The Skills Gap in Modern Manufacturing Deloitte Consulting · Men and Machines: The Skills Gap in...

Men and Machines: The Skills Gap in Modern Manufacturing Raj Vohra Deloitte Consulting May 31, 2012

Copyright © 2012 Deloitte Development LLC. All rights reserved. 1 Of Machines and Men

• For years, low labor cost in developing markets have been attracting manufacturing jobs, but trends appear to be shifting the paradigm

A Manufacturing Renaissance

What would be required to make Apple products

in the U.S.?

Cost Reduction?

Sophisticated Technology?

Strategic Location?


• The decline in U.S. manufacturing has been widely publicized (perhaps overly so), but developing markets are not solely to blame

0.0

20.0

40.0

60.0

80.0

100.0

120.0

0

5000

10000

15000

20000

25000

1962 1967 1972 1977 1982 1987 1992 1997 2002 2007

The oft-lamented tale of U.S. manufacturing

Manufacturing employment held mostly constant from the 1960s through the

end of the 1990s

Source: Board of Governors of the Federal Reserve System, Industrial Production and Capacity Utilization, Statistical Release G.17

Labor Arbitrage

Production Efficiency

Knowledge Economy

Productivity has increased steadily, fueled by automation, process efficiency and better education

Manufacturing labor

Manufacturing Production Index (2007=100)


Global Manufacturing Job Creation Announcements

Source: FDIMarkets.com, 2012 Excluding: wood, oil & gas, minerals, building materials

0

100,000

200,000

300,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Top 5 Global Manufacturing Jobs Created by Country 2003- 2011

China India United States Brazil Vietnam

• The US is second only to India and China for manufacturing jobs created

China United States


Global Manufacturing Project Announcements


0

250

500

750

1,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Top 5 Global Manufacturing Project Announcements by Country 2003- 2011

China United States India Russia Brazil

• For project announcements, the US is nearly 2x China

China United States


Number of Posted Job Openings Across the US

0

50

100

150

200

250

300

350

400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Manufacturing Information

Bureau of Labor Statistics Job Openings March over 10 Year Period (‘000’s)

• There has been a significant spike in manufacturing job openings over the last 3 years


Manufacturing Project Announcements by State


• What do locations with high project announcement activity have in common?

Skills

Lower Cost and

Skills

Lower Cost and

Skills

Skills

Skills Lower Cost and

Skills

Project Announcements

LOW

HIGH


Shift of Labor Arbitrage

• Rising labor costs in emerging markets giving manufacturers pause about where they locate new production

Competitiveness • Strong companies emerging from developing markets to compete globally, including in developed markets

Energy Cost • Rising pressure to produce locally to avoid fluctuating transportation and logistics costs and enhance sustainability

Footprint Balancing

• Growth cycles and country dynamics leading to misalignment between corporate footprint and corporate objectives

Precision Information

• Increasing need for precision information, better served by automated system

• A number of factors are altering the long-term cost advantage toward investment in automation

Rise of the machines (again)


• A variety of factors make the current environment more realistic than previous claims heralding automation revolutions

Manufacturing 2020 and Beyond

Additive Manufacturing

Humanoid Robotics

Driverless Robots

Swarm and Modular Robotics

The knowledge gained from incubation environments and collaborative research helps

identify opportunities to transition to higher volume production


The Changing Face of Manufacturing Talent

THEN

Practical skills

Primarily mechanical (assembly, machine operations, tool and dye development)

Education Apprenticeships, vocational school programs, high school

Career path Limited growth, focused on position, potential line foreman

Business involvement of employees

Limited knowledge of business strategy/ focused on specific role

NOW

Technical / software skills, computing, problem solving, interpersonal collaboration

Technical colleges, collaborative training programs, university or tech. degrees (computer sciences and robotics)

Measure and recognize strong performance, using clear metrics and methods of evaluation creative compensation strategies recognizing standout performance

Clear communication of business strategy and objectives to employees


• Countries are unlikely to see a “return” of already vacated manufacturing capacity …

… but they have the opportunity to participate in new manufacturing growth

Preparing for the Robotic Revolution

Nurturing Technology

“Homo-robo Relations”

Planning for the iFuture

• Designing for automation • Joint business planning for manufacturing • Technology incubation

• Addressing the skills gap • Empowering employees • Producing a pipeline

• Manufacturing as a strategy • “Where” as important as “how” • Getting ahead of the curve

Companies that identify the opportunities relevant to their business now can seize an opportunity to establish a

sustainable competitive advantage


What can you do to be competitive?

How Can Economic Development Capitalize on Manufacturing Trends

• Develop flexible training programs

• Emphasize manufacturing at High School and Technical School levels

• Understand your assets, how can assets in your region be utilized (tech schools, energy, labor force, logistics)

• Think like a business: study manufacturing trends and offer creative solutions for company needs


Sample Case Studies

Commercial Grade Solar Panel Manufacturer

California

Biopharmaceutical Products Manufacturer

Georgia

The Skills Gap in Modern Manufacturing Deloitte Consulting · Men and Machines: The Skills Gap in...

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