Bridging the Skills Gap with Automation

Old bridge in the city of Koblenz, going over the Mosel river by Cristina Sarasua. Courtesy of WikiCommons

There are three significant trends with which manufacturers need to come to terms.  The first is the skills gap. According to a 2014 report jointly authored by The Manufacturing Institute and consulting firm Deloitte:

“Over the next decade, nearly three and a half million manufacturing jobs likely need to be filled and the skills gap is expected to result in 2 million of those jobs going unfilled.”

The breakdown of the job requirements is over three quarters due to “baby boomer” retirements rather than business growth; manufacturers will see a significant amount of experience exiting the labor force over the next 10 years. They are also finding the available labor pool lacks the necessary skills in science, technology, engineering, and math (STEM), in problem-solving capabilities, and in basic technical training.

The second trend is technology adoption. Manufacturers are approaching the end of the first generation digital automation, which according to Jim Schindler of Litzler Automation, was essentially characterized as “relay replacement”. Modern automation has far more capabilities than the devices which are now going out of service. There is an interesting dynamic in digital automation; the control devices themselves (PLCs and CNCs, for example) are not subject to Moore’s Law – they are expected to provide reliable service for 20 years or more. It is not unusual for a PLC to be active for over 30 years. But digital automation exists in an environment very much subject to Moore’s Law. As the first generation of automation gives way to the next, manufacturers are discovering that simply swapping the new devices for the old is inadequate; there is an expectation of tapping the business value of the capabilities of the new technology.

There is an effect of Moore’s Law on automation technology though; it places a pricing pressure on the control devices. To a very large extent, devices like the PLC have become a commodity – the true value comes from vendor support rather than technical capabilities. Costs for automation technology across the board – from controllers, to user interfaces, to advanced robotics – have fallen over the last decade. Interestingly though, this doesn’t seem to have caused an acceleration in the adoption of automation technology.

There is a fascinating article entitled “The Automation Myth: Robots aren’t taking your job – and that’s the problem” by Matthew Yglesias. He argues that the evidence of increasing automation adoption would be an increasing GDP per hour worked and a decreasing hours worked per worker. He points to a report showing both metrics are essentially flat over the last five to seven years and concludes that manufacturers are not adopting technology as they should.

In a related article in the Harvard Business Review, there is a significant difference between the productivity of “frontier” organizations (those that are integrating new technologies) and everyone else, which is an obvious competitive advantage for those organizations.

"Productivity Is Soaring at Top Firms and Sluggish Everywhere Else", HBR, August 24, 2015

The third trend impacting manufacturing is “Smart Manufacturing”. This has been referred to as “the next industrial revolution” and “the fourth wave”. This is all about utilizing the leading edge technologies of Social, Mobile, Analytics, Cloud, and the Internet of Things (SMACIT). According MIT’s Center for Information System Research (CISR), it’s not any single technology that is causing business disruption but an amalgam of all these technologies working together to provide business benefit.

There are several national initiatives across the globe to utilize the disruptive force of these technologies. Here in the US, there is the Smart Manufacturing Leadership Coalition. In Germany, it’s known as Industrie 4.0. In China, it’s called “Made in China 2025”. What is clear is that nations are expecting technology to significantly affect the productivity of their manufacturers and are working to ensure they remain competitive.

How should manufacturers respond to these trends? Obviously workforce development is necessary, but by itself is insufficient to allow manufacturers to remain competitive. Skills can be taught, but will not replace experience. Also, some skills have low market demand – not that they aren’t important, but without demand there will be little incentive for people to develop those skills. Finally, skill development takes time – often months to years – so there is no “quick fix” using labor force development to address the skills gap. Continuous improvement initiatives such as Lean provide some benefit, but tend to be asymptotic without innovation (“perfection” of the current state is an upper limit). Manufacturers should institute a two-pronged strategy for dealing with all three trends: workforce development and technology (automation) adoption. This should be done proactively, because a reactive approach will leave manufacturers at a disadvantage relative to competition.

Automation isn’t just for machines either. Mechanical automation does eliminate a great deal of human labor, and the capabilities of modern technology (robotics and additive manufacturing, for example) allow a much broader spectrum of tasks to be automated. But there is another category of labor inefficiency which also benefits from automation: work processes. Think about all the lost time in paper-handling and manual data exchange (a human transferring information from one form of information technology into another). Think of processes such as project time tracking, new customer account setup, product data management, purchase requisitions, capital authorization requests, and other processes that keep an organization running. These processes are frequently manual, using paper forms, and require either routing through an internal mail system or (to expedite matters) having someone walk the form through the process steps. This kind of inefficiency impacts workers who are among an organization’s highest paid: engineers, managers, accountants, supervisors, directors, and senior executives. Fortunately, automation solutions for work processes are far less capital intensive than mechanical automation, and are well within reach of most manufacturing organizations.

The skills gap, technology adoption, and Smart Manufacturing; these trends will affect all manufacturers within the next decade. The marketplace will be the ultimate judge; organizations which respond strategically to these trends are likely to succeed. Those that don’t will struggle in the new competitive environment that is developing.

This blog post is an excerpt from “Bridging the Skills Gap with Automation”, presented to the Cleveland Engineering Society at their October 21^st, 2015 Industrial and Manufacturing Conference at Case Western Reserve University in Cleveland, Ohio. This was co-presented by Patrick Weber of Integrated Automation Consulting, Jim Schindler of Litzler Automation, and Mark Orzen of Clear Process Solutions.

Are your operations ready for the next wave of technical innovation? Find out! Register on Integrated Automation Consulting’s website and receive your free copy of “Seven Warning Signs that Your Manufacturing Operations are Becoming Obsolete”.

What Keeps Manufacturing Executives Up at Night?

October is manufacturing month in Ohio, and here in the Northeastern part of the state that means a broad variety of conferences and seminars specifically targeting manufacturers. Kicking things off this year was the Crain’s Cleveland Business/MAGNET “[M]Power Manufacturing Assembly”. One session at this event was a panel discussion entitled “What Keeps Northeast Ohio Manufacturers Up at Night?”, featuring three area CEOs.
The responses given by these executives reflect the concerns of many manufacturers: attracting and retaining the “best and the brightest”, the economic climate, the effects of government regulation, capital resources, and “losing our mojo” (is culture scalable with growth?). They touched on two areas which caught my attention: losing the high-tech edge and dealing with the skills gap.

“What has happened to all the tool and die guys?”, asked Steve Peplin, CEO of Talan Industries. “With all the downsizing going on you would think there would be plenty of them available, but we’re just not making them – as a country. We’re kind of forced into having to build some of our own.”

“It’s not short-term”, added Ramzi Hermiz, CEO of Shiloh Industries, “It takes a long time [to internally train the skills].”

The tool and die making profession is just one example where the skills gap is hitting manufacturing. At the publication of a 2012 Congressional Research Service report[1], the average tool and die maker was 52 years old (which puts a very large percentage in the “near retirement” category), and few replacements were available in the labor pool (this is still true in 2015). International competition, new technologies, and two recessions had forced closure of over one third of all the U.S. tool and die shops by 2010. The skills needed for this trade have also changed considerably; the market now requires an understanding of CNC programming, CAD modeling, and product lifecycle management (PLM) or product data management (PDM) systems, skills which many older workers don’t possess.

“The crisis we face is in STEM (science, technology, engineering, and mathematics) education…I would argue that if we look at technological game-changers like additive manufacturing and the Internet of Things, the whole work force is going to have to become numerically literate. We’re going to have to make sure the craft workforce as well as the college workforce have numerical literacy”, stated Dr. Michael Heil, CEO of Ohio Aerospace Institute.

Dr. Heil’s comment shows how closely bound the fear of losing a high-tech edge is to managing the skills gap. One of the major trends in manufacturing is digitization. The first generation of digital automation – isolated PLCs, CNCs and other devices – is being replaced by networked versions which are more tightly integrated into the organization. These devices can interact with higher-level systems such as ERP, MES, and PLM as well as collaborating with each other, creating new capabilities which has sparked initiatives such as Smart Manufacturing here in the U.S. and Industrie 4.0 in Germany, as well as an Industrial Internet of Things. But successfully utilizing these technologies will require that executive management also become more digitally savvy, for they will need to establish a vision, create strategies, and nurture a culture of innovation within their organizations.

Here in the northeast Ohio area, there are many educational institutions which are striving to meet the demands of manufacturing. I recently had the opportunity to tour the Cuyahoga Valley Career Center, and was impressed with what they are doing to prepare high school-level kids for careers in industry. They have a broad array of industrial robots, CNC machines, PLC programming, some 3D printing capabilities, engineering design, and networking – all skills which will be needed in a digital world. Local engineering schools also expand their curricula to include many of these skills as well. But I can’t help wondering what happens when these students get into the workforce and discover that the level of technical innovation within many manufacturing organizations lags far behind that which they experienced in their training. Is it any wonder manufacturing executives are losing sleep?

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[1] “The Tool and Die Industry: Contribution to U.S. Manufacturing and Federal Policy Considerations”, Bill Canis, March 16, 2012

If you’re in the NE Ohio area on October 21^st, why not join me at the Cleveland Engineering Society’s Industrial and Manufacturing Conference? I and co-presenters from Clear Process Solutions and Litzler Automation will be discussing “Bridging the Skills Gap with Automation”.

Are your operations ready for the next wave of technical innovation? Find out! Register on Integrated Automation Consulting’s website and receive your free copy of “Seven Warning Signs that Your Manufacturing Operations are Becoming Obsolete”.