How Much Should Truss Design Outsourcing Cost? Part 2
In part one of this series; I touched on some general points to consider about component design outsourcing. In this article, I will get a little more specific and pose some questions for you to ponder. The topic: How much should truss design outsourcing cost?
As mentioned in part 1, there are multiple factors to consider. Let’s assume for the sake of argument that there are more factors no one has even considered. Perhaps management is not even aware of them. How much should the cost be? Is it a fixed cost? Or a variable cost?
In my experience, most of the companies I have dealt with are looking to pay somewhere around what they are paying their employees. Makes sense, right? Well it should! However, have we considered all the variables?
Salary vs. “Piecework”
How do you measure output? Do you know what the design value is of each individual job? My guess is you don’t, or probably don’t even know where to begin. With a salaried employee, they are collecting a paycheck for just for being on the job. This applies whether they are playing on Facebook or playing with wall girders. There is little to no control over the amount any given job could cost you to get designed. With piecework, you have the exact opposite. You are paying a set amount, based on the amount of product that is designed. You have an exact cost applied to each specific truss profile that can be pinpointed with an extremely low variable. You can even estimate the cost ahead of time that you would expect to pay, because you know the amount of material in the project from your quote calculation.
How much should a designer be able to produce? There is no “blanket” answer to this question, as each company has a varying set of requirements. In addition, every designer has a different output potential. A good productivity target number is between $1.5-2 million worth of sold product, for each designer on staff. In other words, if you have 10 designers, your company should be selling between $15-20 million worth of trusses per year. I have seen some companies with as little as $600k per year, and others exceeding $3 million per designer. Funny thing is; they were both making nearly the same amount of salary! How is this fair to the designer or the company employing them?
Is your designer producing new product all day? Or are they answering phone calls, educating shop or sales staff or hanging around the water cooler? Distractions in these areas and many others (there are too many to list) can cost companies hundreds of thousands, even millions in lost profit. Without a handle on the distraction factor, it is impossible to measure the salary or productivity mentioned above. Since the designer is making one of the top salaries the company is paying, shouldn’t we do everything we can to limit or remove their distractions?
At the end of the day, you need to be able to pinpoint these and many other factors that are directly responsible for your bottom line. Using an outsourcing firm, all of these variables are eliminated. You have an exact cost relevant to the work performed and designers banging out truss profiles all day. Since you are paying a set cost, the fluctuations are relevant to the project, NOT the designer’s skill and efficiency level.
In my experience working as an efficiency consultation expert, a majority of component manufacturing companies do not have a solid figure that they can give as to what each individual designer’s output numbers are. How can this be? Why are you paying your (potentially) most expensive employee in a way that you cannot measure? How can you accurately price your projects? How do you know what you expect to profit from each job?
In part 3 of this series I will go even more in-depth about specific cost factors. This article should allow awareness of some of the things that are rarely considered when trying to make an “apples to apples” cost comparison of employee vs. outsourcing. The intent of a quality outsourcing firm should NOT be to replace your employee, but to compliment them and allow your company more output.
Remember: Not every designer is capable of the producing the same amount. Be sure that you have ample measurement systems in place to measure output. Make sure that you designers are spending their time designing…and not doing tasks that others in the office could.
To read part 1 in this series, click here.
Stay tuned for part 3 in this series.
Christopher Gould – President
Gould Design, Inc.