Manufacturers Are Concerned Skilled Labor Shortage Could Stymie Innovation, Finds L.E.K. Consulting Survey

Most U.S. manufacturers agree that increased growth and investment opportunities are on the horizon, despite some of the uncertainties related to global trade. But they say a major issue looms: Where are the skilled workers for the digital factories of the future?

In a recent survey of 200 decision-makers across seven manufacturing industries, global management consulting firm L.E.K. Consulting found that four out of five U.S. manufacturers are preparing for an increase in automation technology, with only 18% of companies saying they have minimal plans for automation.

As such, employee skill set upgrading and retraining employees for different functions are high on manufacturers' priority lists in preparation for automation advances and increased onshore manufacturing, trailing only the modernization of manufacturing lines. Notably, despite automation's reputation as a job-killer, it is actually prompting manufacturing companies to actively invest in their workforce. Just 22% of respondents claimed to have downsizing in mind as a driver of greater adoption of automation.

"It's clear to us that downsizing is not a priority for U.S. manufacturers right now, even with the current uncertainties surrounding trade. Yet, they are worried about potential skilled labor gaps and the effects this may have on their overall automation strategy," says Carol Wingard, Managing Director of L.E.K.'s Industrials practice in the Americas and coauthor of "2018 Manufacturing Priorities Survey." "In fact, manufacturers have indicated that access to key talent pools is a dominant motive behind facility expansion in new or existing sites."

Internet of Things (IoT)-enabled products (goods and devices that can transfer data over the internet to other interrelated products) are piquing the interest of manufacturers, but most are still caught in early development stages. While questions around data collection are major factors in planning delays, manufacturers also report a lack of technical, analytical, field support and commercial skills and capabilities – further evidence of rising concerns around a workplace shortage of skilled labor.

"About 70% of our survey respondents said they're taking a wait-and-see or quick-follower approach to IoT, which tells us there's some apprehension toward heavy IoT investing at the moment," says Eric Navales, coauthor of the survey report and Managing Director at L.E.K Consulting.

Further survey findings

Just as the vast majority of manufacturers see a bright future ahead for onshore manufacturing opportunities, 66% view existing ecommerce players (such as Amazon) as promising partners to further drive business.

"In the short term, ecommerce players like Amazon will easily provide manufacturers with broad distribution channel access," says Wingard. "But down the line, we think the possibility of future conflict with more profitable channels may curb the allure of partnerships with today's leading ecommerce firms."

Finally, U.S. manufacturers are concerned that departments traditionally considered non-customer-facing (such as manufacturing, supply chain, and operations) will need to shift with current market trends to become more customer-forward.

"Using a holistic approach, manufacturing firms can target non-customer-facing departments for customer-friendly initiatives that will really drive operational and cultural change across the whole company," says Navales.

About L.E.K. Consulting

L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance, and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private and public-sector organizations, private equity firms and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,200 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com.

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