Is It The Shaft Or A Shift?

Most of us who work in manufacturing are reeling from the fourth quarter news about the latest spate of corporate downsizing. Disturbingly large layoffs at Boeing and others beg questions about what's going on. It's particularly disconcerting news because national economic indicators tell us that unemployment is low, interest rates are low and inflation is almost flat—the numbers continue to look good. So why are some of our blue-chip companies apparently stumbling against the current of a good economy? Are these adjustments a reaction to overseas tribulations, or might they represent a change in how some large companies approach their manufacturing?

Obviously, the economic problems in the Pacific rim are impacting companies that do business there. When a significant market dries up, there are consequences. Moreover, it is a possibility that some of this workforce contraction also results from a basic shift in how some large U.S. companies plan to manufacture in the future. The article, "Not Your Typical Job Shop," discusses one shop's perspective and reaction to what it sees as a shift in manufacturing, especially in some of the large companies it does business with.

What's happening for the featured shop is that larger companies are farming out more and more of their manufacturing to suppliers. By changing the fixed cost of in-house manufacturing into a variable cost of purchased services, companies can be more flexible in reaction to market vagaries. Farming out non-proprietary parts and components that can be more efficiently made by other manufacturers, such as job shops, appears to be a trend. This trend may be at least a factor behind some of the downsizing announcements.

Good news for those people impacted by the downsizing is the existence of an acute shortage of qualified manufacturing personnel in small and medium shops. Finding good people is close to the top of almost every shop owner's wish list. If the trend away from in-house manufacturing in favor of vendor supplied parts and components is true and continues to proliferate, it is possible that many of the pink-slipped workers from bigger companies may find new homes in smaller supplier companies. It's certainly worth looking into.

It just seems logical that if one segment of manufacturing has an oversupply of people and another has high demand, then perhaps industry is indeed experiencing more of a transition than contraction.