We need to bring to [the CEO’s] mind that the productivity improvements they achieved in the past were really low compared to in other areas out of production, what can happen. It's like helping them with a mirror on what is possible.

Dr. Jörg Gnamm
Senior Partner & Global Head of Manufacturing and Industry 4.0 Practice, Bain & Company

The modern manufacturing landscape continues to be reshaped by significant external factors, including the need for reshoring, the volatility of supply chains laid bare by global events such as the pandemic, and the persistent issue of labor shortages. These challenges have underscored the urgent necessity for manufacturers to digitally transform their operations in order to build resiliency and maintain their competitive edge.

The Current State of the Global Manufacturing Labor Shortage — and Ongoing Workforce Challenges

The manufacturing industry faces a variety of hiring challenges today, the most pressing of which is the competition for talent. According to the U.S. Bureau of Labor Statistics, the manufacturing unemployment rate hit a historic low of 1.8% in December 2022. These conditions have introduced a shift in power: Workers have the upper hand as manufacturers have to compete with each other (and in some cases, other industries) to attract and retain the top talent.

The fights are around the details, but quite frankly, most of the time we all want the same thing, interoperability.

Erich Barnstedt
Chief Architect, Standards, Consortia & Industrial IoT, Azure Edge & Platform, Microsoft

As a longtime member of the OPC Foundation Technical Advisory Council, Barnstedt has had extensive experience with the inner workings of such groups. When asked about how they operate, he describes the committees as a battleground of ideas, where the technical minutiae matter just as much as the overarching goals of the spec. For better or worse, the discussions and debates within these groups are not always driven by the needs of end users, but can be influenced by strategic interests from the software vendors that sit on the committee. The push and pull of these interests are what shapes standards, with the stated goal of creating specifications that are robust, versatile, and capable of driving true interoperability across diverse systems.

manufacturing dashboard

Addressing the requirements for digital transformation

Skilled workers who know the ins and outs of the industry are retiring — leaving knowledge and process gaps. At the same time, high turnover rates and shorter job tenures are becoming the norm. According to the U.S. Bureau of Labor Statistics, “the median tenure of workers ages 55 to 64 (9.8 years) was more than three times that of workers ages 25 to 34 years (2.8 years)” in 2022.

These conditions introduce a cycle in which manufacturers constantly have to recruit and train new talent. By leveraging digital augmentation, organizations can begin to break this cycle.

Focusing on lean practice when everyone becomes knowledge workers and works with data and apps and things like that, it's just not supported in the traditional sense of lean.

Dr. Jörg Gnamm
Senior Partner & Global Head of Manufacturing and Industry 4.0 Practice, Bain & Company

In light of the ongoing manufacturing labor shortage and increasingly competitive talent landscape, driving and maintaining worker engagement is critical to your long-term success. By shifting from a process-centric to human-centric approach to manufacturing, you can leverage digital tools to augment workers’ capabilities, empower informed decision-making, and continuously improve the worker experience.

Start by considering the types of conditions and opportunities different workers within your organization seek. For instance, you may want to evaluate the needs of salaried workers versus hourly workers.

Salaried workers often want to be able to take things to the next level. They want to be able to innovate and drive creative solutions to potential issues, implement changes quickly, and embrace digital tools to scale up across factories.

Meanwhile, hourly workers often want to be able to provide business value. They want to know the expectations for the job they are assigned, understand how success is defined, and have reward structures that highlight the value of their work. These workers may also want to be able to rotate through jobs via a flex workforce approach.

Mack Molding Operator Interacting with Tulip

2. Make Data the Keystone of Digital Transformation

Planning for what data you’ll need to collect and how it will be governed should be at the forefront of any digital transformation strategy. Start with determining the must-haves for data collection and structures, and ask yourself the following types of questions:

  • What problems are you going to solve?

  • How will the data be collected, structured, and analyzed?

  • Is consistency across all sites to enable enterprise-wide insights desired?

The answers to these questions not only prepare an organization for the challenges of scaling across multiple locations but also ensure that the data collected is meaningful and aligned with the broader strategic goals. This data will act as the basis for informed decision-making, ensuring that business decisions are based on real-world figures, rather than a pencil-whipped view of reality. Getting this right can be the difference between a successful transformation, and one that fails to realize its full potential.

I do not believe the world will grow from 100 trillion to 150 trillion in GDP without digitizing those industries.

Lior Susan
Founder, Eclipse Ventures

Susan firmly believes that for significant global economic growth, digital transformation must extend beyond the boundaries of single firms to encompass entire industries. This large-scale transformation is not merely a pathway to economic prosperity but also a strategic imperative to ensure industries remain competitive and relevant in an increasingly competitive economic environment.

For such a transformative vision to be realized, however, Susan argues that a collaborative technology ecosystem is vital. Products from different vendors must be interoperable with one another in order to enable businesses to build their tech stack with the technologies that best fit their unique operational needs.

“I think ecosystem is not an easy thing,” he states. “It's really hard to [form a connection] between different companies that [are] focusing on different aspects of the chain, and [find that] magically, everything works like a charm.”

At the moment, the gaps in native connectivity between various systems is bridged by system integrators, but according to Susan, “software will eat a big portion of that system integration. And I think you will be able to simplify a lot of things with software.”

As Susan states, creating a cohesive ecosystem is challenging yet essential. It requires a collective effort to develop standards, design open architectures, and integrate different technologies to ensure that innovation is not constrained by any vendor’s walled garden. While Susan accepts that his vision for industry-wide transformation is ambitious, as more and more technology vendors embrace the idea of open ecosystems and architectures, the future of digital transformation in physical industries looks bright.

Turning Your Workforce into Your Competitive Advantage

Read our ebook for insights on how a shift from a process-centric to a human-centric mindset can help you solve your most pressing operational challenges.

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