There was optimistic news on Monday indicating that with the help of a federal mediator a tentative agreement has been reached between the Boeing Company and its 27,000 member striking Machinist’s union. A union endorsement vote is scheduled for this upcoming Saturday.  This agreement comes in the eighth  week of work stoppage, and the overall disruption could cost Boeing and its supplier network untold hundreds of millions of dollars.  Union leadership is recommending that striking workers vote to ratify this new four year agreement. 

As we have noted in previous posts, the heart of this labor dispute revolves around wage increase demands, healthcare benefits, as well as Boeing’s ability to outsource work to some of its outside contractors, a key issue for some of Boeing’s supply chain outsourcing strategies. 

In wages and healthcare benefits, the agreement calls for a 15 percent wage increase over four years and a freeze on worker medical costs at 2005 levels.  In job security and outsourcing, a compromise was reached among union negotiators and Boeing which will have to be played out in the coming months. In 2006, Boeing hired 3PL provider New Breed Logistics to manage the delivery of parts to its 787 Dreamliner assembly lines from a distribution facility adjacent to Boeing’s Everett WA plant. The union took objection to this practice.

According to a blog posting by James Wallace on Aerospace, a journalist for the Seattle Post-Intelligencer, as well as a summarized document posted on the web site of the striking Machinists union, Boeing retains the ability to have outside vendors deliver parts to the factory, but once these parts are in the factory, unionized workers will reportedly deliver the parts to specific assembly lines.  Union workers can also bid against sub-contractors for work. The summarized agreement synopsis document issued by union president Tom Wroblewski includes the following statement:

“Except for 787 final assembly, vendors are limited to delivering products to designated areas only.  From there, bargaining union employees will track use, disbursement, acquisition, and/or inventory of parts, materials, tools, kits and other goods and products.”

There is a positive note here since the summarized document also indicates:

{the union will}”Jointly work with the Company to improve material delivery process and ensure our members grow with the new technology and innovations. .. Parties will explore options for retraining or reassigning bargaining unit employees to equal level jobs when employees are impacted by process and technology changes.”

With a backlog of over $275 billion, a supplier network facing its own impacts of disruption, and with a U.S. economy in desperate need of a continued export engine, this tentative agreement is great news.  Production operations have ceased since the strike began, impacting all future deliveries of Boeing aircraft including the already critically delayed 787 Dreamliner program.  Boeing still has an additional hurdle of labor negotiations with its 21,000 union-based engineer and white-collar worker union, but both sides remain optimistic of a timely settlement in order to ramp-up to normal production levels.

I offer congratulations to both sides on their spirit of final compromise, albeit over a rather lengthy time period.  Much work and many challenges remain in order to return Boeing’s supply chain to normal levels of output and delivery. Once again, our byline of supply chain does matter is again reflected at the level of a company’s ability to effect both supply chain outsourcing innovation and work practices.  While its easy for industry observers to play arm-chair quarterback, I really have to wonder why these matters of supply chain outsourcing strategy could not have been ironed-out much earlier. 

We trust that Boeing, its sub-contractors, and its union membership can all mutually benefit from future innovations in supply chain business and technology business practices. Our world economy, our safety and peace of mind are all at stake as we look forward to future flight.

Bob Ferrari