Reskilling the Workforce in the Age of Automation

Digital technologies are transforming operations, changing the daily duties of nearly every employee.

Automation is changing the needed workforce skills. The demand for technology skills will rise by 55% by 2030, according to the 2018 McKinsey Global Institute (MGI) report, Skill Shift: Automation and the future of the workforce. MGI estimates 14% of the global workforce may need to switch occupational categories by 2030 because of these automation and other digital changes.

Executives see the writing on the wall. Of those polled, 66% reported that "addressing potential skills gaps related to automation/digitization” in their workforces was at least a top 10 priority, while 27% of all polled said it was a top five priority.

From a McKinsey survey of 197 private-sector organizations. |Credit: Matt Leonard / Supply Chain Dive, data from McKinsey

Research varies as to how many jobs will be lost to automation and how many new ones will be created, but there's no doubt new technologies are changing how work is completed and the job types available. What’s needed now is the training to enable the current workforce to transition to new, more technical jobs — and that requires reskilling and job redesign in supply chain and manufacturing spaces.

"We're just getting to the tipping point of automation, but also other digital technologies, which are equally transformative," Katy George, senior partner at McKinsey and member of the MGI Council, told Supply Chain Dive. Other digital technologies include decision algorithms, virtual reality, and augmented reality. Repetitive transactional work can be automated, while other roles can be augmented by digital and analytic capabilities. "In almost every job in the world, especially in operations and supply chain, what people do daily will change," she said.

To reskill or hire new?

It may seem easier to just hire skilled workers to take on the more technical roles created by an increasingly automated workplace. But there are several reasons why companies are not primarily using this model. 

"Most of the time, companies are willing to make some investment in their folks to upskill them. If you have a talented workforce, why not upskill them and allow them to advance into higher technical skills?” said Jan Brna, director of postsecondary and workforce education at Lehigh Career and Technical Institute.

With a low unemployment rate, skilled workers are in high demand. The workers needed by one distribution center or manufacturer are the same ones needed by their competitors. "The demand keeps growing exponentially," Brna told Supply Chain Dive. "The distribution centers need the same electromechanical technicians as the manufacturing facilities." Hiring is difficult and expensive. The average cost per hire is $4,129, according to the Society for Human Resource Management (SHRM).

Another reason for reskilling is that jobs are not always created in places with an available workforce, so companies should use their existing labor force. "It’s not only good to invest in people who are invested in your company, but it’s a business need," said George.

Some companies use a mixed approach to recruit and train qualified workers. "We’re seeing companies both wanting to upskill their loyal dedicated people, but also recruiting constantly from high school and adult programs," Brna said. She compared the recruiting process at her school to the NFL draft, observing which companies are able to nab which students first. "Most students have multiple job offers on the table" when they graduate, and the wages are good, she said.

The challenges in reskilling

That’s not to say that reskilling is easy.

Timing is tough: A distribution center already short on staff may not have time to train the existing labor pool. “It’s hard to fit it in when managing production,” said Brna. Many facilities are open 24/7, and bringing workers off the floor for training is difficult. "But it’s a necessity," she said.

It’s expensive: Companies may need to fund reskilling efforts on their own. Companies use different models, whether paying for classes directly, offering them in-house or reimbursing tuition for outside programs. Some community workforce development boards offer funding for incumbent worker training. The Lehigh Valley Workforce Development Board pays 40-60% of reskilling costs, with the employer paying the rest, depending on the job type.

It’s continuous: "It’s not just a one-time thing," said George. Reskilling should continue throughout a person’s career. Companies need to create programs to foster lifelong learning for all employees. "People at all levels will have to continue to evolve their skills more rapidly than in the past, because of the technology evolution," she said.

How reskilling works

Reskilling can work in different formats. "In supply chain, big employers have often had in-house capabilities," said George. Companies like Walmart, AT&T, SAP, and Amazon are offering in-house classes or tuition reimbursement for specific skills, certifications, and degrees.

Companies also partner with high schools, vocational schools, and community colleges to create programs and help with internships. Schools are creating curricula relevant to employers. Consulting companies like McKinsey are building larger scale academies as well.

When Brna’s school provides incumbent worker training, the school evaluates the employee’s current skill sets to customize training. Training can be a 30 to 60-hour course or a series of courses.

For multiple courses that incumbent workers in automated warehouses or manufacturers might take, the workers often start with a foundational course in electrical systems. "The people might have some decent mechanical skills, but usually their understanding of electrical and electronic components are lacking," Brna said. The foundational electrical system course is 40-60 hours, and they also learn about motor controls which communicate with the programmable logic controller (PLC) that makes machines work. Troubleshooting makes up the bulk of incumbent worker training. The idea is to use a systematic troubleshooting approach, so they don’t change out expensive parts unless needed but have a more logical approach to determining what went wrong and how to fix it. Last, they focus on pneumatics and robotics.

Another area for reskilling is soft skills. "With digital technology and automation, there’s a higher premium on technical skills, but also on interpersonal skills," George said. "If there are 100 things a person does every day in a distribution center, and 50 are replaced by automation, those that can’t be automated are interpersonal skills, management, decision making, and leadership."

Automation spurs a different kind of job growth

Even, in facilities that are fully automated, such as one of the large Walmart warehouses and the C&S Wholesale Grocers warehouse in the Bethlehem area, "we still need technicians who know and understand how to fix the robots right away," Brna said. Internal maintenance staff on site are usually responsible for programming and fixing them, or the warehouse loses a lot of production time.

The technical skills are needed to fix many types of equipment, as increasingly machines work together. "It’s not just automation working in isolation with one piece of equipment on the floor, but multiple pieces of equipment being able to talk to each other and compute data to the cloud," Brna said. That includes the internet of things (IoT), tracking when machine maintenance is due and when there’s a problem on the production line.

Many workers are concerned about robots and new technologies replacing workers. "I'm sure we'll see some of that," said George, but she’s also seeing a positive future with the technologies. She seen factories outside the U.S. driving such significant performance improvement as a result of technology innovations that the factories are attracting a higher volume of work and increasing hiring. She’s also seen stories about workers at some of these factories became self-empowered, envisioning new ways to use technology and building it themselves.

Some factories are hiring younger people who are more comfortable with technology, and they're coaching the older workforce in technology, while the older workforce is coaching the younger generation on manufacturing. "There was blending of generations and capabilities in a way that was empowering," she said.

Written by:  Deborah Abrams Kaplan, for Supply Chain Dive.