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In Germany, Demand for Engineers Outruns Supply

Posted by hkarner - 28. September 2016

Date: 27-09-2016
Source: The Wall Street Journal

Industrial heartland’s move to embrace cyberspace is hampered by shortage of engineering graduates

Adolf Würth built a thriving business after World War II selling screws, nuts and bolts to local businesses. Today, his Würth GmbH sells digitally monitored supply bins that let customers around Europe restock fasteners automatically.

Würth’s shift is emblematic of a transformation taking place across Germany’s machinery sector, the backbone of its thriving industrial economy. Giants like Robert Bosch GmbH and the legions of small and midsize companies that once only worked with metal today are branching into cyberspace.

But the change is creating a problem for Germany’s formidable machinery firms. Going digital require more specialized engineers, and the demand for their skills is rising so fast that even record numbers of graduates aren’t enough.

“We have problems finding engineers,” said Marcus Frei, chief executive at Frei Robotics GmbH, a producer of advanced machinery for research and industry. “Digitization requires above all software engineers and electrical engineers and Germany definitely lacks them.”

The Federation of German Engineers estimates employers this year will seek 85,200 engineers but find only 73,500 takers. The gap will roughly triple over the next decade, the federation predicts.

Germany is the world’s third-biggest machine manufacturer after China and the U.S. The sector’s 3,200 companies, most of them family-owned, employ roughly one million workers, more than any other industry. Three-fourths of its revenue is from exports, according to the VDMA industry federation.

German universities haven’t trained enough engineers since reunification in 1990. “From 1995 to 2002 sluggish growth discouraged studying engineering,” said Oliver Koppel, economist at the Cologne Institute for Economic Research. The annual number of graduates declined to 30,000 from 50,000 during that period.

skills-shortage-dThe effects are evident today after a decade of economic expansion. Of the 1.7 million engineers working in Germany, over 37% are at least 50 years old. More than 600,000 of them will retire in the next decade, making the current shortage worse over time.

Unlike the so-called Mittelstand, the country’s small and midsize companies that are key suppliers, large German corporations can bank on their reputation to woo talent. For instance, engineering and automotive-parts supplier Robert Bosch employs more than 15,000 software engineers alongside many more in traditional fields who design smart systems for machinery from drills to autonomous cars.

Forklift producer Jungheinrich AG, a familiar name in German industry, now offers equipment, systems and training to run fully automated warehouses, not just the vehicles used in them. CEO Hans-Georg Frey said the new division’s net sales grew 25% last year over 2014, compared with 10% growth for the overall company, and finding engineers hasn’t been difficult.

Big German companies also can find engineers abroad. “We don’t rely on one single pool to hire engineers,” said Gordon Riske, CEO of forklift truck maker Kion Group AG, which operates in the U.S., Asia and Latin America. “It wouldn’t make sense for us just to hire German graduates.”

Smaller firms must get creative. Preccon Robotics GmbH nurtures talent through close ties with local engineering schools. “We’re dependent on the creativity of young engineers,” said marketing and sales manager Hartmut Lindner.

‘German companies are very quickly applying innovations on the factory floor.’ —Rolf Wutzke, Fraunhofer

Complicating the situation for smaller firms is increasing specialization among technical staff. Germany’s industrial might was built largely on mechanical engineers. Their design process tends to move slowly because product requirements are very specific and inflexible, said Joachim Seidelmann, head of the competence center at Fraunhofer Society for the Advancement of Applied Research. Fraunhofer brings together government and corporate funding to help companies develop technological innovations.

“Software is flexible and can be modified after the design to please individual customers,” he said. To bridge the disciplines, engineers must find common ground. “They have to learn how to understand each other.”

Germany’s engineering challenges are a national priority. The government in 2013 launched an initiative called Industrie 4.0 to help companies digitize and reduce their dependence on U.S. technology.

The project boasts some success. According to a study by the Boston Consulting Group, 64% of German manufacturing firms will digitize operations in the next two years, compared with 36% of similar U.S. firms.

“German companies are very quickly applying innovations on the factory floor,” said Rolf Wutzke, a scientist at Fraunhofer.

But while digitizing internal operations can increase productivity, it is only a first step. Companies will need armies of engineers to digitize the products they sell, as Kion has. The firm can track from its headquarters in Wiesbaden how much its customers as far away as China are using their forklifts. Unexpected benefits go beyond offering a new product range, executives say.

“A reduction in our activity could help us predict a recession,” said Mr. Riske.

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