8 Reasons Component Design Outsourcing Works Better Than You Expected
During the past decade, we have seen the rapid growth of Design Outsourcing as a key operational driver for cost savings, productivity increases, and competitive differentiation. Design Outsourcing – the process of engaging with a third-party to deliver a system, sub-system or component design, or a set of engineering services (such as drafting or analysis) – is used to achieve a diverse set of tactical and strategic business objectives, including:
- Focusing on Core Activities
- Increased Revenue
- Reduced Time-to-Market
- Organizational Transformation
- Information Duplication is Eliminated
- Error Reduction
- Project Standardization is Enabled
- Sharing of Data is Streamlined
There are several reasons for outsourcing engineering design. Outsourcing lets companies take advantage of lower costs, increased flexibility, and allows the company to focus on their core areas to get their products to the market better, faster, and sometimes (if not always) cheaper. The choice to outsource is not an easy one and cost is often not the major driving factor or selection criteria. Instead, the decision to outsource is much more complicated and is driven by a number of varied factors.
The most commonly assumed reason for outsourcing is of course cost, but the reality is that cost is not the biggest factor or advantage of outsourcing. One of the biggest advantages to outsourcing is the subjective availability of the right skill sets. Another key factor is flexible arrangements which just aren’t feasible with employees. Often product development efforts require specialized skills in certain areas that are only needed for a short time and are often not found (or available) in the local area. This is a primary factor for many product development and engineering projects. Finding the person or company with the right skill set and availability is a big challenge.
One of the other primary reasons for outsourcing is for the company to be able to focus on their core activities where they really add value for their customers. For example, many companies outsource activities like accounting, payroll, and janitorial services. Unless those services are the main focus of your business, and what your customers pay you for, outsourcing these tasks frees up valuable company resources that can focus on the most important tasks. In some cases, paying more for outsourced labor can make a lot of financial sense if the HR, benefits, training, and other administrative costs can be avoided or the outsourced services become a variable cost that can be added to the cost of the services, essentially passing the full cost of outsourcing on to the customer. As you evaluate your choices and decisions in outsourcing, you will need to consider the advantages of outsourcing. When done for the right reasons, outsourcing will actually help your company grow and save money. There are other advantages of outsourcing that go beyond money, as I outlined above. But let’s go into more detail:
1. Focusing on Core Activities
During rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.
Example: A company lands a large contract that will significantly increase the volume of purchasing in a very short period of time. Outsourcing purchasing may be the only solution.
2. Increased Revenue
Back-office functions that are complicated in nature, but the size of your company prevents you from performing it at a consistent and reasonable cost, is another advantage of outsourcing.
Example: A small doctor’s office that wants to accept a variety of insurance plans. One part-time person could not keep up with all the different providers and rules. Outsource to a firm specializing in medical billing.
3. Reduced Time-to-Market
Component outsourcing companies typically have designers that work in different time zones. Rush jobs can be done, in some cases, overnight, reducing time-to-market concerns.
Example: Your largest volume customer needs a quote for a multi-family complex that has had the current bidder dismissed from the project. Outsource design companies can get your quote and your in-house designers are not overwhelmed or working overtime.
4. Organizational Transformation
Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available. The fixed costs will already be known before the project is outsourced.
Example: Your company is in a cold weather area and you typically increase staff as the snow melts. A contracted outsourcing agreement will allow management to maintain year round staffing levels and bring continuity to that area during the busy times. The outsourced staff may or may not be used during the winter.
5. Information Duplication is Eliminated
Outsourcing will dispose of the need for duplication of files related to a project. Outsource companies typically operate in the “cloud”, with one location for file storage that can be accessed by anyone at any time.
Example: An architect makes changes to the plans. He can upload them directly to the cloud site thus eliminating the need for re-printing, shifting that burden to the outsource company.
6. Error Reduction
Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.
Example: The design manager has just requested extended medical leave and the two newly hired designers can’t comprehend his load case notes on a project and components are produced that don’t meet the specified criteria. Had the project been outsourced in the beginning, those notes would not have been necessary and errors not made.
7. Project Standardization is Enabled
Outsourcing companies typically request design criteria standards from their clients which are then relayed to their designers. Your staff can work with them to answer their questions. The outsource company can then assign any designer on their staff to work on any project, no matter the source. In addition, by utilizing this criteria with your own team, you will increase uniformity, thus adding points to your bottom line.
Example: A company needs to embark on a replacement project on a partially hurricane damaged roof system that was delivered years ago. Your designers are swamped and cannot meet the deadlines required. An outsource company, with design standards in hand, can duplicate the old designs exactly and on time.
8. Sharing of Data is Streamlined
A typical project begins with a set of plans drawn by an architect or engineer for an investor or realtor. Depending on the size of the project, those plans are distributed to contractors to bid on the project. The contractors send the plans to their sub-contractors for bids of the various components of the project. This process takes days, sometimes weeks, to accumulate all the bids and send a total to the originator.
Example: An outsource component design company is a one stop deal, having the ability to bid on all aspects of the project. Lumber, trusses, wall panels, EWP, masonry, insulation, doors, windows, etc., all from one source, saving time and money with their services offered. Less chance of omissions are also another benefit.
Outsource component design companies work as efficiently as they do, because they have the people with the skill set required for any project, big or small. Cloud services are standard, on-time project completion is a must, errors reduced through standardization of criteria, changes made quickly, lowered overhead, etc. You’ll have to agree with me that these companies are better than you thought in more ways than you can count.
I trust this has painted a clearer picture of a unique field. So what are you waiting for? Give it a try and allow yourself to reap the benefits.
Richard Gould – Design Administration
Gould Design, Inc.