10.8 Trends in Production and Operations Management
- What key trends are affecting the way companies manage production and operations?
What trends will impact U.S. production and operations management both now and in the future? Manufacturing employment has fluctuated since the Great Recession and with the impact of the COVID-19 pandemic, but by the end of 2024 there were nearly 13 million people employed in the manufacturing sector. U.S exports have increased to nearly $300 billion and the integration of technology into manufacturing processes has made U.S. firms more competitive.9
Yet rapid changes in technology and intense global competition create anxiety about the future. Is technology replacing too many jobs? Or, with qualified workers predicted to be in short supply, is the integration of technology imperative to the United States' ability to compete in a global marketplace? Will the United States start to lag behind other economies for leadership in innovation? And what should it be doing to ensure that today’s students are tomorrow’s innovators and scientists?
Workforce development and finding skilled employees is a concern facing U.S. firms today. If the United States is to maintain its competitive edge, more emphasis is needed on science, education and workforce development, research, and entrepreneurial ventures. And what about the crucial role of technology? These are some of the trends facing companies today that we will examine.
U.S. employees compete for positions with workers across the world and are no longer simply competing against one another. This is particularly true for manufacturers who account for over 60 percent of U.S. exports. Today's integrated global economy with more competition and export opportunities brings new challenges and new possibilities to the United States and its workforce. To compete in the global economy, emphasis on innovation and workforce development are critical success factors for countries to consider.
Looming Workforce Crisis Threatens U.S. Competitiveness
According to the latest National Association of Manufacturers Skills Gap Report, manufacturing executives rank a “high-performing workforce” as the most important factor in their firms’ future success. This finding concurs with data from the U.S. Department of Labor, which conclude that over 70 percent of future jobs will require education and training beyond a high school diploma.
But the National Association of Manufacturers predicts that 3.8 million new jobs will be filled over the coming years, but nearly two million jobs will go unfilled due to a skills gap. When asked to identify the most serious problem for their company, 65 percent of survey respondents indicated that attracting and retaining employees is their biggest business challenge.
As demand for better-educated and more highly skilled workers begins to grow, trends project this shortage of skilled workers will increase. Firms are investigating innovative ways to develop their current workforce to keep up with the skills needed in technology and AI. For example, businesses are partnering with trade schools, high school career centers, and economic development organizations to both train the existing workforce and to recruit new employees. Governments and business leaders alike recognize the importance of education and workforce development activities.10
American Innovation Leadership at Risk
Recent research shows the United States in competition for its global leadership position in science and innovation. The report was prepared by the Task Force of the Vision for American Science and Technology (VAST), a coalition of industry leaders, scientists, and academics. Although the United States has historically been a leader in innovation, competing countries are narrowing the gap. In response, according to the Task Force report, the United States needs to focus on strengthening and building an adaptable workforce.
The task force indicated a need for a renewed focus on investment in science and research. Federally funded research as a share of GDP has been on the decline since a high in the 1960s. Federally funded research and development represented less than one percent (0.63 percent) of GDP in 2022.11 The U.S. share of worldwide high-tech exports has fluctuated over time after the Great Recession and COVID-19 pandemic, from around $220 billion in 2008 to the latest data showing U.S. high-tech exports at $385.3 billion. However, graduate science and engineering enrollment is on the rise in the United States as it is in competing countries worldwide. In addition, the changing workforce in the United States in these fields could lead to a critical shortage of the talent needed by firms.12
So what needs to be done to reverse this alarming trend? Continued investment in research at all levels—federally funded, business funded, and privately funded—is a key success factor to fostering innovation and technological development. Historically, such funding has helped bring to market products such as lasers, MRI machines, fiber optics, and even the internet. National Association of Manufacturers President Jay Timmons noted that, “Modern manufacturing offers high-paying, long-term careers. It’s a high-tech, sleek industry. It’s time to close the skills gap and develop the next generation of the manufacturing workforce.”13
Business Process Management (BPM)—The Next Big Thing?
Today's firms have a wide span across borders with an assortment of partners and an array of suppliers often spread across thousands of miles. Some companies can find themselves unprepared for this global design. Many firms today see the benefit of collaboration across borders and are making strides to acclimate to the global nature of doing business.14
“Business Process Management is the glue to bind it all together,” says Eric Austvold, chief revenue officer at ToolsGroup (formerly research director at AMR Research). “It provides a unified system for business.” This technology has the power to integrate and optimize a company’s sprawling functions by automating much of what it does. The results speak for themselves. Implementing BPM can provide significant savings on inventory costs and material expenses. Defense contractor Lockheed Martin uses a BPM system to eliminate waste and improve process efficiency, allowing them to realize considerable savings each year.
BPM is the key to the success of such corporate high-flyers as Walmart and Dell, which collect, digest, and utilize all sorts of production, sales, and shipping data to continually hone their operations. So how does BPM actually work? When a Dell product is ordered online through an integrated BPM system, electronic transactions flow between suppliers so that each part arrives quickly and the product assembly including software installation and testing is scheduled. Because of the efficiency of the process and the just-in-time delivery, Dell bills customers when the products are shipped. A well-thought-through BPM system can even reschedule production runs, reroute deliveries, or shift work to alternate plants.15
The amount of available data—business intelligence (BI), enterprise resource planning (ERP), customer relationship management (CRM), and other systems—is staggering. "Every organization has hundreds of processes that require decisions," says Paul Harmon, executive editor and founder of Business Process Trends. "If you could improve each of those decisions so that the average employee consistently did as well as the best employee, your organization would be making a lot more money," according to Harmon. BPM can drive growth through the automation of business processes and decision-making, particularly those processes that integrate organizations. Companies that have good collaborative processes through the adoption of business process management programs experience savings in inventory costs, stronger order fulfillment practices, fewer stock outs, increases in sales, and as a result of the cost savings, increased revenues.16
AI, specifically the data analytic capabilities made possible through artificial intelligence, is having a significant impact on operations management. The goal of operations management is maximizing efficiency in all aspects of production—from design, to sourcing raw materials, to supply chain, to delivery to the end customer. AI technology is proving to be instrumental in assisting leaders with this goal. Data gathered by Deloitte found that 94 percent of business leaders surveyed contend that AI will be critical to their firm’s success in the coming years. Through the high-level data analysis provided through AI technologies, managers can make real-time decisions to increase production or reduce waste, and ultimately reduce costs. AI technologies can be integrated into existing systems to manage inventory more efficiently, address customer concerns in a more timely manner, optimize supply chain activities, and automate processes that have typically been manual operations. AI can gather and analyze large data sets and make recommendations based on this analysis for business leaders to evaluate and implement. By “partnering” with AI, employees can enhance their critical thinking and problem-solving capabilities to make improvements to production processes.17
Concept Check
- Describe the impact of the anticipated worker shortage on U.S. business.
- How are today’s educational trends affecting the future of manufacturing?
- What is business process management (BPM), and how do businesses use it to improve operations management?