US manufacturing reaches 18-month high despite COVID-19
Despite the considerable growth, the road to a full recovery for the manufacturing industry remains long. Following a survey from the Institute for Supply Management (ISM), it showed that hiring at factories has remained subdued for a year now, with around 72% of industries reporting growth last month.
James Knightly, chief international economist at ING in New York, commented: “After the scale of shutdowns we really should be seeing a large proportion of firms saying they are experiencing rising output. Jobs continue to be lost in the sector. With COVID-19 cases picking up, businesses are likely to remain cautious.”
The ISM said its index of national factory activity increased to a reading of 54.2 in the last month from 52.6 in June. It was the strongest showing since March 2019 and marked two consecutive months of expansion. A reading above 50 indicated growth in manufacturing, accounting for 11% of the US economy.
The ISM confirmed that the “sentiment was generally optimistic” among manufacturers. The continued improvement in the landscape of the manufacturing industry is encouraging considering the ongoing impact of the coronavirus pandemic.
The ISM added that 13 industries including wood products, primary metals and electrical equipment, appliances and components reported growth in July. Manufacturers of transportation equipment, machinery and fabricated metal products reported contraction. The ISM’s forward-looking new orders sub-index increased to a reading of 61.5 in July, the highest since September 2018, from 56.4 in June. The survey’s measure of order backlogs at factories rebounded as did others for exports.
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.