Dive Brief:
- Defense contractor and technology company Leidos aims to gain more control of its supply chain by moving some of its manufacturing operations internally, according to a Q4 earnings call.
- The company plans to bring some of its contract manufacturing for lower level parts and final assembly of some pieces of equipment in-house, CEO Roger Krone told investors.
- “With the Dynetics organization and the expertise we now have, we’re very comfortable with doing more of those operations internally,” Krone said. Leidos’ Dynetics division includes technology for hypersonics, defense, and other security and critical infrastructure needs.
Dive Insight:
Although Leidos cited reduced material purchases for Dynetics in Q2 2022, CFO Chris Cage told investors last August that supply chain bottlenecks were not a “big issue.”
Cage noted the company was “still not out of the woods” when it came to procuring certain component parts for various parts of its Dynetics business, but it hadn’t significantly impacted its Q2.
Still, the company now plans to bring some of its security product supply chain in-house to help cut costs, Cage told investors this quarter.
“That’s been part of our strategy, and we are having the conversations about a manufacturing Center of Excellence which I think really is a great part of the evolution of the company,” Krone said. “So we can look at, if you will, larger manufacturing like the provision system … and be very confident that we can build that well in-house.”
During the pandemic, contract manufacturing enabled businesses to grow inventory and reduce supply chain risks. As shipping rates and demand continue to normalize, Leidos is among a growing number of companies looking to curb costs by moving some production in-house.
Oatly is one of the many companies who relied on contract manufacturers throughout 2021 to meet demand, before announcing plans to grow its own global manufacturing footprint.
