Tuesday, April 5, 2016

Boeing's Labor Fungibility

Fungible is not a term used for people but for liquid assets sometimes found in an oil pipeline. A barrel of oil found in a New Jersey pipeline is also a barrel of oil found in a company's portfolio for its nation-wide barrels of oil positioned for trading purposes. Has Boeing's workforce become a commodity where 4,000 to 8,000 employees are released from its system as working units in some sort of fungible manner?

Boeing needs to reduce its workforce footprint and still make guidance for its stockholders and achieve lofty goals needed in its airplane ware with Airbus. A 8,000 workforce reduction is a 10% sock in the gut for those whom are loyal to the cause of airplane building. Next workforce unit up in this case. Trimming the fat is a Boeing battle cry, and full steam ahead with less. The President of Boeing did not explain well what all this meant leaving the likes of this blogger with an attempt at better understanding the nature of it all regarding business at hand.

The storm swirls with airplane costs, workforce fat when competing with Airbus pricing in the market place. Long gone are the statements referring “bang for the buck" or "added value". Boeing is just dumping its fungible workforce. Most people don't even know what I'm talking about and that's just fine, but you need to use the word fungible in a sentence today as if you know something when impressing your friends with business school like acumen.

Going a little deeper on this subject requires a further imagination for what is occurring with Boeing in the workforce reduction announcement. It isn't from a thin backlog nor is it from a bad sales year coming up. The real cause for fungible workforce reduction companywide is the buildup problem occurring several years back. A time was occurring where Boeing was not meeting its objectives in a timely manner. It was smarting over the three years late reputation so Boeing hired more people to throw on the fire of progress for its multi-layered programs. Boeing had bit off more than it could chew in anyone program. 

The KC-46 problems are in the cusps of finding whether it will be allowed its first initial production run this year. It has problems too, but not insurmountable by any means it just needs more hours of tinkering. 

·      Boeing is building a building for building an Airplane for which is not ready yet, the 777X.

·      Boeing is building an airplane for which contains an X factor in the single aisle Max realm.

·      Boeing has just started building a perfect 10 machine in Charleston, SC.

·      Boeing has just announced 4,000 people will leave in this perfect industrial storm?

It doesn't pass the smell test of reducing cost for the purpose of competitive pricing against Airbus. Fickle customers who buy aircraft at a clip of $100 million a unit, do look at the price factor. The price factor becomes more fickle if all things are equal in what is purchased. In Boeing's case it claims superiority over the other, but it has to lower its selling price at the expense of furloughing workers.

The answer to all this confusion comes from analogy. In the cruise ship industry seasons affect the critical assets, the cruise ship itself. Boeing is in such a season where its workforce needs repositioning from one ocean to another to capitalize opportunity. Workforce build-ups in one area will reposition to another. Having this flexibility will cost Boeing employees up to 8,000 jobs in the next year while other programs will receive just in time human resources in another part of production cycle, as if it were a fungible matter.  

The prediction forthcoming and concerning lost Boeing manpower: 

"it will need workers sooner rather than later in other projects it even has already started or made the commitment". 

It can make a shift of its "too many workers" in one area where production costs are affecting the market. The downgrade of employee numbers is housekeeping which allows future absorption for the day where a further 8,000 workers are required and repositioned for its various programs. However for the 8,000 today it doesn't pay the rent.