Meeting manufacturing challenges mitigates risk
From energy and chemical equipment manufacturing to safely handling food and beverage or apparel and textiles, the manufacturing industry faces challenges in managing skills within the workforce. While the varying types of manufacturing have their differences, each must abide by optimal standards.
Here we’ll unpack the five most significant challenges in the manufacturing industry while touching on similarities and differences between the respective manufacturing subsects. We’ll also share how skills management software can help solve these challenges.
Frequently asked questions about manufacturing skills management
Manufacturing skills and competency management is the business process of identifying critical skills, assessing organizational capability, and developing the workforce to meet dynamic industry demands and strategic business goals.
The manufacturing industry comprises establishments engaged in transforming materials, substances, or components into new products. The U.S. Bureau of Labor Statistics reports 21 different subsects within the manufacturing industry. Examples of these include:
- Transportation and Equipment Manufacturing
- Chemical Manufacturing
- Petroleum and Coal Product Manufacturing
- Food Manufacturing
- Beverage and Tobacco Product Manufacturing
- Computer and Electronic Product Manufacturing
- Machinery Manufacturing
- Fabricated Metal Product Manufacturing
- Primary Metal Manufacturing
- Plastics and Rubber Product Manufacturing
Manufacturing organizations are facing an array of significant challenges, including retention of staff, supply chain disruptions, inconsistencies with training, data integrity for decision-making, and keeping up with the evolution of smart manufacturing technologies.
Manufacturing skills management enables organizations across the different subsects of the industry to:
- Meet the fluctuating demand for talent.
- Reduce and control the cost of poor quality.
- Minimize the threat of future disruptions.
- Diminish the risk of HSE incidents.
- Mitigate risks associated with non-compliance.
Top 5 manufacturing industry challenges
What are the five most significant challenges facing the manufacturing industry?
1. Retention of staff
In the manufacturing industry, operations are heavily dependent on the workforce’s knowledge, skills, and expertise. Talent retention is a top priority. In 2021, the annual labor turnover rate for manufacturing was 39.9%. As factors like the Great Resignation, an aging workforce, and the economy continue to pressure the industry, engaging and retaining talent and skills is critical to achieving strategic operational goals.
What is the Great Resignation?
The Great Resignation refers to the increased rate at which employees resigned from their jobs amid strong labor demand and low unemployment. The term was initially coined by Texas A&M business professor, Anthony Klotz, in May 2021, when he forecasted trends that would occur due to pent-up resignations throughout 2020.
In the early stages of 2020, resignation rates slowed as a result of the uncertainty brought on by the unprecedented COVID-19 pandemic. According to the EPI, resignation rates dropped from 2.4% in January 2020 to 1.6% in April 2020. However, by December 2021, rates shot up to 3%. Throughout 2022, the resignation rates have wavered above 2.7%.
Aging manufacturing workforce
As of 2017, nearly a quarter of the manufacturing workforce was 55 and older. Now, years later, 2.4 million employees are set to retire within five years. 97% of organizations are concerned about the loss of institutional and technical knowledge, shortage of labor, declined productivity, and the rising costs associated with the aging workforce.
Subsequent generations aren’t as eager to join the manufacturing industry, leaving organizations to adapt their talent recruiting and retention strategies. Namely, more efficiency with technology, opportunities for career planning and advancement, and a clear understanding of organizational purpose.
By focusing on manufacturing skills management, organizations can:
- Better track and retain the tribal knowledge and skills of those retiring.
- Provide more clear skill expectations and career opportunities for the younger generations entering into the industry.
What impact does inflation have on retention?
When wages increase at a slower rate than inflation, employees are likely to look elsewhere for a job that can better invest in them. Over 56% of workers would leave their employer to look for a job with higher pay, and 49% said they see higher compensation and better benefits as a deciding factor when choosing to work for a company.
In 2022, the Consumer Price Index increased by 8.5%, the “most significant 12-month advance since December 1981,” but employer wages only increased by an average of 3.4%. The reality is that most organizations can’t adjust their wages on par with inflation rates. But in an environment where competition to retain talent is high, providing benefits that help adjust for rising economic costs can make a difference. This will help organizations retain quality talent, achieve the desired productivity levels and meet organizational goals.
Manufacturing skills management programs impact talent retention
Building a sustainable manufacturing skills program is a key component in retaining talent. The Manufacturing Institute notes a variety of retention efforts described by manufacturing leaders, including:
- Ensuring individuals understand how their efforts contribute to the success of the organization
- Equipping frontline managers to support workers
- Creating formal employee development plans and career paths
- Providing cross-training opportunities
- Supplying competitive benefits and a supportive organizational culture
Organizations can take these efforts a step further with a deeper understanding of employee skills, knowledge, and abilities. With a sustainable skills management program, leaders are able to more strategically:
- Align employee skills with their professional goals through career pathing.
- Understand specific skills gaps across the organization and target reskilling, upskilling, and cross-skilling efforts accordingly.
- Staff teams and production lines with more well-rounded skillsets for a more safe, more productive work environment.
- Provide compensation or benefits based on skills, knowledge, abilities, and experience.
- Plan ahead for unplanned departures with knowledge of what skills are needed to backfill the position.
Why is employee retention so crucial for manufacturing?
2.1 million manufacturing jobs could go unfilled by 2030, and finding the right talent is now 36% harder than it was in 2018.
Retaining knowledge is critical to be able to adapt to all of the advances in the manufacturing space. Suppose you lose employees and aren’t able to hire and fill those positions quickly enough. In that case, the costs associated are extremely high. Organizations risk a loss to their production levels and the quality of products, and they risk overworked employees because of smaller, lean teams.
When and if positions are able to be filled, organizations will spend precious time and money throughout the hiring process – hiring, training, and producing.
Retaining talent means retaining critical knowledge. For manufacturing, to improve employee retention, you’ll need to invest in employee skills development plans. That way, employees can more easily map out their career journey with your company and fill in any gaps in knowledge. Critical skills gaps are also more easily filled with brisk, data-backed changes in the case of any unplanned departures, with minimal stress to your team.
Retaining talent means retaining knowledge which means more sustainable, effective, and safe processes, operations, and outcomes for products produced.
2. Supply chain disruptions
Supply chain disruptions are causing chaos throughout the manufacturing industry. According to a McKinsey report, companies on average can expect to lose 45% of one year’s profits over the course of a decade due to supply chain issues.
Post-COVID-19 disruptions, 93% of manufacturers cited a need to make their supply chain more resilient as a way to be proactive about future scenarios. As they adjust operations accordingly, understanding the exact skills and knowledge available within the organization is a key factor in achieving more agility and stability. This enables training programs to evolve and upskill, reskill, and cross-train employees in line with business needs.
3. Consistency of training
Consistent training is more than just delivering training to the workforce on a specific schedule. Consistency refers to providing training that correlates with how an employee actually performs their job function and roles. What technology should be used? Which geographical locations need this training? Which job roles or functions need to learn these skills? Are there employees in other departments who should be familiar with this machine in case of unexpected attrition? These are examples of the questions that should be thought through when structuring a training program.
Keep in mind, no matter how the training function is structured, tracking the skills and experiences in one centralized location should be the best practice. This enables leaders throughout the organization to validate employee knowledge for staffing, training needs, skills gap closure, and capability planning.
Standardized training is key
Consistent training across the organization often begins with standardizing training processes and materials. Standardized training organization-wide ensures that employees, regardless of location, are equipped with the right materials to achieve the desired proficiency levels in line with business goals. It also ensures those evaluating employee skills and experiences are qualified to do so. A more structured approach to training enables employees to be more agile in moving to various departments or plant locations. Leaders across the company can be confident their workforce is not only skilled and capable, but equipped to do the work safely, effectively, and consistently.
A lack of consistency in training can result in variable outcomes — from an increase in safety incidents from one plant to another to an increase in training costs due to unnecessary and repetitive training. Overall, training programs lacking standardization and consistency impact an employee’s ability to perform their job role, which impacts the bottom line of the organization’s operations.
SKILLS AND TRAINING CAPABILITY MATRIX
Build robust manufacturing training programs informed by skills data
A manufacturing training program based on validated skills data enables the organization to achieve:
- Higher efficiency and productivity
- Better flexibility and agility
- Increased profitability.
Use Kahuna’s skills and training capability matrix to better develop your training function and enable these outcomes.
How conducting skills-based manufacturing training impacts organizations
What are the benefits of skills-based manufacturing training?
- Provides visibility into the organization’s supply of qualified and knowledgeable trainers.
- Ensures training is delivered in accordance with the desired proficiency levels.
- Connects skills with the right learning materials to help close skills gaps.
- Validates employee knowledge and experiences through assessments with qualified trainers.
Without a skills-based approach to training, organizations lack insights into which skills are in deficits or surpluses throughout the workforce. The diagram below speaks to the vicious cycle that can occur if skills aren’t the guiding factor when implementing manufacturing training programs, causing employee burnout, overworked employees, and an increase in safety incidents.
A skills-based training approach helps reduce training costs
As shifts in the industry and the economy occur, costs are soaring — raw materials, labor, training programs and materials, and the list goes on. Making strategic decisions about where dollars are spent is important.
Using skills as a guide for manufacturing training programs, training and development initiatives are targeted to skill and capability gaps. Not only does this decrease time to revenue so the organization makes money faster, but it also saves precious dollars and eliminates unnecessary training and development activities. Implementing a skills-based training approach means the organization isn’t wasting time, money, or resources on training that no one needs.
4. Data integrity for decision-making
Data integrity is the maintenance of data to ensure consistency and accuracy throughout the organization. In some manufacturing sectors, such as biopharmaceutical, data integrity should meet ALCOA standards — Attributable, Legible, Contemporaneous, Original, and Accurate. In manufacturing, data integrity is paramount to verify the safety of the workforce and the quality of goods produced.
Workforce competency insights are one of many data records organizations must keep track of and it may be one of the most important. Accurate reporting on workforce skills and competency data can lead to reduced safety incidents, more agile operations, and a clear understanding of training needs. In contrast, inaccurate reporting on workforce skills data can lead to ill-equipped employees working on production lines, under-given or unnecessary training and development, an increase in the cost of poor quality because of mistakes on the line, or an increase in safety incidents.
Keeping track of workforce competency data the old way — through files, spreadsheets, paper, or disparate systems — is the most guaranteed way to NOT ensure data integrity throughout the organization. As plants grow in size, or employees move around to different departments or job roles, those manual records are easily lost and become out of date quickly.
Manufacturing workforce skills data
The three most pertinent data-involved pain points in manufacturing are a lack of standardization, data cleanliness, and data availability. As the manufacturing industry evolves, or as organizations expand operations, keeping track and verifying workforce skills and capabilities becomes even more complex. Digitizing your workforce skills data in a system that connects with the HRIS, LMS, and scheduling platforms creates unity between all data across the organization. This allows the skills data to be maintained regularly and keeps leaders across the business informed and up to date on workforce capability to make better business decisions.
5. Keeping pace with technology
Keeping pace with and adopting tech advancements in the manufacturing industry depends on an organization’s agility. As the emphasis on AI, nanotechnology, smart factory systems, Industry 4.0, smart manufacturing, automation, machine learning, and robotics grow, training processes must be put in place to upskill, reskill and cross-train the workforce. Agility is a key component in maintaining a competitive edge within the market.
Workforce skills, competencies, and abilities are a manufacturing organization’s competitive advantage in the industry. Without skill insights, it’s nearly impossible to begin the training and development needed to prepare the workforce to take on new technologies and challenges.
What are the common standards required in manufacturing?
Many organizations either self-impose or have a regulatory body setting a quality management program or system requirement. Manufacturing standards are in place to protect and ensure the safety of employees and the workplace, as well as product safety for the consumer.
The Occupational Safety and Health Administration (OSHA)
The most common regulatory standards for manufacturing are OSHA mandates. OSHA is a regulatory agency stemming from the United States Department of Labor to ensure the health and safety of all U.S. workers. Worker safety and workplace safety and compliance are all critical issues regulated under OSHA.
As all manufacturers are subject to OSHA requirements in the U.S., industry-specific regulatory bodies apply to different types of manufacturers. Regulatory bodies in manufacturing ensure rigorous validation of industry-standard safety and compliance. They describe in detail standard processes and how organizations should follow them. They’re needed to avoid and reduce the impacts of safety incidents and risks.
American Petroleum Institute (API)
API is the largest trade association representing corporations throughout the American oil and gas industry. In energy and manufacturing, for example, organizations manufacturing a pressure vessel must meet API requirements before passing along that pressure vessel to a client.
International Organization for Standardization (ISO)
ISO standards are safety and compliance standards regarded in many countries worldwide. These standards are often the framework for quality management. Under ISO regulations, organizations must follow specific standards and processes, and have documentation to prove this.
ISO standards are prevalent in manufacturing sectors across the board from automotive and aerospace to food and beverage. One example for the automotive industry is the International Standard for Automotive Quality Management Systems, or the IATF 16949, which regulates automotive parts.
Food and Drug Administration (FDA)
The Food and Drug Administration oversees the safety and compliance of the manufacturing of biological, pharmaceutical, medical devices, and food and beverage products. The FDA is a federal agency enforcing relevant safety regulations in order to protect public health and guides the implementation of manufacturing processes and any facility changes. Any updates must also be reported in an FDA-compliant fashion.
Bridging the competency and manufacturing skills gap
The manufacturing skills gap is a mismatch between the supply of employee skills available to organizations and the demand for skills needed to accomplish operational and business goals. 57% of manufacturing companies are facing a shortage of skills needed to support current and future initiatives. To maintain a competitive edge and achieve operational agility as the industry changes, equalizing the supply and demand of skills and closing the skills gaps is a must.
How does skills management help the manufacturing industry meet regulatory compliance and workforce safety?
Implementing skills management helps organizations validate employee skills, knowledge, abilities, experiences, and certifications. In Kahuna’s skills management process — Curate, Assign, Assess and Develop — organizations establish a robust skills management framework that fully meets the needs of the business and operational requirements, identify verified assessors to validate employee skills and competencies, and plan specific training to close skills gaps. With accessible, maintainable, and accurate skills data, leaders across HR, L&D, and Operations can work together to ensure a more safe workforce that not only meets regulatory compliance requirements but produces in line with operational targets.
Why is skills management essential for the manufacturing industry?
Skills management is essential for organizations within the manufacturing industry. Tracking and validating employee skills, competencies, knowledge, experiences, and capabilities enables organizations to train the workforce effectively, retain talent and meet fluctuating demand, engage the frontline worker, establish operational resiliency, reduce and control the cost of poor quality and diminish risks and impacts of HSE incidents.
Enable resiliency of operations in manufacturing
Skills management gives leaders across the manufacturing organization visibility into how current workforce skills and capabilities align with what’s needed to sustain operations and adapt to industry disruptions. With this information, the business can make more informed and strategic decisions about hiring, training programs, production line staffing, technology advances, and employee development, whether experiencing stable or uncertain labor markets.
Future-proof the manufacturing workforce
Skills management guides businesses in current and future planning for the manufacturing workforce, regardless of what may come their way. As the industry continues to evolve, so too will the skills needed for each individual within the workforce. Using skills as a guide, companies can reskill, upskill and cross-train employees to meet the needs of the future in manufacturing.
What are Kahuna's competitive advantages for manufacturing skills management?
Kahuna skills management software helps organizations ensure they’re operating with the right skills needed to enable more reliable, safe, and quality operations.
Assign multiple competency roles, regardless of job title
Assign employees with multiple job roles and the correlating required skills and competencies. This allows the necessary qualification to be unhindered by an employee’s job title. As employees pursue professional growth, development roles and their correlating competencies can be assigned to work towards.
Integrate data from systems across the organization
Kahuna fully integrates with an organization’s existing tech stack, including the HRIS, LMS, scheduling and dispatch, and more, and is flexible in how workforce data is consumed. Rather than having to change the data structure, Kahuna can be right-sized to fit the organization’s HR, L&D, and Operational environment. Integrations also enable training and development activities to be correlated directly with the skill or competency needing attention. Employees no longer have to waste time jumping from system to system, but rather can access all learning materials whenever they need.
Work in the flow of work, with or without internet connectivity
As employees complete the required trainings, experiences, or courses for their required skills and competencies, assessors can validate them in the flow of work with assessments. If connectivity is an issue on the factory floor, Kahuna’s mobile app will save all data and upload it to the platform when connectivity is restored.
Building a more skilled, competitive workforce
Kahuna’s skills management platform equips manufacturing organizations with the right data needed to understand current workforce skills and capabilities, establish training and development initiatives to close skills gaps, and proactively prepare for the future of the organization. Ready to learn more about Kahuna skills and competency management? Talk with one of our skills advisors.