How are talent shortages in engineering impacting the auto industry?
By Phil Biggs
The auto industry has put the pedal to the metal. As cars and their parts become more advanced, the lines between software, mechanical and electrical engineering are blurring, creating a greater need for collaboration and process improvement among original equipment manufacturers (OEM) and integrator engineering teams.
As a result, the auto space is seeing a fundamental change in the needs and talent makeup of its engineering teams, led primarily by the re-positioning of people and processes, as well as the implementation of new
software applications.
WHAT ARE THE KEY BUSINESS ISSUES FACING THE AUTO SECTOR?
Tier 1 system integrators’ primary role is to efficiently co-locate with the OEM customer and fulfill system integration requirements, while ensuring critical components and parts have a precise operational and financial fit, can be delivered on time and can meet high standards of quality.
The system integrators are facing a one-two punch as they work to keep pace with OEM global requirements without hurting profitability. And as vehicle platforms become more technologically complex and powertrain options diversify worldwide, these mission-critical suppliers will continue to face even greater demands.
Every supplier will need to optimize vehicle content volume while managing build-to-operate costs and balancing investment needs. In the next few years, the industry will need to leap over a variety of hurdles, including limited availability and higher costs of key raw materials and down-line supply chain issues in emerging markets. Selecting locations for new assembly plants, complying with evolving tariff and non-tariff policies by region, and aligning those and other business decisions with global technology investments will be vital.
Perhaps the most crucial issue, however, is workforce readiness and deployment as the industry evolves. Modern factories demand a new, diverse and technologically advanced skill set to manage emerging technologies including robotics, laser welding and 3-D printing. Training for jobs in assembly lines and on factory floors and recruiting for engineering staff have been most impacted, particularly amid talent shortages in the U.S.
WHICH FACTORS CONTRIBUTE TO THE ENGINEERING TALENT SCARCITY?
The automotive industry has historically operated a manufacturing-finance business model until it moved to a design-marketing business model during the middle part of last decade. The manufacturing-finance model, which emphasized mass sales, prevailed from the 1960s through the mid-1990s. The design-marketing model evolved when the need to differentiate car brands sharpened and competition from Germany and Japan escalated pressure on American automakers to add content to vehicles. The global evolution in business models today is attributed in part to the relationship between buyers’ changing tastes and the proliferation of onboard electronics, technology and development of powertrain variants.
Since the mid-2000s, market fracturing between baby boomers and echo boomers has prompted greater vehicle program diversity. Coupled with significant unit volume growth in North America, this generates significant demand for engineering resources and talent while competition for a limited pool of engineering talent is at an all-time high.
WHAT ARE SOME OF THE CURRENT GAPS BETWEEN ENGINEERING REQUIREMENTS AND RESOURCES?
Because of the growing number of program launches, field production support is more vital than ever. Most customer program delivery now occurs in under two years, with advanced technology projects (in-vehicle telematics enhancement, infotainment, sensor integration) spanning four to five years. To achieve their ROI goals, these future projects require greater definition of time and motion and a better means to prioritize which tech projects make it over the commercial finish line. A global process cadence that incorporates common work standards across teams is critical to understanding and achieving efficiency goals and ROI. Auto manufacturers also need to develop comprehensive database tools that enable engineering teams to assess and allocate resources and requirements by global region in real time.
Engineering managers are also weighing the value of contract labor against full-time talent in their capacity planning. Hiring contractors can help managers in some cases avoid higher permanent capital expenses. However, manufacturers will want to consider the potential quality and re-work issues—as well as potential turnover—that can occur when working with contractors, especially in foreign locations. Matching software updates with new or ongoing project requirements without disrupting workflow is an ongoing challenge as well.
HOW CAN AUTOMOTIVE OEMS, INTEGRATORS AND SUPPLIERS ADDRESS THE SHORTAGE?
Over the long term, the industry must invent smarter ways to do old jobs, unique ways to do new jobs, and encourage a new generation of talent to pursue engineering degrees. And to appeal to tomorrow’s engineers, the industry needs to combat the perception that manufacturing is a dead-end road. The manufacturing industry, and the auto sector especially, may have to rev their engines and honk their horns to stand out against flashier tech jobs and effectively compete for scarcer engineering talent in the coming decade.
In the short term, OEMs and integrators should make plans now to realize aggressive industry growth goals with the same or fewer engineers. This means engineering teams will need to optimize their time, run projects more efficiently and increase productivity both in the advanced technology workstreams as well as program management delivery requirements.
LOOKING AHEAD
Despite flattening volume so far in 2016, car sales are still expected to reach or surpass last year’s record of 17.6 million by end of year. Even with low take rates on electric or hybrid alternatives and greater focus on SUVs and trucks, the projections for growth are solid based on millennial buyers entering the market, and ride sharing and other mobility choices driving demand.
According to the National Association of Manufacturers (NAM), 3 million manufacturing jobs are expected to be created over the next decade, with nearly half being automotive-related. Coupled with Google, Apple and other automakers’ unrelenting investments in the connected car and autonomous vehicle and infrastructure requirements, market development will continue and the need for engineering talent will not abate. The challenge is re-training the automotive workforce and matching emerging technical requirements to relevant shop-floor experience and new-age engineering skills.
To take advantage of the market opportunity, OEMs and integrators must link the multitude of technology options to unique and ever-changing consumer preferences, while simultaneously accelerating their new product speed to market. Engineering work processes must continually improve as the demands on product development grow. The dual challenge of scarce engineering talent and spiking volumes is causing a dramatic need to evaluate, re-evaluate and improve current engineering and product cycle plans, processes and tactics.
This article originally appeared in BDO USA, LLP’s “Manufacturing Output” newsletter (Fall 2016). Copyright © 2016 BDO USA, LLP. All rights reserved. www.bdo.com
