Manufacturers Need to Refocus on Managing People

Editor’s Note: Simon Jacobson is VP Analyst, Gartner Supply Chain Practice

COVID-19 catalyzed a shift in focus from physical assets to people. Labor is the new constraint, prompting manufacturers to prioritize skills and knowledge needs, required workplace safety measures, and new workforce models, for example, increased involvement of contingent and remote workers.

To maximize performance, supply chain leaders need new labor-management strategies that account for three imperatives.

Rethink factory designs to meet social distancing requirements

Complying with social distancing requirements calls for changes that are neither cheap nor fast — and directly impact employees. Adapting to new physical barriers without compromising productivity is a big adjustment.

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

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.

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 are 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.

Be strategic and deliberate when creating a more virtual environment:

- Create new metrics that describe, emphasize, 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 then 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. Access to labor and production costs (for example, material conversion) and other network design factors that enforce resiliency 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.

Build a more flexible workforce by hiring for new skill sets

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.

Staffing plans will now need to accommodate expansive skills requirements and talent capabilities while accounting for variable staffing levels of internal employees and the potential leverage of contingent workers. As a result, talent searches for higher-salaried jobs, such as data scientists, might be deprioritized in favor of operational knowledge. A gig economy opportunity is looming.

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.

Finding the right mix of talent will require new ways of hiring. Leverage relationships with labor unions, universities, technical training centers and industry organizations for access to talent with the operational skills needed to succeed in this new normal.

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