Organizational Silos and Growing Skills Gap: Most Common Challenges in Manufacturing

Written By: Peter Rifken
November 8, 2019
5 min read

(Updated 12/13/2023)

As manufacturing companies advance through their digital transformation journey, they can often get stuck in the reactive stage. Being stuck in this stage means being unable to move forward or deal with challenges as they crop up.

Some of the most common challenges in manufacturing include communication breakdowns, siloed workforces, a growing skills gap, inflexible tools and complacent leadership. These issues can lead to instances of Gray Work - or the slow, manual ways people do work “just to get by” - popping up, which can torpedo attempts to continuously improve.

As many manufacturing companies look to move ahead into the fourth industrial revolution, they are having to confront these challenges and find ways to move forward. I have worked with several manufacturing companies over the years helping them develop innovative solutions to the following challenges.

Growing Skills Gap

In the midst of a cooling labor market, there are currently more positions needing to be filled than the amount of people looking to fill them. Employers are facing a new challenge of a growing skills gap with not enough prospective employees having the skills necessary for the jobs. A recent study by the National Association of Manufacturers on challenges within manufacturing found that the skills gap may leave about 2.1 million positions unfilled by 2030.

There is a need for a shifting skill set in manufacturing due to the introduction of advanced technology and the automation of some processes. Many of the workers have decades of experience performing tasks a certain way and are naturally resistant to changing how the work is done. Additionally, a significant amount of the manufacturing workforce is nearing retirement age.

While the older generation of workers is gearing up to retire, one of the most serious recruiting challenges the Deloitte study found was that younger workers have a largely negative perception of the manufacturing industry.

Addressing the skills gap is one of the most challenging issues companies are facing. Companies need employees with technical skills, but also with an interest in continuously learning to keep up with the fast-paced environment of evolving technology. Given the complex nature of the industry, the types of skills needed within manufacturing are constantly changing, making it increasingly difficult for the workforce to keep up.

In my work with manufacturing companies, I’ve noticed the most successful employees are knowledge-based workers who are both close to the manufacturing processes, possessing those vocational skills, and equally appreciative of continuously improving the business. These folks are increasingly reliant on a digital tool chain to accomplish these goals.

Siloed and Fragmented Communications

Manufacturing companies typically have many plants located throughout the country and while they may be unified by company name and brand, they remain very siloed in how they operate. These silos have allowed for localized definition of standards, vocabulary and best practices. While this allows employees to work efficiently within their own plant, it creates fragmentation among data and systems, and is not effective for leveraging best practices across an organization.

There are many reasons why silos may exist throughout an organization including a lack of trust or transparency, a disconnect or misunderstanding of company goals, a lack of incentive to work together, and a lack of ownership for overall success, among many others. Silos can lead to communication breakdowns as it becomes difficult to communicate lessons learned company-wide which can lead to duplicate work, inefficiencies, and increased costs that have a negative impact on the industry.

Recent research has found that 75% of manufacturers struggle with data silos, and over 40% have reported their silos have expanded. By not having a single view of all data and systems, manufacturers are unable to share real-time information with one another and grow the customer experience.

Inflexible Tools

Though it is important to break down those organizational silos and barriers within manufacturing companies, in order to obtain business agility, it is equally important to break down barriers up and down the supply chain. While this may be difficult, significant agility can be realized by standardizing on reporting KPI’s, process and tools.

Regardless of whether you work for a small, medium-sized or large manufacturing company, all of these companies need to upgrade and standardize their digital infrastructure to better share and interpret information. I’ve found that this is where traditional tools, like Excel and Microsoft Access, create more Gray Work and struggle to meet the needs of detailed manufacturing processes.

These traditional tools struggle to keep up with the pace of change that is required to realize integrated work environments. I’ve found the pain manifests in fiscal, quarterly and often month-end reporting exercises. This results in a small team of analysts works overtime for days compiling, normalizing, and reporting on data across multiple sites, departments and business units.

The most successful firms are those that utilize cloud-based platforms that are highly configurable, customizable to support integrations with other sources of truth (or the ‘inflexible’ systems of record) and easy to implement and support.

Complacent Competency

According to the Association for Manufacturing Excellence (AME), in the last two decades while many manufacturing companies have taken steps towards continuous improvement, leveraging Kaizen, the most successful companies have regular continuous improvement plans implemented. They do this by ensuring visibility into important metrics, eliminating process variation and fostering human development. These successful companies make a priority to frequently review numbers, processes and behaviors, according to AME.

Those transformational companies that can fight off complacency recognize that the answer goes beyond technology. Great leadership is just as important as having the right tools when approaching the continuous improvement of people, processes, products, and services. Great people demand support to implement their ideas, which may often involve implementing tools and systems that enable a level of flexibility not afforded by legacy systems.

Top managers not supported by the right technology will inevitably leave for more forward-thinking companies that prioritize and invest in providing the tools and systems to optimize work. While technology isn’t everything, it does make a significant impact in scaling the lessons learned, best practices and processes inherent to high performing teams.

Written By: Peter Rifken