Focus for Smart Factories Turns to Managing People

COVID-19 has prompted smart manufacturers to rethink their long-term factory designs and refocus on people. This means giving more attention to the skills and knowledge employees need, required workplace safety measures and options for leveraging new workforce models to utilize, for example, contingent and remote workers.

“ Labor is the new constraint and needs attention”

"Just as physical assets depreciate,so do workforce skills and knowledge,” says Simon Jacobson, VP Analyst, Gartner. “Labor is the new constraint and needs attention. Manufacturers that continue to rely on tacit know-how and do not invest in knowledge management and transference will struggle with capacity utilization." 

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Supply chain leaders responsible for the strategy and performance of manufacturing operations need new labor-management strategies that account for three imperatives in particular.

Adapt factory designs to meet social distancing requirements

From assembly lines to break rooms, the effects of social distancing are already apparent in many factories. Requirements for new staffing, frequent line balancing and changing work layouts have disrupted long-term investments in designs for productivity at line or unit levels.

Complying with social distancing requirements calls for changes that are neither cheap nor fast — and don’t discount the impact those changes will have on employees. Some can be a big adjustment for workers, such as having to adapt to new physical barriers without compromising productivity. 

“ Eliminate the “If you’re not on-site, you’re not adding value” ethos”

The key is to focus on the collaboration and communication components of your social distancing strategy. Start by filling communications gaps between team members with simple visual cues such as signs, charts or status-alert systems like andons.

Most important, don’t attempt a total overhaul right away. Instead:

• Budget for a gradual rollout and adjustment period over a few weeks. Focus on critical paths and core processes first. Be sure to catalog what can be automated later.
• Be realistic about how much work and processes can be redesigned. A 25% redesign is more realistic than a 100% redesign. 
• Make safety requirements core to your strategy, and continue to focus on employee well-being and engagement.

Adjust on-site staffing to create a more virtual work environment

Although hourly workers are needed on-site for specialist tasks and essential services, Gartner predicts that by 2024, 50% of factory work will be done remotely. Virtual teams will be a reality. 

As manufacturers move to more virtual environments, supply chain leaders will need to ensure the right mix of on- and off-site labor. Successful organizations will be those that can eliminate the “If you’re not on-site, you’re not adding value” ethos from their culture.

“ You don’t have to go it alone. Partner closely with HR to understand and implement new ways of managing talent”

Several manufacturers have already begun to reap the benefits of virtualization. For example, one consumer products company is remotely executing final acceptances for the testing and commissioning of new equipment. A multinational telecommunications company used virtual reality (VR) to train associates on different continents and bring a new smart factory online.

Be strategic and deliberate when creating a more virtual environment: 

• Create new metrics for lean workforces that work with the way factories are currently managed. Focus KPIs on those that describe and show the interdependencies between labor utilization rates, direct and indirect labor costs, capacity utilization and service levels.
• Identify the methods and procedures critical for on-site labor and determine what can be done remotely. Also critical are the various points of communication and how they can be enhanced, not just maintained.
• Perform a rigorous cost analysis when identifying the value of having work done remotely. Local labor access and production costs (material conversion) and other network design factors will also play a role.
• Examine the detailed skills requirements for key jobs and the staffing levels globally. Weigh the trade-offs of having distributed versus on-site knowledge.

Expand staffing skills and requirements to accommodate a more flexible workforce

A flexible workforce is key to a manufacturer’s ability to remain resilient. COVID-19 laid the challenges bare as supply chain leaders worked to juggle permanent and contingent workforces and stagger shifts to keep factories up and running. 

“That’s just the tip of the proverbial iceberg,” says Jacobson. “Balancing labor supply and demand for an expanding and contracting workforce affects the ways in which roles and skills are configured. It’s a profound change to how manufacturers manage factory-level talent.”

“ Talent searches for higher-salaried jobs, such as data scientists, might be deprioritized”

Staffing plans will now need to accommodate new skills requirements and take into account variable staffing levels of internal employees and contingent workers. As a result, talent searches for higher-salaried jobs, such as data scientists, might be deprioritized, while searches for gig workers with needed operational knowledge are accelerated. 

You don’t have to go it alone. Partner closely with HR to understand and implement new ways of managing talent:

• Develop a clear understanding of what skills are and aren’t suitable for contingent workers.
• Account for the costs of certification and training, sensitivity of intellectual property and the indirect costs of gig-worker turnover. 
• Manage and understand changes to recruiting, pay, benefits and the overall employment value proposition. 
• Address fundamental cultural changes required for part-time and contingent workforces to fit in.

Leverage your relationships with long-term partners such as labor unions, universities, technical training centers and industry organizations for access to talent with operational know-how — and to lower the cost of onboarding new factory workers.