In an interesting turn, two industry giants have both recently announced a departure from their old ways. In announcing their news, both Boeing and Apple said the changes will improve their supply chain balance.
First, Boeing announced it’s establishing new centers for engineering design, propulsion, and out-of-production airplane support for Commercial Airplanes as it continues to lay the foundation to increase competitiveness and profitable growth in its second century. The company, which marks its 100-year anniversary in 2016, will establish engineering design centers in Washington state, South Carolina, and Southern California. These centers will operate independently but cooperatively with one another and with the existing Commercial Airplanes engineering design center in Moscow, Russia.
The new Southern California engineering design center will now be home to engineering support for out-of-production airplanes. Boeing’s Southern California engineering team in Long Beach is already the center for support to heritage McDonnell Douglas airplanes.
“We will leverage the new Southern California design center to create a single location for out-of-production airplane support, enabling us to streamline processes and develop common practices,” says Lynne Thompson, vice president of Boeing Customer Support.
Creating the new centers helps Boeing be more competitive by building on its talent and capability—across Boeing, the U.S., and around the world, says Mike Delaney, Boeing Commercial Airplanes vice president of Engineering. With these changes, Boeing is structuring its engineering operations to support growth, reduce business risks, and consistently provide the products and services its customers expect, he explains.
Those changes have been some time in the making. The Seatle Times reports that in an internal note to employees, Delaney explained that company leaders began mapping out a strategy three years ago that calls for Boeing to become a larger, more globally competitive company with expanded production capacity and a more geographically diverse manufacturing and engineering footprint. The memo further explained that in addition to using Boeing engineering capability more strategically across the company and providing greater geographic distribution of work within Boeing, the centers will also enhance Boeing’s ability to attract, develop, and retain a talented engineering workforce by opening career paths in multiple locations.
The other company making a significant change is Apple. For years, nearly all of its iPhones and iPads were produced by Foxconn. However, as The Wall Street Journal and others have reported, Apple will begin using a second key supplier as well to deliver greater supply-chain balance. That company, Pegatron—which was a minor producer of iPhones in 2011 and later began making iPad Mini tablet computers—will be the primary assembler of a low-cost iPhone expected to be offered later this year
People familiar with the matter point to strategic reasons for the shift: risk diversification after Foxconn’s manufacturing glitches last year with the iPhone 5 that resulted in scratches on the metal casings, as well as Apple’s decision to expand its product lines amid growing competition from Samsung Electronics Co. and others, the Wall Street Journal reports. It also doesn’t hurt that some analysts note that Pegatron has been willing to accept thinner profits as it courts Apple’s business.
Foxconn, continuing to grow as the world’s largest electronics contract company, was also getting more difficult for Apple to control, with incidents such as changing component sourcing without notifying Apple, the Wall Street Journal article reports. At the same time, Foxconn became frustrated with the growing complexity of Apple products, such as the iPhone 5, which is difficult to make in the volumes Apple needed.
What about your company? Are there any plans underway to change any key strategies?