Disillusioned staff, broken supply chains and inadequate technology threaten to hold manufacturers back in 2022
By Mark Fagan,
Leader, Moore Global Manufacturing & Distribution Group
Businesses across the world are being buffeted by a new industrial revolution but this one feels very different to what’s gone before. Where previous revolutions were technology-led, this time around change is also being driven by people radically reappraising their roles in the workplace.
The pandemic accelerated technological change that was already underway. CEOs across the spectrum of industry sectors have had to adapt and innovate as Covid lockdowns forced them to reinvent operating models.
Remote working and online collaboration are now commonplace and any significant business not using a virtual workplace or applying algorithms to streamline or replace certain human activities now seems like an outlier.
However, even as business leaders congratulate themselves on pivoting fast and learning to deploy and exploit new digital toolkits, there is evidence of a human backlash that will present a new set of challenges for CEOs in 2022.
Here are the three most pressing issues leaders must address.
A global talent war is raging because of what academics have dubbed the Great Resignation – a phenomenon which describes the departure of millions of workers from jobs in which they once seemed content. They are either choosing to join employers more closely aligned with their values and lifestyle, opting for self-employment or retirement.
The tight labour market in the United States illustrates what is rapidly becoming a global trend of unfilled vacancies and urgent searches for new talent. The situation is most acute in technology-oriented roles right across the supply chain.
A total of 4.4 million Americans quit their jobs in September, marking a record high – and the following month nearly 3% of the entire US workforce resigned, according to US Bureau of Labor statistics.
Many workers re-evaluated their priorities during lockdown and concluded that their jobs were either unfulfilling, badly paid or involved an unacceptable work-life compromise. Research has found that toxic work environments are a key reason for workers quitting, putting the onus on managers to reappraise workplace culture if they want to attract and retain talented employees.
CEOs cannot afford to be complacent about an employee exodus, particularly given that many are still fighting fires on several fronts. We enter 2022 with global supply chains still stretched, creating a string of pressure points spanning sourcing, purchasing, manufacturing, fulfilment, distribution and customer service.
While automation can replace or speed up some rote work, we cannot replace all the people who will leave their posts with machines. Not only is competition to woo the best people intense, the cost of hiring and training new people is significant.
The technology revolution offers a chink of light to employers caught in this bind as studies show that a data-driven approach helps identify which employees are most likely to leave, while also improving staff retention and talent development.
Data tools can be used to analyse employee turnover rates, benchmark this against the industry average and calculate the annual cost of staff turnover. Such intelligence is not always given as much scrutiny as it should, especially as high turnover has a significant impact on costs.
The US Department of Labor says the true cost of filling a technical position is between 100% and 150% of the outgoing employee’s salary after factoring in lost productivity, onboarding and training costs.
Human resources teams must identify the root causes of what makes an employee feel either satisfied or unhappy. This could involve a combination of pay, time between promotions, training opportunities, bad bosses or workplace locations. When these variables are evaluated using accurate and consistent data, potential triggers or hot spots for resignations can be identified.
True, people can be unpredictable and may be determined to leave even when offered inducements to stay. However, utilising data to measure and predict talent movements is no different than exploiting it to evaluate product performance – it simply makes good business sense.
For many workers, hybrid working is now the norm, yet not every CEO is alive to the changes in mindset this requires in leadership teams. They need to hone their skills in managing multi-disciplinary project teams while maintaining relationships with key customers and monitoring the output of suppliers. This has always been a challenge and it just got harder.
That said, there are also huge potential advantages in this new world of work. Employees that feel good about the company they work for can flourish and be highly productive in a hybrid environment. Allowing working from home sends a clear signal to staff that they are trusted and their personal wellbeing is important. In the battle for talent, such things are crucial.
CEOs need to consider not just human skills but also the systems and tools required in this new revolution. Traditional logistics, for example, requires a complete rethink.
The extent of Covid’s role in global supply chain disruption is unclear but the pandemic clearly demonstrated the inherent fragility of manufacturing and distribution models that require goods to be moved halfway across the world.
Ships are sailing slower to reduce carbon emissions and freight prices are rising. Meanwhile, container ports cannot handle growing volumes of cargo and a shortage of truck drivers is slowing down delivery of goods by road.
Successful supply chain officers have learned to be agile. Sourcing their products efficiently requires changing delivery routes, using different ports of entry, smaller vessels and alternative warehousing locations on a monthly basis. Longer term changes include increasing the number of sourcing partners and manufacturing locations.
In these circumstances, it is too risky to rely on the just-in-time inventory models that have been used by logistics managers for the last 30 years.
If they conclude that just-in-time no longer works, companies will inevitably stockpile more inventory, which requires a different management approach. However, warehousing availability will continue to be scarce in 2022 and that inevitably means a continued rise in storage costs.
Multiple sourcing partners often means utilising factories in different countries. That might involve several currencies and sophisticated hedging on international markets. This creates greater complexity and reinforces the need for flexible talent in an organisation.
Proponents of artificial intelligence (AI) say it offers an efficient way of tracking and managing large amounts of data in real-time. Some contend that machine learning is so efficient in this respect that it can offset concerns over the human brain drain.
However, AI is still in its infancy and should not be seen primarily as a means to replace workers. At least in the short term, companies may be better to focus on understanding the data that is currently stored on their servers and determine how to cleanse and shape this into usable commercial information before moving to more sophisticated tools.
Effective system integration across all business functions is complex. Flowing in additional information sourced from suppliers and other external data sources adds another layer of complexity and carries a risk of capturing inaccurate information.
Full utilisation of these systems requires a company to develop an accurate and complete business process taxonomy, which is a map of necessary business processes from each department of an organisation and supply chain partner.
Companies can harness the Internet of Things to expand the collection of data to sources outside their own enterprise management systems. That enables a deeper understanding of business trends and behaviours.
Quality data is a powerful form of business intelligence that can produce actionable insights. For example, systems that interrogate the inner workings of suppliers can predict potential future pinch points in supply chains. Transmitting this insight up the line to key customers can be crucial in cementing business relationships.
Looking ahead, the most successful CEOs will be those who rise to the dual challenge of deploying the best systems and the best people to think through and solve complex problems in order to capitalise on new opportunities.