The importance of Outsourcing Product Design (OPD) and the inherent challenges in entering an emerging market continue to be discussed in multiple forums. Given the overwhelming benefits of OPD, engineering managers and business owners have come to firmly believe that outsourcing is the strategy for addressing some key business challenges.
However, not many organizations have taken the next steps to develop the substantial benefits of OPD. Research has made it clear that most organizations have not had successful outsourcing engagements in the past.
This is evident from the article titled “What causes outsourcing failures?” This article details nine principal causes of failure that are common across outsourcing. Upon closer analysis, it is evident that these apply to OPD as well.
With over a decade of experience and expertise in handling product design projects coupled with a robust six-step OPD engagement process, we have demonstrated proven success to our customers.
Our six-step OPD engagement process successfully addresses these nine causes of possible failure as explained below. Though this may sound obvious, but to ensure success, both the outsourcing organization and the OPD partner need to spend substantial quality time and energy during both the pre and post engagement stages.
What to Outsource?
Firstly, the outsourcing company should understand what part of their product design process can be outsourced. To decide this, the company should ideally complete an internal engineering assessment based on the product diversification strategy adopted for the entry into the emerging market.
Defining your Work
A well-defined Statement of Work (SoW) or Requirement for Proposal (RFP) can reduce and eliminate many issues that crop up in an outsourcing engagement.
After deciding the project scope, the next step is to create a requirements document involving all the relevant project stakeholders.
Discuss this requirements document in the light of the outsourcing partner’s proposal document. Does it match one-to-one? Does the proposal explain clearly the project scope, key deliverables, schedule, resource skills, training requirements, roles and responsibilities, and cost terms adequately without any ambiguity?
At this juncture, both the companies should be aligned with respect to the project and commercial terms
This step is critical to eliminate the risk of possible project failure. Take the time to check the following:
- Did you define what the outsourcing company should do?
- Do they have the capabilities outlined in the proposal?
- Do they have the resources and experience as claimed?
This due diligence enables you to check if the scope of engagement needs to be further refined or the decision to continue with the partner needs to be re-visited.
This phase is for both companies to contractually agree upon other essential obligations such as:
- Who will own the patent for the product designed by the outsourced partner?
- How will the outsourced partner protect my (outsourcing company’s) intellectual property rights (IPR)?
- How do I handle product design concepts that are shared or leaked to my competitors?
- What is the accountability at the partner end if there is a deadline slippage leading to product launch delay?
The outcome is a contractual agreement with a list of Service Level Agreements (SLA) with legal bindings including penalty clause, force majeure, non-disclosure agreements, patent violation acts. This will enable you to safeguard your company rights.
Now that the ball is rolling, build project team counterparts at both the ends. Involve top management (project sponsors), project leads and a project governance document comprising project execution process, project / knowledge transition escalation matrix, documentation, configuration management, audit schedule, and contact information.
This step ensures the engagement is intact and limits possible communication gaps.
Managing and Reporting
The final step is the value realization step for the outsourcing company.
- How rewarding has this engagement for their company?
- How much value addition has this partner relationship done for me?
- Can I measure value against reduced product lead time, optimum project costs, repeatability in quality, reduced project management time?
- Does the partner have creative product design ideas as against the competition? Typically, the partner will be working in house to come up with this data
The writer is handling the business operations for the European Market and provides engineering and design consultancy for the countries strategizing to enter emerging markets like India. You can reach him at email@example.com or the below contact number for any queries.
About Barry-Wehmiller International Resources
Barry-Wehmiller International Resources (BWIR) is a global provider of business and technology solutions to the mid-market manufacturing domain. With headquarters in St. Louis, MO., and global delivery operations strategically located to meet customer needs throughout the U.S., Europe, Southeast Asia and South America, BWIR offers world-class engineering services and enterprise consulting solutions that enable its clients to achieve a competitive edge in their marketplace.
Head Business Development –Europe
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