AI in Manufacturing: Optimizing Costs and Enabling Workforce

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Industrial manufacturing is leading the way by adopting emerging technologies to optimize costs and drive growth. Ninety-three percent of industrial manufacturing organizations use artificial intelligence (AI) in their operations, which leads the seven industries surveyed in KPMG LLP Thrive in an AI world report.

Technologies like AI enable the workforce to visualize the future, and workers play a vital role in smart manufacturing operations. In an increasingly digital market, executives should take a fresh look at cost structures, especially those of the workforce, to identify areas where they can use AI to increase their business. efficiency and stimulate growth.

Prioritizing talent development generates value and growth

In the United States, industrial manufacturing has the highest multiplier effect of any economic sector – every dollar earned in direct labor income in manufacturing generates $ 3.14 in labor income earned elsewhere, including direct and induced impacts. The manufacturing sector is also at risk of losing more than 400,000 jobs in 2019-2029. Managers can benefit from efforts that balance optimizing costs with upgrading skills and retraining the workforce.

The lack of qualified professionals is a major concern. In 2020, ‘talent risk’ shifted from a minor concern to the No.1 threat to long-term growth during COVID-19, as less than a third of manufacturing CEOs prioritized investing in workforce skills, according to other KPMG surveys.

Over the past year, these priorities have changed dramatically. Almost 40% of CEOs in the manufacturing sector in 2021 KPMG CEO Perspectives Pulse survey say they “invest in training, developing and improving digital skills to ensure that employees’ skills remain focused on the future”. For example, in the finance function, data and analytics skills, technical workers experienced in business modeling, and process designers will become more prevalent. The same goes for data scientists who can clean the data and use it to derive meaningful insight. Another KPMG report, “Reinventing Work”, found that leading organizations are focusing on digital skills to deploy and manage AI and human skills to live and work with AI. He also cited the case of a global high-tech manufacturer who built “a company-wide capability in workforce training to meet many challenges, including impacts of AI and associated technologies that atomize the workplace “. To drive growth and value for investors and shareholders, leaders in the manufacturing industry will need to take proactive steps to balance improvements in technology performance with the need to develop a performance-driven workforce. and technologically savvy.

Put in place the right talent management strategy

For many manufacturers, finding new workers and upgrading the current workforce remain challenges even as production increases. The technology is closing the skills gap, but the majority of implementations in the industry today are robotic process automation and opportunities to improve efficiency, not productivity enhancing technologies.

According to the National Manufacturers Association, “Manufacturing output is expected to exceed pre-pandemic levels in the third quarter of 2021, with robust sales supported by pent-up demand, fiscal and monetary stimulus and economic recoveries in the markets. markets around the world. “Meanwhile, the workforce is shrinking. In August of this year, the ISM manufacturing employment index showed a contraction in the manufacturing workforce – 4 percentage points lower than the reading of July – even on the back of modest growth in manufacturing.

In a collaborative effort to win the competition for talent, CEOs, CFOs and controllers must assess the profitability and validity of various talent acquisition channels, including recruiting, outsourcing, co- sourcing and upgrading of current employees. Additionally, with the shift to a hybrid workforce, capital investment may be required to develop both the skills of remote workers and the infrastructure to empower these workers.

Board members should also oversee human capital management issues, especially talent development. As the pandemic illustrates, successful strategy execution depends on a company’s talent base. Talent oversight by boards has broadened to include all workers.

Retraining to retain your talents

A recent KPMG survey of manufacturing CEOs in the United States found that 44% plan to invest more in AI, but many lack concrete plans to improve the skills of the current workforce or compete. for new talents. This highlights the need to train the current workforce. Talent assessment is an important first step.

Companies need to determine which employees have the right skills, which employees are suitable for new roles, and where recruiting or outsourcing can fill gaps in the talent pool. Areas of assessment should encompass both specialized programming and analytical skills and interpersonal and engagement skills. For example, the centralization of accounting operations has challenged factory controllers to monitor multiple factories. Successful factory controllers in today’s smart factories need to master data analysis and aggregate actionable insights.

There are benefits to upgrading the skills of the current workforce instead of recruiting or outsourcing:

  • The cost of upgrading employees is lower than recruiting: existing workers are endowed with valuable institutional knowledge for productivity and organizational culture.
  • Manufacturers looking for new workers skilled in data analysis and problem solving will face stiff competition from their peers in industry and other high growth sectors.
  • Reverse mentoring and the role that young workers can play in helping older generations to develop new skills with high added value, in particular around digital technologies.

According to a recent McKinsey survey, “in high-tech industries and industrial organizations, respondents are less focused than others on building basic digital skills – likely because these skills were already present before the pandemic. But… their peers in the public and social sectors, as well as in healthcare and pharmaceuticals, are almost twice as likely as those in industry organizations to say that they have focused on people skills and empathy. “This reinforces the need to flesh out a programmatic approach to skills development.

Take into account the net costs of recruiting and outsourcing

Outsourcing and recruiting are two valuable strategies for improving manufacturing productivity while staying focused on fundamental business transformations. The manufacturing industry has historically outsourced many shared services and routine transactions. Increasingly, manufacturing companies without the requisite technical skills in their workforce are choosing to outsource or co-source back office operations such as financial reporting, accounting, and auditing.

To kick off the process, manufacturing managers should weigh salary and investment options when evaluating external recruiting or outsourcing projects to those with advanced facilities and experience in the field. emerging technologies.

As emerging technologies change the dynamics of the manufacturing workforce, industry leaders must maintain a balance between promoting an employee-centric culture and pursuing cost optimization. Having a sustainable talent management strategy and a modern workforce will be critical to the long-term success of industrial manufacturing companies and industry, in the face of increasing competition as the economy shrinks. straightens.

To keep their own skills up to date, accounting professionals can use the Guide and tools of the CGMA skills framework.

Anne Zavarella, CPA, is a partner and national industry leader in industrial manufacturing auditing for KPMG LLP in Columbus, Ohio. To comment on this article or suggest an idea for another article, contact Ken Tysiac, the JofAmanaging editor of, at [email protected].

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