Manufacturing leaders must close AI knowledge gaps

As organizations undergo an AI transformation, they need leadership prepared to manage both the technical and organizational aspects.

AI technologies have long been a part of manufacturing and related functions -- such as supply chain. But the current wave of agentic and generative AI technologies differs significantly from more established forms like machine learning and automation. Organizations are now requiring manufacturing and supply chain leaders to manage an AI transformation they might not be prepared for.

TechTarget recently spoke with Heidi Hoffman, partner at executive search firm ON Partners, about the AI leadership gap in manufacturing and supply chain. Hoffman places executives such as chief operating officers, chief supply chain officers and chief manufacturing officers for companies primarily in the consumer products, industrial, aerospace and automotive industries. 

Many companies are forging full speed ahead with AI technology implementations in manufacturing and supply chain, Hoffman said, but there's a significant leadership gap in these functional areas. Manufacturing and supply chain leaders need to develop skills in emerging agentic and generative AI technologies to meet the demands of a changing operational landscape. 

Editor's note: The following transcript was edited for length and clarity.

AI has been in manufacturing for a while. What's different now, and what are some issues with leadership in manufacturing and AI?

Heidi Hoffman: AI is funny in manufacturing because it means different things to different people -- and it should not. The phrase AI and being AI-ready has been in our position specifications for only the last four or five years. It's been more on automation and technology deployment. Those two were being conflated. Being AI-ready meant that you had gone through a big ERP implementation without problems, and that's not the same thing. So, what being AI-ready means in manufacturing is very different today than it was even two or three years ago.

Heidi Hoffman

Are manufacturing leaders ready for what AI is now, rather than the more common experience with similar technologies such as automation that have been around for a while?

Hoffman: [When talking about AI experience in manufacturing] you have to know if you mean that AI is using intelligence to make us more efficient. Agentic AI is already very much involved in operational decisions like demand planning, supplier selection, quality inspection. The leaders that are leading those areas own [the AI agents], whether they built them or not. That's the challenge -- do they really know what they're running or do they just know how to manage the outputs of [the agents]. That's the challenge of what the leader needs to look like in the future.

Should manufacturing organizations educate the leaders who are already there in AI, or should they bring in new leaders who already have that AI knowledge and experience?

Hoffman: We're evolving into that. ChatGPT made everything terrible, because everyone who uses ChatGPT thinks they're comfortable with AI, and that's not realistic. They conflated the tools with strategic fluency, and they're very different competencies. It's too much to learn it fast enough to be the expert who's already sitting in the chair.

What are some of the specific AI needs for manufacturing leaders?

Hoffman: The leaders need to focus on not just teaching their people how to use the tools but also learning how to change the processes to effectively use the new AI tools. That's very different. Before, it was about, "We're putting in a new ERP system and let's train everybody in it." [With AI] it's not as much about just training them on the tools. Now, it's about how this function will look different in the future. The amount of information an AI tool can get to do demand planning or quality inspection is a much more pinpointed use of the information than they can do now. The next question is, how can we actually do it -- quality, manufacturing, sourcing -- using these tools? Then you've got the governance issue of all of that: Where is the information coming from? Who is managing that? What happens when something goes wrong? [Organizations] want an executive that is AI-fluent, but it's not really about fluency. Do they understand what happens when it underperforms? It's a marriage of all the functions together.

The leaders need to focus on not just teaching their people how to use the tools but also learning how to change the processes to effectively use the new AI tools. That's very different.

Where is the push toward AI and the need for AI-centered leadership coming from in organizations?

Hoffman: It's definitely being pushed down by the board, because it's everywhere. People use it in their everyday life, and say that if it's in their everyday life, it should be running their business as well. So, the boards are definitely putting that into the need for future talent. The other part is that ever since Covid, supply chain has been a board agenda. In every board meeting, supply chain is on the conversation. Supply chain is where they want AI to come in and do more, like resilience scenarios or what-if scenarios to get to the answer more quickly. That was a challenge in Covid. It was a challenge with a lot of geopolitical issues or big weather events. That's an easy way for the boards to wrap their head around the use of AI.

Are supply chain leaders ready for this kind of change?

Hoffman: No, absolutely not. The challenge for them also is that they're functional leaders; they think about their function. But now, because they have to present to the board, they have to become strategic leaders -- and that's a different skill set. The people who are moving up into those roles have a different functional profile. You used to have to be really good at procurement, logistics and manufacturing. Now you must have financial fluency and AI fluency: What's the investment. What's the governance? What scenarios can we run? It's a totally different skill set, and I don't think people sitting in the seats or even the candidate base are prepared for it. But the next generation is coming up that way.

After Covid, supply chain became a more strategic function in the organization. Has AI accelerated that, and have the more traditional supply chain leaders kept up?

Hoffman: I'm not sure that there's that big of a distinction. [Supply chain leaders] are sitting in the board room now, so they're more at the center of the attention for the board, and that's why AI comes up in the conversation. I shouldn't say they're unprepared -- they're just still getting educated, and the evolution of AI is so rapid that it's impossible to stay ahead of it. It's also understanding what tools are out there, how they can help you, what the good return on investment is and not just constantly going after the shiny objects. You have to be much more strategically aligned to how it can help your organization.

How are the manufacturing and supply chain leaders getting prepared while they still have to perform their job functions?

Hoffman: It's learning on the job. There are tons of consulting firms that are coming out to start pushing AI through, which is not abnormal. When Six Sigma or Lean manufacturing became big, the consultants came in and made that knowledge permeate the rest of the organization. AI is not new in the way it's coming into the process. It's just very fast, and trying to fill that gap will be a challenge for them.

The AI transformation appears to be different from initiatives such as an organization moving from on-premises ERP to cloud. Are the leaders preparing for the issues in an AI transformation that go beyond technical deployment, like change management or complete process changes?

Hoffman: It changes the way you do things, and you have to recognize that AI is not just there to make your job simpler. It does for sure, but it's not there just for that. It's about how to rethink how you're doing it. In some ways, it's similar to ERP implementations. You had to make sure the organization was ready for it or it blows up -- which many of them did. You have to be ready. You have to think about how this process needs to be designed for your people. Do you need fewer people, or do you need different people? Do you need them in different places? Do they have to have different skill sets? It's not just the tool -- it's the whole universe of what's going on around it.

How are organizations doing with the preparation?

Hoffman: Different people and different companies are at different phases. They might be ahead one day, and the next day some new tool comes out, and all of a sudden they're behind. There's no comfort. You never reach comfort level. You have to constantly be questioning, be creative and think differently. It's not asking for IT leaders to run manufacturing, it's asking for the manufacturing leaders to evolve into this. So it's a slow and steady but constant change.

Jim O'Donnell is a news director for TechTarget, where he covers IT strategy and enterprise ESG.