Productivity on the Rise
U.S. labor productivity soared at a 4.9% rate in the most recent quarter as compared to the typical annualized rate of 2% during the current business cycle. This means there has been two back-to-back quarters of high productivity. According to the U.S. Bureau of Labor Statistics, labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all workers. Manufacturing increased as well at a 3.3% rate. Rates were high during the rollout of the internet with similar implications as the ramp up of artificial intelligence. From the LMA vantage point, we are seeing productivity gains across the board at manufacturers and supply chain organizations as they utilize predictive processes such as SIOP (Sales Inventory Operations Planning), and advanced technologies such as AI, robotics, and the automation of processes and better utilization of ERP and related systems. Executives are focused on increasing output more efficiently and with less waste.
Productivity Enhancements
Clients are focused on continually increasing productivity. As companies reshore production, expand facilities and build new sites, there simply are not enough resources to hire. Companies must surge output to meet the demand for production at scale on quick notice. As companies want to take advantage of opportunities as data centers are constructed, manufacturing investments break ground, and new orders come in from trade deals for airplanes, food, and energy, the successful will be prepared to ramp up. Thus, they are thinking creatively and focused on increasing productivity to scale up rapidly with minimal new resources. To better support these initiatives, they are also focused on building and upskilling talent to empower and engage workers and better utilize their existing talent.
We have seen productivity improvements ramp up as companies want to grow revenue and EBITDA while further engaging and rewarding top performing employees. A few of the top strategies include the following:
- SIOP: Our most proactive clients are pursuing SIOP to stay ahead of changing conditions, reallocate production to maximize output without increasing labor, and optimize operational performance with automation and advanced technologies. To learn about additional strategies to optimize with SIOP, download our complimentary eBook, SIOP: Creating Predictable Revenue and EBITDA Growth.
- Automation of repetitive tasks: Keying of repetitive data is no longer acceptable. There are countless automation programs and capabilities to eliminate keystrokes and automate process steps. Software developers are utilizing artificial intelligence to eliminate unnecessary waste.
- Better Use & Optimization of ERP: 80%+ of companies do not fully utilize ERP for to increase their productivity. In fact, we find that this figure is at least 95%+. There is vast opportunity to automate, digitize, and upgrade the use of ERP and related technologies. For example, instead of manually reviewing inventory availability, proactive companies are utilizing functionality such as available to promise (ATP) and expected delivery date (ETA) to better answer customer questions and automate unnecessary research.
- Robotics & Automation Equipment: Lights out manufacturing is gaining momentum as companies realize they can utilize automation systems, robotics and other advanced technologies to keep lines going during lunches, breaks, and on off-shifts. In addition to gaining production with minimal to no people, by keeping production going, they eliminate start up, waste, and other non-productive tasks. For example, a building products manufacturer ran around the clock in standard welding with robots, dramatically increasing output and eliminating a bottleneck so that welders could focus on custom items. To read more about industrial robotics, refer to our article.
- Use of AI: Artificial intelligence is incorporated widely across manufacturing and supply chain equipment, technologies and related toolsets. According to a 2025 Deloitte survey of 600 manufacturing executives, the majority (80%) plan to invest 20% or more of their improvement budgets in smart manufacturing initiatives, with a focus on foundational tools and technologies. To learn more about how manufacturers can utilize AI to power smart supply chains and smarter decisions, download our complimentary eBook.
- Autonomous vehicles: Manufacturers commonly utilize autonomous vehicles to supply materials to production lines and other repetitive tasks. In addition, autonomous vehicles (AVs) are revolutionizing logistics by increasing efficiency, improving safety, and addressing labor shortages across the entire supply chain, from warehouses to long-haul transportation and last-mile delivery.
- Data normalization & analytics: Forward-looking executives are utilizing AI tools to automate the normalization of data and to dig deep into predictive analytics, thereby improving sales forecasts, cash planning, and predictive insights.
Productivity to Fuel Success
As Baby Boomers retire, technology advances, and manufacturing, mining, and construction surges, productivity is no longer optional. It is a requirement to fuel success. Smart manufacturers and supply chain professionals will find ways to leverage artificial intelligence and advanced technologies to automate, digitize, and thrive.
If you are interested in reading more on this topic:
Maximizing Performance and Margins with SIOP