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.

Operators on an assembly line

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.

I would say 85–90% are still using production systems fully based on lean.

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

The cornerstone of any successful digital transformation is a clearly articulated vision and strategy. This is all about setting specific, measurable objectives that dovetail with your business goals.

Starting off small with quick, early wins is an easy (and recommended) way to build momentum, but to grow you need a strong vision and strategy to align your organization and key stakeholders. This vision must be communicated effectively across all organizational levels, ensuring everyone from the shop floor to the boardroom is educated on not just the 'what' and ‘how,' but also the ‘why' of the transformation journey.

Aligning the transformation strategy with business operations is equally vital, ensuring that the adoption of new technologies directly contributes to and enhances the operational efficiency at each site. A clear vision serves as a guiding light, keeping all sites aligned with broader business objectives and fostering a sense of shared purpose between them.

DMG Mori operator engaging with display device

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.

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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