Growing the
Lean Community
LAI Executive Board Meeting
Building The 21st Century
Aerospace Workforce
May 9, 2001
Presented By:
Joel Cutcher-Gershenfeld, MIT
Steve Sleigh, IAM
and Thomas Kochan, MIT
Research Sponsored Jointly with Labor Aerospace
Research Agenda
Lean
Aerospace
Initiative
Aim for this Session
Ø Begin with a call to action
Ø Present evidence on the dimensions of an employment
crisis in the Aerospace Industry
Ø Understand the links to issues of instability and lean
Ø Focus dialogue on high leverage, mutual gains
options for all stakeholders in the industry
Ø Identify specific next steps
Ø Under the auspices of LAI
Ø In other forums as appropriate
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Lean
Aerospace
Initiative
A Call to Action
Ø Dimensions of an employment crisis in Aerospace:
Ø Increasing skill shortages
Ø Changing skill mix in a post-cold war era
Ø Reduced investment in training and development
Ø Divisive and immobilizing concerns over job security
Ø Industry has lost over 500,000 jobs since 1990
Ø Demographic “cliff”
Ø Average age of IAM members is 44 in the Commercial Sector and 53 in
Defense – with over 20% eligible to retire in next 3 years
Ø Global competitive dynamics
Ø Projected loss of jobs and revenue due to increased global competition,
as well as complex issues around projected increase in foreign content
Ø Projected job growth in European Aerospace Industry
Ø
Inability to attract and retain a 21st Century
workforce
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Lean
Aerospace
Initiative
U.S. Aerospace Employment
and Sales 1987-2000
600
Total Sales
65
Employment (thousands)
550
60
500
55
450
50
45
400
40
Employment
350
35
300
billions of constant 1999 euros
70
30
1980
1982
1984
1986
1988
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1990
1992
1994
1996
1998
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Lean
Aerospace
Initiative
U.S. Engines and Parts Imports as a
Share of Total Aircraft Sales, 1981-2000
Share of U.S. Aircraft Sales (Percent)
20
18
16
14
12
10
8
6
4
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
Year
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Lean
Aerospace
Initiative
Three Scenarios for U.S.
Aerospace Employment
U.S. Aircraft Employment Forecast, 2000-10
700
Employment
Change, 2000-10
(thousands)
600
Rapid Output Growth
+146
500
Constant Share, no
Outsourcing
400
300
Boeing 2000 Market Outlook base
200
Teal, constant share, no international
outsourcing
Teal, falling share, with international
outsourcing
-109
Current Trend
-262
100
1986
1989
1992
1995
1998
2001
2004
2007
2010
Source: Rob Scott, EPI and LARA
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Lean
Aerospace
Initiative
Assumptions and Ten-Year
Forecast Results
Ø Low Growth Scenario: 262,000 jobs lost
Ø U.S. Share of World Market: -41.5%
Ø Productivity Growth: +34.6%
Ø Falling Demand: -12.4%
Ø Rising Share of Imported Parts and Engines:
+11.5%
•
Key Assumptions and Sources:
•
Teal Group, “World Aircraft Overview, 1999”, World Military & Civil Aircraft Briefing. Charts: “Aircraft Production, Civil and
Military” and “The Big Aircraft Builders”
•
Boeing, “World demand for commercial airplanes,” Current Market Outlook, 2000.
•
All demand forecasts scaled up to equal total Aircraft, Engines and Parts Sales, as reported in Aerospace Industries
Association, 2000 Year-End Review and Forecast.
•
Direct employment losses estimated using the Bureau of Labor Statistics “Employment Requirements Table, 1998.” Two
Source: Rob Scott, EPI and LARA
percent annual productivity growth from 1999 through 2010 assumed in all scenarios.
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21st Century Workforce
Commission
Lean
Aerospace
Initiative
A projected skills gap in the overall
workforce:
“The ability to read, write, and compute
with competence, think analytically, adapt
to change, to work in teams and use
technology”
Source: A Nation of Opportunity. Report of the 21st
Century Workforce Commission, 2000.
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Why Worry About Instability?
Pull
Pull
Interdependence
Lean
Aerospace
Initiative
Flow
Flow
Stability
Stability
T1
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T2
T3
T4
T5
T6
Time
T7
T8
T9
T10
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Lean
Aerospace
Initiative
Highlights From Cases
Ø Types of instability:
Ø Funding/orders
Ø Shift from R&D to
production funds
Ø Fluctuations in demand for
primary product in facility
Ø Technology
Ø Changes in customer
requirements
Ø Shifts in materials
Ø Rapid pace of change in
computer capabilities)
Ø Environmental constraints
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Ø Organizational
Ø Acquisition/layoffs
Ø Mergers/restructuring
Ø Relocation of products
among facilities
Ø Two-tier relationship
between sister facilities
Ø Demographics -retirements/gaps in past
hiring, skill shortages
Ø Turnover -- management,
engineering, and hourly
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Lean
Aerospace
Initiative
Highlights From Cases (cont.)
Ø Observed mitigation strategies:
Ø Business Strategy
Ø Increase proportion of commercial business sought
Ø Shift in product mix to increase focus on space
Ø Human Resource Management/Industrial Relations
Ø Cross-training/flexible utilization/teams
Ø Informal no-layoff practice
Ø Labor-management partnership
Ø Employee involvement
Ø Intensified training of hourly and salaried employees
Ø Co-location of engineers, teams
Ø Two-tier wage system
Ø Multi-facility transfer agreements
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Lean
Aerospace
Initiative
Facility Survey: Survey Response
Rate, Facility and Respondent
Profile
Ø Survey focused on issues of instability,
employment and innovation at the facility level
Ø 198 aerospace facilities
Ø
Responses from Presidents, CEOs, Senior Facility
Managers with an average of over 20 years in the
industry
Ø Survey conducted in Summer/Fall 1999
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Lean
Aerospace
Initiative
Facility Survey: Sources of Instability
Focus on Four Categories of Instability
% of Facilities Selecting Item as Most Significant
100%
Budget and Market Instability
90%
Changes in Product Demand, Changes in Government Budgets, Changes in
Company Budgets, Changes in Government Acquisition
80%
Technology Instability
70%
Changes in Customer Requirements/Technical Design, Changes in
Equipment/Technology, Problems from Technical Challenges,
60%
Organizational Instability
50%
Mergers/Acquisitions, Changes in Leadership Vision, Re-Engineering/ReStructuring, Voluntary Staff Turnover
40%
Supply-Chain Instability
Changes in Supplier Performance, Problems of Cooperation with Customers/
Partners/Suppliers, Subcontracting of Work, Reducing the Number of
Suppliers
30%
20%
10%
0%
Changes in
product demand
Changes in
customer
requirements
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Changes in
government
budgets
Mergers/
acquisitions
Changes in
leadership vision
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Lean
Aerospace
Initiative
High Levels of Instability and Facility
Size
Under 100 employees (n=93)
101-250 employees (n=44)
251-500 employees (n=16)
501-1000 employees (n=11)
Over 1000 employees (n=26)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Funding and Market
Instability
Technology Instability
Organizational Instability
Supply Chain Instability
Remedies
Remedies to
to Instability
Instability Have
Have to
to Be
Be Sensitive
Sensitive to
to Facility
Facility Size
Size
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Lean
Aerospace
Initiative
100%
90%
80%
70%
60%
50%
Impact of Instability on
Retention of Critical Skills
Funding & Market Instability
Funding & Market Instability
Less Technology Instability
More Technology Instability
Less Organizational Instability
More Organizational Instability
Less Supply Chain Instability
More Supply Chain Instability
40%
30%
20%
10%
0%
% Reporting increased loss of people with critical skills
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Lean
Aerospace
Initiative
Facility Survey: Reported Use of Mitigation
Practices – Five Most Extensively Used Practices
(past 3 yrs)
100%
Never
90%
Limited
Extensive
80%
70%
60%
50%
40%
30%
20%
10%
0%
Cross-training
Employee
Long-term supplier
training/skills devt.
agreements
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Computer-aided
manufacturing
Increased
employee control
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Lean
Aerospace
Initiative
Facility Survey: Reported Use of Mitigation
Practices – Five Least Extensively Used Practices
(past 3 yrs)
100%
Never
Limited
Extensive
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Formal
employment
security
Early retirement
Work in from other
facilities
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Sending people to
other facilities
Work sharing
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Lean
Aerospace
Initiative
Future Prospects for the U.S.
Aerospace Enterprise
“I would highly recommend that my children work in this industry”
(Agree or Strongly Agree, n=482)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Engineers
Production Workers
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Managers/
Supervisors
Technicians/
Specialists
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Lean
Aerospace
Initiative
Conclusions
Ø Attraction & retention of skilled workforce is a
crucial challenge
Ø Existing remedies do not seem to be working
Ø Labor markets and product markets are
interdependent
Ø Therefore—
Ø
Need action to select and implement a
coordinated set of remedies
Ø Industrial actions
Ø National policies
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Lean
Aerospace
Initiative
Potential Elements of an Action
Agenda
Ø Several possible industry-wide initiatives:
Ø Aerospace industry skill/capability requirements
Ø Effective enterprise knowledge management systems
Ø Aerospace industry apprenticeship/training systems
Ø Regional workforce sharing
Ø Training and curriculum initiatives
Ø Government as an employer
Ø Next generation aerospace industry workforce
Ø Implications of increasing globalization in the industry
Ø Government policies play a role
Ø
For example: Clear and explicit consideration of
workforce/skills implications in acquisition processes
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Lean
Aerospace
Initiative
Institutional Approaches
Ø Entities to define and enable industry remedies and
Government policy:
Ø Special internal group jointly sponsored by LAI and LARA
Ø Initiative adjunct to LAI
Ø LARA is a prototype
Ø Independent tri-partite initiative
Ø Sub-group within AIAA or other professional associations
Ø Sub-group within AIA or other industry association
Ø A cross-industry, cross-institutional cooperative group
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Lean
Aerospace
Initiative
Next Steps
Ø Recommendation
Ø Establish a special Executive Board subcommittee on
the 21st Century Aerospace Workforce
Ø Subcommittee charter
Ø Prioritize remedial actions
Ø Recommend practical implementation actions
Ø With appropriate institutional arrangements
Ø Provide ongoing executive leadership and guidance
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