Building the 21st Century Aerospace Workforce

(1)

Research Sponsored Jointly with Labor Aerospace

Research Agenda

Building The 21

st

Century

Aerospace Workforce

May 9, 2001

Growing the

Lean Community

LAI Executive Board Meeting

Presented By:

Joel Cutcher-Gershenfeld, MIT

Steve Sleigh, IAM

and Thomas Kochan, MIT

(2)

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

(3)

Aerospace

Initiative

web.mit.edu/lean

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 21

st

_Century

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Lean

Aerospace

Initiative

U.S. Aerospace Employment

and Sales 1987-2000

300

350

400

450

500

550

600 1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

Employment (thousands)

30

35

40

45

50

55

60

65

70 billions of constant 1999 euros

Total Sales

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Aerospace

Initiative

web.mit.edu/lean

U.S. Engines and Parts Imports as a

Share of Total Aircraft Sales, 1981-2000

4

6

8

10

12

14

16

18

20 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

100

200

300

400

500

600

700 1986

1989

1992

1995

1998

2001

2004

2007

2010

(thousands)

Boeing 2000 Market Outlook base

Teal, constant share, no international

outsourcing

Teal, falling share, with international

outsourcing

Current Trend

Constant Share, no

Outsourcing

Rapid Output Growth

Employment

Change, 2000-10

+146

-109

-262

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Aerospace

Initiative

web.mit.edu/lean

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

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Lean

Aerospace

Initiative

21 st

_{Century Workforce}

Commission

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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Aerospace

Initiative

web.mit.edu/lean

Why Worry About Instability?

Pull

Flow

Stability

T

1

T

2

T

3

T

4

T

5

T

6

T

7

T

8

T

9

T

10

Interdependence

Time

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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

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,

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Aerospace

Initiative

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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

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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

(13)

Aerospace

Initiative

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Facility Survey: Sources of Instability

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Changes in

product demand

Changes in

customer

requirements

Changes in

government

budgets

Mergers/

acquisitions

Changes in

leadership vision

Focus on Four Categories of Instability

Budget and Market Instability

Changes in Product Demand, Changes in Government Budgets,

Changes in

Company Budgets, Changes in Government Acquisition

Technology Instability

Changes in Customer Requirements/Technical Design,

Changes in

Equipment/Technology, Problems from Technical Challenges,

Organizational Instability

Mergers/Acquisitions, Changes in Leadership Vision,

Re-Engineering/Re-Structuring, Voluntary Staff Turnover

Supply-Chain Instability

Changes in Supplier Performance, Problems of Cooperation with Customers/

Partners/Suppliers, Subcontracting of Work, Reducing the Number of

Suppliers

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Lean

Aerospace

Initiative

High Levels of Instability and Facility

Size

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Funding and Market

Instability

Technology Instability

Organizational Instability

Supply Chain Instability

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)

Remedies to Instability Have to Be Sensitive to Facility Size

(15)

Aerospace

Initiative

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Impact of Instability on

Retention of Critical Skills

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% Reporting increased loss of people with critical skills

Funding & Market Instability

Less Technology Instability

More Technology Instability

Less Organizational Instability

More Organizational Instability

Less Supply Chain Instability

More Supply Chain Instability

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Lean

Aerospace

Initiative

Facility Survey: Reported Use of Mitigation

Practices – Five Most Extensively Used Practices

(past 3 yrs)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cross-training

Employee

training/skills devt.

Long-term supplier

agreements

Computer-aided

manufacturing

Increased

employee control

Never

Limited

Extensive

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Lean

Aerospace

Initiative

web.mit.edu/lean

Facility Survey: Reported Use of Mitigation

Practices – Five Least Extensively Used Practices

(past 3 yrs)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Formal

employment

security

Early retirement

Work in from other

facilities

Sending people to

other facilities

Work sharing

Never

Limited

Extensive

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Lean

Aerospace

Initiative

Future Prospects for the U.S.

Aerospace Enterprise

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Engineers

Production Workers

Managers/

Supervisors

Technicians/

Specialists

“I would highly recommend that my children work in this industry”

(Agree or Strongly Agree, n=482)

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Aerospace

Initiative

web.mit.edu/lean

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

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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

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Aerospace

Initiative

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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

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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