Spreading out engineering operations to minimize risk is one thing, but having them compete with one another for projects is something more.
According to this Reuters report, Boeing's new design centers (set up around the US) will compete with each other for projects, with a focus on how good they are at supplying skills at the lowest cost.
Boeing announced recently that it was establishing new centers in Washington, South Carolina, and Southern California for engineering design, propulsion, and out-of-production airplane support for its Commercial Airplanes business.
The new centers will add internal capability and capacity in both engineering and propulsion, aimed at meeting “unprecedented demand for commercial airplanes and services,” Boeing's news release said. The company is forecasting strong growth in commercial aviation over the next 20 years, with a market for 34,000 new airplanes estimated at $4.5 trillion. The services market is estimated at $2.4 trillion.
The Southern California site will consolidate all engineering support for out-of-production commercial planes, such as the 727 and 757, while the South Carolina engineering center will handle propulsion features of new jetliners.
“Our opportunity for future growth is unprecedented and this helps us be more competitive by building on our team's talent and capability — across Boeing, the United States, and around the world,” Mike Delaney, Boeing Commercial Airplanes vice president of Engineering, said in the statement. “With these changes, we are structuring Boeing's engineering operations to support that growth, reduce business risks, and to consistently provide the products and services our customers expect.”
It's all well and good to mitigate risks and build talent capacity in different regions, but there seems to be another side to the story that's not included in the press kit. What's this about each center competing for work?
As the Reuters report (which was posted on Crains' Chicago Business) points out, about 300 jobs will move from the Seattle area in about six to nine months. Reuters reports, quoting company spokesman Doug Alder, “Everything is on the table. It's up for grabs for any of these centers to compete for the work that's coming down the road.”
Forbes's Contributor Loren Thompson has an interesting take on this, and speculates that the latest engineering moves — which follow similar production strategy shifts — has more to do with union and non-union labor contract pricing and political lobbying to spread employment around the US.
I can buy into the risk-mitigation portion of this. It's not a bad idea to have pockets of people working in different places, especially as a plan to curb risks associated with natural disasters.
But from an industry perspective, making design centers compete against each other on a cost basis seems to go against the grain of the supply chain's current mantra about fostering collaboration and breaking down internal silos.
As many professionals on the procurement and supply chain side have seen, running with a “lowest cost” model — as opposed to a “total cost” model — doesn't always prove to have the greatest longer-term costs benefits.