Illumination

Insights and trends on augmented reality and advanced manufacturing technology
30November2020

3 Effects of the Skills Gap on the Bottom Line

Effects of the skills gap on the bottom line

Over the past few months, the primary causes of the rise in the skills gap have been increased consumer demand and decreased employment. Factory activity rose to the same levels as this time last year but, 3.2 million more people between 56 and 74 years old retired this year compared to last, according to the Pew Research Center. Read “What Causes the Skills Gap?” to find more details about these changes. 

With a large percentage of the manufacturing workforce out of work or retiring, businesses are moving new employees into the open positions. But often, the workers brought in are from other departments, industries, or completely new to the workforce. 

As new employees start their new job, they are expected to perform at the same level as the experienced workers before them, who had decades of experience. Without the same level of experience, production is unable to perform at its full potential.

There are three main effects of the skills gap that are affecting the bottom line; quality, inefficient productivity, and increased cost. 

Effects of the Skills Gap on the Bottom Line

1. Quality

Without a proper understanding of a task or technologywhether it is new to the company or just new to the workerit is likely that mistakes will be made during its process. This can put the efficacy, and specifically the safety, of the final product in jeopardy. 

However, a lack of knowledge about the full capability of a technology or task can also drive down quality. Especially if a technology is new, a lack of basic understanding can restrict workers from more advanced aspects that would make processes simpler. Again, quality would be lacking, but instead of being due to error, it would be because a worker didn’t understand how to use the technology to its full potential.

2. Inefficient Productivity

Time is spent identifying and fixing quality issues by workers and supervisors. It holds back the entire production line and limits throughput, but also takes time away from finding new ways to improve productivity and efficiency in the long term. 

With the inability to move forward, it may seem like a better choice to move back to the original process. If issues with a task or technology persist due to a skills gap, the entire value of it can be lost. Abandoning either as an attempted solution to the issues caused by the skills gap holds back the innovation and agility of the entire company. 

3. Increased cost

The time it takes to extensively train employees and fix issues can take away from throughput and therefore reduce capital. As explained above, abandoning a new technology or process can prevent other advancements in the business that would drive profit.

Along with business-level effects, the skills gap has effects on the overall economy and has already affected the future. The National Association of Manufacturers stated that:

Over the next decade, 4.6 million manufacturing jobs will likely be needed, and 2.4 million are expected to go unfilled due to the skills gap. Moreover, according to a recent report, the lack of qualified talent could take a significant bite out of economic growth, potentially costing as much as $454 billion from manufacturing GDP in 2028 alone. Between now and 2028, a persistent skills shortage could cost $2.5 trillion in reduced output. (Source: Deloitte and The Manufacturing Institute)”

Overall, even a minor skills gap can limit production now and in the future. With nearly a million manufacturers currently unemployed and 2.4 million jobs projected to be unfilled, the future losses may come sooner than planned. 

So, how do you prevent it? 

Solving the Skills Gap

Ensuring proper training is a simple, yet effective way to solve the skills gap. Though some sources state that automation will solve the problem, nothing can replace the “distinct, experienced, human skill set that is still really necessary,” as Bridgewater Interiors CEO Ronald Hall Jr. says. 

The time invested in upskilling workers provides solutions to these production challenges and provides additional organizational benefits. More on that will be discussed in our post on upskilling.

To ensure proper training, tools like Augmented Reality (AR) make training quick, simple, and can certify trainee knowledge. Gautam Goswami from Forbes found a 2018 white paper by ARC Advisory Group that explains that: 

“By adopting AR solutions, the paper states, manufacturing organizations can empower their factory workers in training and guidance applications. By integrating AR, you can lead your team toward the democratization of knowledge and solve a key roadblock shared by logistics, manufacturing and field service: the experience gap.”

Training with AR technology levels the playing field. Anyone with any skill set can use AR to guide processes with no experience necessary. Guided work instructions can reduce cycle time and create error-free assemblies, every time. 

More about the features of AR training is mentioned in our blog post on upskilling

To learn more about how Light Guide uses AR technology on their TrainAR workbench to solve the skills gap, please contact us for more information. 

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