A Critical Look at the Skills Gap in Manufacturing

Over the last decade, the phrase “skills gap” has entered the popular vocabulary.

The era of post-pandemic challenges and supply chain limitations continue to plague manufacturers well into 2023, with the industry still struggling with job vacancies. Despite a record level of new hires, as of March 2023, there were 693,000 open manufacturing jobs, pushing leaders to consider new approaches to strengthen their workforce and retain their talent.

With over 10,000 workers reaching retirement age daily, as reported by the US Census, the manufacturing sector has a significant number of workers taking their training and knowledge with them as they retire. This tacit knowledge isn’t documented and instead lives in the mind of its owner. As a result, manufacturers are losing significant operational and technical know-how.

In this post, we'll explore the growing skills gap in manufacturing and how businesses are using digital solutions to help capture and transfer workers' knowledge and overcome the challenges brought on by labor shortages across the industry.

The “skills gap” describes a misalignment between the skills possessed by a workforce and the skills demanded by the labor market.

The concept surfaced in the years following the 2007 financial crisis. During this period, the number of positions open in the U.S. economy returned to pre-recession levels while unemployment remained high. The skills gap offered one explanation for this phenomenon.

Today, the term is synonymous with a STEM or digital skills gap. This is in part a product of the exploding demand for skills in software development, IoT and cloud technologies, as well as machine learning and AI.

While it is true that high-tech skills are and will likely remain in demand, they’re not the only skills that fall under the umbrella of “skills gap,” especially in manufacturing. The concept also encompasses manual, operational, and other skills not requiring digital expertise. In manufacturing, these skills can include machining, assembly, and process-oriented knowledge, as well as soft skills that are difficult to capture on a resume.

In the last two years, large scale studies have confirmed that manufacturing faces an acute skills gap. In the last decade, the Bureau of Labor Statistics found that vacancies in manufacturing firms have increased threefold. As a result, analysts predict that 2.4 million jobs will go unfilled over the next decade, contributing to nearly $454 billion in unrealized GDP.

One of the key findings of this research is that the skills gap in manufacturing isn’t limited to high-tech positions or job titles with digital buzzwords in them. Many manufacturers struggle to find workers with adequate experience in fabrication, machining, and assembly.

In manufacturing there are two forces leading to a concrete, measurable workforce skills gap.

First, experienced manufacturing workers are retiring at a higher rate than new workers are entering.

Called the Silver Tsunami, a generation of career manufacturers are taking their hard earned knowledge with them. As labor and management researcher Thomas Kochan has suggested, a significant portion of manufacturing knowledge is tacit knowledge. In other words, it isn’t documented or codified in any external resource. It lives in the body and mind of its owner.

Thus, manufacturing is particularly prone to losing significant operational and technical know-how if workers can’t pass their skills on.

Second, manufacturing is increasingly a digital industry.

As IIoT, Cloud, and Big Data become a reality on the shop floor, manufacturers need new skill sets to match. Increasingly, job postings in manufacturing call for software development, machine learning, and SQL analysis experience. A 2019 BCG study that 70% of the fastest growing skills in manufacturing and adjacent industries are digital. In those industries, job postings containing “IoT,” “cloud,” and “machine learning” are increasing 20% year over year.

The effects of the manufacturing skills gap are already being felt by companies worldwide. For instance, a study by Deloitte and The Manufacturing Institute estimated that the skills gap could leave an estimated 2.1 million manufacturing jobs unfilled by 2030, potentially resulting in a significant reduction in economic output.

In real terms, this means companies are facing prolonged vacancies, which can lead to decreased productivity and efficiency, and increased costs. Furthermore, the skills gap limits the capacity for innovation, constraining companies' ability to adapt to market changes and implement advanced technologies.

By understanding the nature of the manufacturing skills gap, industry stakeholders can devise strategies that address the root causes and minimize the impacts. The first step towards mitigating the problem is to recognize that the manufacturing industry has changed, and so too must our approach to equipping its workforce with necessary skills.

Closing the skills gap is going to take significant effort, and it’s not something that any organization or institution can do alone.

Here are some potential ways manufacturers, educational institutions, and government can collaborate to help close the skills gap.

1. Reskilling as a regular part of employment – Both employers and workers suffer when open positions go unfilled. Since IIoT, Cloud, and Big Data are more and more a reality on the shop floor, leaders in this rapidly evolving industry need employees to have skill sets to match. By helping employees develop the skills they need, manufacturers stay competitive in a changing landscape. Manufacturers who include continuous training strategies that upskill the workforce are ensuring that both new and existing workers receive the real-time training they require.
2. Involve workers early – Technological change is incremental. The earlier employers involve workers in decisions about which technologies are implemented and how, the better chance projects will be successful for employers and workers.
3. Digital knowledge share – Continuous organizational learning and digital knowledge-sharing need to be a primary focus for manufacturers. If workers are interested in developing new skills to advance their careers, digital knowledge-sharing initiatives can provide them with the content and resources needed to advance. Digital knowledge-sharing reduces mistakes, helps employees make informed decisions, and increases productivity. Technical advancement is a key competitive differentiator for companies, creating more opportunities for people and machines to work together.
4. Cross-institutional collaboration – Manufacturers can work with government organizations to assess needs and create targeted training programs at the local, state, and national levels. They can also invest in startups to access new technology as well as collaborate with academic ecosystems to attract talent with digital skills. To build a pipeline of workers, some colleges and universities in the US are “overhauling their education and training programs” and investing more in science, technology, engineering, and mathematics to teach technical skills.
5. Improving the Perception of Manufacturing Jobs – Younger workers are being deterred by their inaccurate assumptions about the many opportunities afforded in the manufacturing industry. By clarifying processes and operations, modern manufacturers can appeal to the upcoming generation. By implementing current technological tools and the training to go with them, manufacturers are attracting fresh, skilled talent.

In order to combat the manufacturing skills gap, a range of innovative approaches has emerged, focusing on new strategies, cutting-edge technologies, and targeted educational programs. These initiatives aim to align workforce skills with the ever-evolving needs of the industry, thereby driving productivity, innovation, and growth.

For example, manufacturers are increasingly investing in platforms like Tulip to provide interactive, step-by-step digital work instructions to help guide operators through daily processes, aiding employees in honing their technical skills and understanding complex processes.

Additionally, manufacturers use our platform to collect and analyze real-time data, enabling them to identify and improve areas of inefficiency across their operations.

To help promote education across the industry, we've created an entire library of resources as part of Tulip University. These programs offer access to comprehensive online courses specifically designed to enhance technology-oriented manufacturing skills. Our courses aim to provide both theoretical knowledge and practical skills, promoting a culture of continuous learning within the manufacturing industry.

If you're interested in learning how Tulip can help you hire, train, and retain better workers, reach out to a member of our team today!