Engineering Services Firms Can Be Valuable Partners
The global engineering services market size is $990 Billion, and the market’s growth is expected to accelerate in the coming years.
Traditionally, Engineering Service Providers (ESP) were categorized as third-party vendors. However, the dynamic changes for product development and manufacturing in the last decade has made them key players in the product development cycle. As manufacturers move beyond tactical outsourcing to developing long-term strategic partnerships, ESPs will be designated as an integral part of the organization’s product development process.
There are many reasons for outsourcing engineering, ranging from cost savings to opportunities to focus on core competencies. Technological challenges, digitization, scarcity of engineering talent also contribute to the decision to outsource.
For example, the outsourcing of engineering services enables manufacturers to add valuable outside assets to the engineering project without including progressing working expenses or keeping new contractors occupied after the project is completed.
Also, the advent of connected products (Internet-of-Things) and cyber security challenges have led to a number of software changes and software management tasks that manufacturers are outsourcing to ESPs with relevant expertise.
Manufacturers must evaluate an organization’s product development process to determine what needs to be outsourced. Development projects vary significantly: the spectrum ranges from completely new development projects through routine product enhancements.
Therefore, in choosing an ESP, manufacturers should ensure the ESPs have expertise in all aspects of product development. These aspects include project management, concept development, design and development as well as system integration, testing and validation, prototyping, production requirements, quality assurance, certification, and production support.
Potential activities to outsource include:
•Research and Development (R & D) and New Product Development
◦New Product Development or Research and Development (R&D) is among the most prevalent outsourced activities. Using outside experts enables organizations to bring their product to the market significantly quicker.
•Reverse Engineering
◦Reverse engineering, the process of analyzing the construction of a product when there are no design documents available from its original production, serves many purposes from improving production efficiency to figuring out how to replicate or enhance a product.
•Engineering Consulting
◦Engineering Consulting can help with activities such as specialized documentation, machining, low volume rapid prototyping, as well as provide valuable input into processes or product strategies.
•Sustaining engineering activities
◦Outsourcing the product’s sustaining engineering responsibility allows in-house teams to focus on new products.
An organization can outsource locally and thereby fast-track interaction in the same country working in the same time zones. Conversely, it could choose to outsource to low-cost countries gaining a cost advantage. However, experience has shown the importance of close physical proximity increases along with the complexity of a project. Therefore, complex activities should be outsourced to organizations easily accessible, increasing the effectiveness of problem-solving and communications.
Some of the significant factors to be considered while selecting an ESP are the domain expertise, previous projects, market value, and quality of service it offers. After a manufacturer selects an ESP for a particular project, the two parties should define how they will work together to ensure a successful end product.
Elements to considers are:
•The contract◦specifications in the contract should be detailed enough to allow it to measure progress toward achieving milestones without the need for follow-up negotiations.
•Project kick-off◦The parties need to define clear, detailed tasks, milestones and deliverables that cover every aspect of the project.
•Managing outsourced engineering work◦The parties should agree on clearly defined project requirements, identify the appropriate project managers in both organizations, ensure IT-system compatibility, and create a process for design-technology convergence. It is ideal when the teams from both organizations have worked together on previous outsourced projects.
Potential cons of outsourcing include Intellectual Property (IP) security. To avoid breach of IP, manufacturers need to mandate a high degree of vigilance.
Manufacturers are likely to continue to increase their outsourcing of engineering services as they seek greater flexibility to meet customer demands.