The Age of Average is Over
One of the biggest threats to manufacturing prosperity U.S. companies face today is talent. As the global economy grows and manufacturing evolves into Industry 4.0, the American workforce must have the skills and capabilities to thrive, not just survive. At BASF, solutions and best practices have been implemented to address several industry trends challenging retention of a skilled and qualified workforce including: automation, Baby Boomer retirement and change agility.
As an industry in the midst of the fourth manufacturing evolution known as Industry 4.0, cost effective solutions are being sought that couple increased manufacturing with unique workforce development demands. Historically, the first industrial revolution leveraged mechanization through water and steam power. The second scaled up production through the assembly line and electricity. The third introduced computers and automation. Now, the fourth is driving further automation by interconnecting computers and robotics with more computers and robotics to form the “smart factory.”
According to the International Federation of Robotics, between the years 2010 and 2014, the average sales of robots increased 17 percent per year (CAGR), the largest robot installations increase in history. Between 2005 and 2008, the average annual number of robots sold was about 115,000 units. Between 2010 and 2014, the number rose to about 171,000 units. This is an increase of about 48 percent and a clear indicator of the significant rise in demand for industrial robots worldwide.
As the global economy grows and manufacturing evolves into Industry 4.0, the American workforce must have the skills and capabilities to thrive, not just survive
So where does the growth in robotics leave the human worker? Companies, like BASF, are radically shifting staffing methods. Industry 4.0 introduces concepts like the Internet of things (IoT), big data and augmented reality. There will be more demand by manufacturing companies to hire people with a combination of IT and mechanical skills to accommodate the need for automation. Also, the Industry 4.0 workers will need to be able to efficiently analyze large amounts of data to provide customer-based solutions for these factories. In an automated world, the human worker still plays an important role, but training, workforce development and the overall education system are integral to their success.
Public and private partnerships will be critical to fund training programs that lead to job placement in this new work environment. At BASF, we are in the early phases of Industry 4.0 starting with incorporating some of the augmented reality tools into maintenance organizations. BASF is partnering with local community colleges and universities to ensure robust pipeline of talent is being properly trained to meet the growing demand. Along with the complexities of 4.0, the industry faces a tremendous shift in the age, experience and tenure of the workforce as Baby Boomers begin to retire. According to Sixth Annual Update on the Retirement Preparedness of the Boomer Generation by IRI, there are about 76 million Baby Boomers in the U.S., more than 40 million of whom are already age 65 or older. They will retire at a rate of 10,000 per day through at least 2030, when almost 73 million Americans, comprising more than 20 percent of the U.S. population, will be age 65 or older.
Companies will need to overcome the shortfall in manpower and properly transfer knowledge to the next generation. Many organizations, including BASF, have succession plans in place to address this issue from the factory floor to the executive level. BASF is being proactive in this effort through a program called “Transitions at Work.” Prospective retirees are backfilled one year ahead of retirement to provide time for proper knowledge transfer. We are also improving the skills and capability of our workforce through manager skill build series, revamped learning and development programs with an emphasis on diversity hiring practices.
Lastly, the most critical skill needed across these complexities is change agility. Regardless of globalization, automation, or economic conditions, human innovation is still key. Our workforce has to be able to quickly accept and adapt to change. Within change agility, individuals will need continuous improvement tools as well. Learning and applying the techniques of LEAN, Six Sigma, TPM, etc. are critical for success of both the business and the individual. We know these tools work as evidenced by successes at companies like Toyota, Procter & Gamble, AutoLiv, GE, etc. In my experience, overall the benefits for the organization can be measured in “hard” terms: 50 percent reduction in overall supply chain cycle time, 25 percent increase in customer order accuracy (delivery and quality), and 30 percent reduction in inventory. Additionally, in “soft” terms, these tools boost employee morale and give them a new skill set that is transferable in any market. BASF launched its continuous improvement program, OpEx, in 2011 with a primary focus on manufacturing. OpEx contributed 60 percent improvement to run rate savings that affect the bottom line. We now have launched OpEx 2.0 in 2016, which broadens “end-to-end” customer centric approach with heavy emphasis on people and culture development.
So, yes, the age of average is over. The American workforce will need to evolve to keep up with industry trends and not just be good at one thing but great at several. BASF, along with many industry leaders, are finding the necessary solutions and best practices to not only adapt to the changing environment, but excel and prosper.