in their daily jobs is a challenge gladly accepted by the upcoming generation.

Digitizing Workflows a Competitive Necessity

Workflows can be thought of as the day to day activities that go into operating a production facility. Today, the competitive edge in manufacturing is found, as Deloitte notes, “In an era of sluggish economic growth, containing costs and increasing productivity to boost profits remains critical for manufacturers.” Containing costs and boosting productivity. Aside from a more skilled workforce contributing to this, as discussed above, it is new technology that brings these outcomes through improved workflows.

1. Boosting Manual Worker Productivity

Existing methods for measuring worker productivity are largely based on an average hourly output. But that doesn’t tell us much about how that worker spends their time – information that can help identify areas of improvement.
This is where the IIoT comes in.
By assigning each worker a wearable tag, we accurately measure where and how they spend their time. Creating a digital map of the facility, we can measure how long worker a spends in area b with tool c on job z. This data can discern the strengths and weaknesses of each worker by measuring the time spent on each job and therefore the skills required for it. With this knowledge, we can know which areas to better train our employees. Which areas are underperforming. And begin to reach the root cause of the issue.
Dashboards that visualize this information in daily, weekly or monthly reports aide decision makers in this process. Accompanied by real-time alerts of anomalies compromising the integrity of the facility.

Read more: What is IoT? Introduction to Internet of Things in Operational Environments

2. Added Transparency in Operations

Built-to-order manufacturing is increasingly the norm. Production facilities need to adapt quickly and without error to growing expectations of quality and availability. The smallest of errors can compromise an entire project, resulting in losses of time and cost as the least of worries. That’s why eliminating error as much as possible in the production planning and execution is crucial.
By connecting stages of the production process with location tracking devices, transparency in the system is created. Using devices and gateways, rules can be set based on your project requirements that can alert stakeholders, in real time, of any inconsistencies in the line by identifying precisely where errors arise and why. The result is a clear and transparency alignment of all stakeholders in the production process and the elimination of shipping faulty or incomplete orders to the customer.

3. Streamlining Paperwork

Document approval processes, safety reporting, and the day to day jobs of individual workers. Each of these processes contributes to the labor productivity and production output of a facility. And as we’ve seen, productivity is the name of the game in the competitive global economy.
Digitizing the reporting and paperwork involved in these processes can free workers’ time for greater value-adding activities while also making the job less boring.

Labor Productivity Moving Forward

As the game goes on, the race to become as transparent and productive as possible shows no signs of slowing. For US manufacturers, the decade to come will need to see a rise in the skilled workforce and effective adoption of new technology in order to sustain and grow.