The Nineties saw a strategic move towards manufacturing outsourcing. Historically, product companies created most processes in-house, such as printed circuit board fabrication, board assembly, CNC machining, coating, cable harness design etc., all under one roof. Within a decade, a sophisticated supply chain emerged where each provider had their own niche expertise and propriety technologies.
A similar trend in Engineering Service Outsourcing (ESO) was slower to emerge. Many original equipment manufacturing companies regarded their internal development teams as guardians of intellectual property and owners of their roadmap strategy and the notion of outsourcing was defensively resisted, sometimes at all costs! Business pressure has grown from a few different directions: a need to increase profitability by reducing the overhead of development cost, the importance of accelerating product development lifecycles, accessing new technology and finding experts who can actually design products that can be manufactured!
A move to offshore outsourcing has become increasingly popular, especially in the climate of corporate globalisation. Larger companies set up whole design offices offshore, particularly in Asia and Eastern Europe, where there is plenty of competition, experience and technical knowledge. However, many companies have struggled with remote communications, time zone challenges and a lack of personalised customer focus.
Companies also outsource to local external engineering agencies and support typically comes from one of two sources: contractors and design services firms. Contractors are a cost effective and flexible solution to expanding engineering capability, but there is an overhead recruiting and managing them, including making sure they have the tools and equipment to do their job. The contractor can be a strange beast – often highly experienced in a particular field but rarely accountable to deliver against fixed milestones and quite possibly not trained on company processes, which requires endless management supervision to ensure they are always adding value and documenting their project progress.
Established design services companies are more self-managing and do have a set of processes they follow. Engagements are defined in contracts meaning they are more accountable to deliver against either fixed cost or time and material work packages. This can come at considerable cost, as the larger outsourcing firms often have significant business overheads (such as expensive facilities, unbillable employees and corporate functions) and customers can often find themselves paying outsourcing firms two or three times the price of a contractor for work packages that are resourced by comparatively inexperienced engineers as the more experienced team members are debugging projects for the biggest accounts.
A smaller bespoke outsourcing company seeks to provide a compromise between these two outsourcing choices. With lower overheads they can be much more cost effective. They may have a smaller engineering team, but do have the skill and experience to pull together a group of associates around a specific project. The overall outsourcing cost for the customer can be comparable to hiring contractors, but avoids recruitment and internal management costs: the customer can also be confident that there is greater accountability compared with a contractor solution. A well assembled team of associates will have all the experience needed for the scope of work and follow a practical process to ensure the smooth transition of concept into manufacture.
Whatever outsourcing route a customer takes, there are a few things to get right in any outsourced piece of work:
- Clearly define the scope of work. Capture all the project responsibilities and assumptions and make sure these are mutually agreed and understood by both parties
- Find an outsourcing partner that wants to communicate openly and freely with you. Having someone within the same timezone obviously helps, as the occasional face-to-face meeting works wonders for building a true partnership. Also, timely communications will help speed up projects
- Make sure the outsourcing partner has the experience, knowledge and capabilities to execute the work package that has been defined. Ideally the process is overseen by somebody who is technically savvy and commercially experienced following an audited quality management system process
- Understand how they manage their business. How do they ensure customer focus, what is their approach when projects become challenged – R&D is a non-deterministic process and an experienced outsourcing partner should have plenty of experience in recovering difficult projects
Hot Solder is a consultancy-based outsourcing partner located in the UK and focused on product realisation projects from concept all the way through to product launch.