Outsourcing stage 3 - Design Tasks 10

[KENAT]

I nearly posted this over in -Engineering Project Management but I’m not sure how much traffic that forum gets so I’ll post it here.

The outsourcing whirlwind is picking up momentum, first it was machining to Asia (which supposedly is saving bug $, though I’m not sure if those are real $ or projected) then drawing checking thread1103-216008 (hasn’t really worked out, yet) now it’s design.

We’ve actually already outsourced some design to companies with specific expertise in specialist areas (not that it went smoothly) but now it looks like they’re looking to do it for some not so specialist tasks.

I’ve been involved with outsourcing engineering tasks on both sides of the fence at a previous employer, though not really on sending out actual design tasks.

My first thoughts are that you need to robustly define the Requirement, not just technical/performance but things like drawing/CAD standards, what software they’ll use etc and project/financial/contract issues, explicit list of deliverables etc.

Second is that you need to actively manage the process, with status tracking, design reviews and the like, not just ship it out and forget about it until it’s due. This probably needs to be by more or less dedicated staff (though they may have more than one project to manage) not a design engineer doing it on the side or even a high level project manager doing it alongside significant management of internal work.

Third is that you need to examine/inspect what you receive to make sure you’re getting what you asked for/specified, this doesn’t just mean a cursory glance by someone not really qualified but quite likely a multi disciplinary design review and/or a detail review by relevant experts as required.

We currently fail to do this well for many internal projects and I’m concerned we’d be worse with outsourcing.

I’m not completely ruling out outsourcing, areas I’ve seen it work is out sourcing to ‘experts’ or for very large organizations outsourcing non-core tasks to smaller nimbler firms. However, these large organizations took the management of these efforts seriously and devoted resource to it. Also we are relatively small (mid sized company but with multiple sites/product lines each semi independent) so you’d hope we’re flexible enough where eliminating the overhead etc doesn’t compensate for the extra management required.

My manager has asked me to give some input on this, so that means you get a chance to have your say too;-) and make me look better (hence Improve Myself to Get Ahead in My Work). Any input appreciated did I miss anything or put anything that’s nonsense. I did a quick search but didn’t find as much as I expected to.

If places like Boeing manage to get it wrong on their premier project, what chance do we stand;-)


KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[IRstuff]

Sure, I suspect that was the case.

Nonetheless, outsourcing has the connotation of a pejorative, even though everyone does it, even when they aren't aware of doing it.


TTFN

FAQ731-376

 

[KENAT]

I've played some Rugby too. I gave 100% regardless of if I thought we'd win or lose (except that one time it turned out I had concussion, not that that's an excuse). We actually won some games I didn't think we stood a chance, one memorable example was against a local rival that we hadn't beaten since before most of our team was born. If they go ahead with this I’ll do all I can to make it work.

I don't think I ever claimed there was a fundamental across the board problem with outsourcing that meant it was universally a bad thing, to do so would be ridiculous. I think I also pointed out in my OP the 2 areas/cases I've seen it work relatively well.

My concern is the reality of what my employer can/is likely to do and the way they seem to be looking at the outsourcing.

I don’t’ believe my employer has the project management type skills in house. In the current climate/environment I’m doubtful they’d hire someone(s).

From the way they acted on the outsourcing of drawing checking I have no reason to believe they’d make the outsourcing of design work.

I just had a great example, our Director just sent out a message reminding everyone that our statement of requirements type documents should not just be a summary power point presentation but should be a detailed written document – no $hit $herlock!

Well I think most of you have backed up my basic ideas and fleshed them out some.

I actually think my manager is a bit too negative on this one, however I will use your input to emphasize the effort taken to make it work. As MikeHalloran above said though, if I’m remotely optimistic in anything I say that’s what they’ll grab onto as that’s what they want to hear, all my cautions etc will be thrown to the wind.

Irstuff,could you clarify what you meant by “Minimize the motherhood requirements”, I assume you meant make sure everything’s in the requirement/SOW so they don’t have to keep asking questions/you don’t keep having to guide them.

Thanks all.


KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[cksh]

At my current employer we outsource a lot of our design work since we have divisions overseas. I am more of a product manager so I have to request help from these divisions since our domestic designers are always overloaded. I will try to give you some examples of things that go wrong.

1st is the lack of xp. They not only lack any kind of engineering xp, but life xp as well. The first part comes with training and time (most of these guys are early 20's and fresh out of school) However, alot of these engineers know abosulutely nothing about cars let alone the product they are working on. As Automotive engineers it does make it easier if you have at least cracked the hood of a car to look underneath. Some of our engineers have never owned one. So this is a big hurdle. We bring a lot of engineers back here to train for 6 months to a year. That seems to help. I guess what I am getting at is a little general engineering knowledge or hands on know-how is nice.

Standards are another biggy. Although this seems to be a bigger issue with China then it does other countries we work with.

Job Hopping. Apparently we have issues with engineers we train either leaving for better pay, or getting promoted. Either way they become useless to our department because the knowledge goes with them. Everytime someone creates a drawing for me it is someone new I have never worked with.

I guess what it all comes down to is I have to check to make sure they have everything exactly the way I want it. All my parts are modeled correctly, drawing are up to par, and my stacks are done correctly (yes I don't even have time to do those!) Communication is key. Outsourcing can be good for a company (not so much my job) if done correctly. Don't know how many late night calls we have.

Ans these are divisions we own. Not some compnay we hired. I feel for someone who has to throw a dart and hope they get a reputable company to work with.

 

[Helicopterjunky]

By the time you do all the detailed drawings, specifications and requirements and then have to recheck everything against them once you receive product back you will have done 95% of it yourself. The risks to your company are very high, just so they don't have to be bothered watching the last 5%! What is the big advantage?

If you were going overseas to tap into huge labor disparities it would be one thing, but to go 4 hours down the road to save a couple of bucks just does not make sense. Unless your management is using this as a test case. "Look at the great product we got over at XYZ". "Let's farm the next one out to kid yourself company in Sudan". "We'll realy save some money there". Does your management get their bonus based on what they invent as savings? These appear to be first steps taken to get rid of their own employees. This may be their cost savings. You have heard the old sayings... don't apprecaite what you already have..the grass is always greener on the other side of fence...familiarity breeds contempt. Obviously, your management does not understand the importance of value added and sadly like most companies today the importance of being able to make things.

 

[KENAT]

Well helicopterjunky, I wouldn't doubt for one minute part of it is reducing our head count, or at least having more perceived flexibility in staffing up or down as required, by having some work done externally.

Engineering Director is taking a trip to the VPs fave outsourcer next week. Any suggestions on questions he should ask them are welcome.

My direct boss is giving him a copy of the vendor survery operations/manufacturing use so that will cover a lot of the T & Cs and stability of the company etc.

I'm thinking extra things like:

Do you work to/are you familiar with relevant industry standards and evidence of this. I was initially concentrating on drawing standards like ASME Y14.5M-1994 & 14.100 but there may be others from the electronics & 'compliance' point of view.

What CAD system(s)/versions do you use and specifically do/can they work in our primary system.

Do you have staff trained/expert in tolerancing especially GD&T (again 14.5). Ideally someone with GDTP or GDTPS.

What procedures do you have for ensuring quality of drawing packs - drawing checking etc.

Do you have Design For Manufacture & Assembly expertise? Especially as it relates to the relatively low production rates we typically have.

Do they have experience creating work/assembly instructions for any 'complex' assemblies.

Are they willing to work with our templates/formats.

How would they propose integrating their design with our database, for instance we have CAD models for a lot of hardware and wouldn't want to duplicate them if possibl but probably don't have the time or staff to spend a lot of time managing this from our side.

We also have a 'smart' part/drawing numbering system, are they willing to work with this.

Are they willing to work with our ERP system, at least as finding already assigned part numbers etc.

Are they willing to work with our processes for requesting new part numbers.

Are they willing to work to our ECO system as required, especially the wonderfully long spreadsheet that goes with it now.

(Yes these latter also have aspects we need to answer)

It seems like the above has a rather narrow focus, any suggestions on areas not covered? Of course I'm assuming a lot of things is covered by the vendor survey I mentioned but I'm sure I'm missing some biggy's.

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[ajack1]

Helicopterjunky, if your company gives a clear brief to any design company and then end up doing 95% of the work themselves I would suggest that it is they who have the problem.

Outsourcing makes a lot of sense and in some cases is the only way, for example like many small companies I outsource accountancy, of course I could employ a full time accountant and provide him with 5 hours work a week and a few hours more at year end, however the 35 hours I would have to pay him to sit around doing nothing would ruin the company. Of course if he gets it wrong I could lose out big time or even end up in prison, which is why you need to carefully choose who you work with but it still remains the only option. Why is design any different?

Kenat, as well as clearly stating what you require the biggest issue I would try and cover is changes. I do not know what happens in your industry, but in automotive it is common to have at least 5-6 revision changes during design. How this gets charged is always a topic for debate. Basically companies have two strategies either go in heavy initially and then absorb some of the costs themselves, or go in light to win the work and really load the changes, very few go in with a “fair” price for both the initial quote and the changes. What seems a bargain may not be so, or what seems expensive may not be so either.

 

[KENAT]

ajack1, good point on the 'changes', 5-6 would be on the high side for for us (though not unheard of) but certainly incorporating changes from a design review and after feedback from prototype is common.

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[GregLocock]

One company I worked for charged about $50 ph for engineers on the main timeline. At that price they were losing money, since that was a multiplier of 1 to 1.5.

But... All extra work, redesigns that were customer inspired etc, were charged at $280 ph, roughly a multiplier of 6 or 8.

So the project gets signed off by the customer on the basis of the $50 quote, but of course is quickly convinced that the Mk II version is what he really needs, so ends up spending $280.

Oh, one thing to watch is bait and switch with personnel on the project. When it is set up you'll meet with experienced project managers, VPs, and senior drafters, who will convince you of their expertise and imbue a sense of complacency. In the course of the project these will rapidly be replaced by a 28 yo project manager with a newly minted MBA, and a bunch of CAD droogs who have just done the tutorials.

What, me cynical?

Cheers

Greg Locock

SIGlease see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[IRstuff]

I don't necessarily see that as fraudulent, per se. Often, you bid on contracts and have only an expectation of a 20% hit rate. But, when the hit rate reaches 70%, you've double or triple booked your key people. The bottom line is that you often have a serious skill mix problem. Sometimes, there's only one guy in the department that can do certain things well; we often have that particular problem, so that one guy is in such high demand that the most critical program gets to "fence" him, and the other programs have to fend for themselves.

Some customers stipulate as part of the contract language that the people specified in the proposal must be the ones doing the work.

TTFN

FAQ731-376

 

[ajack1]

Greg that is exactly what I mean, however $50 to $280 is very extreme, but I do not doubt for one minute it is true.

The problem is no right minded company would believe that another company can remain in business charging $50/hour, so they must have known deep down that either they would get loaded on costs, the company did not know what they were talking about, or they were unlikely to be around next month, but still choose to use them!

Again speaking as a an owner of a design company you are almost forced to play this game to win new customers, although I hate doing business this way but if you go in with a “fair” price of say $150/hour you are three times more expensive than the cheapest quote.

One thing not mentioned so far is small companies tend to be far more streamlined and can work on much tighter margins. Most owners are first in last out and will put themselves out in a way no regular employee would, or indeed should be expected too. Add to this the fact they do not need to satisfy share holders (other than themselves) or run costly departments like HR and these savings can and are passed on.

As I said in my earlier post I believe that the key is to try and build an understanding between two (or more) companies where all parties clearly understand what is expected, in terms of cost, time and content and try and work with each other rather than fighting over every detail. There is a big difference between cost and value.

 

[BigInch]

The primary advantages of outsourcing are found when the projects being outsourced are outside the normal everyday needs of the company. It is obvioulsy not worthwile to maintain a full staff of "X" engineers when "X" design needs of the company only make up a workload of 3 months of any given year. X type projects can be farmed out to X type project design speciality companies that can keep X type engineers busy 100% of the time. Personnel and office costs can therefore be efficiently amortized over the whole year by the outsource company and those benefits are passed on to the company of origin. Not to mention the efficiencies gained by the increased experience of the engineers and personnel in various specific areas of expertise in that type of projects. Hence it is typically found that say, electrical power companies farm out the design work of nuclear or even convenional power stations, something they may need only one time every 2 to 5 years or so to Babock / Stone & Webster etc., but keep engineers on direct staff to do substation designs, for which they might need 1 or 2 designs per week every week of the year.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/

 

[MikeHalloran]

I wonder how B&W, S&W, etc., have maintained any nuclear expertise over the last 40 years or so?



Mike Halloran
Pembroke Pines, FL, USA

 

[BigInch]

I don't know for sure; I was just making an example. If I'm not mistaken, they have done some designs for foreign plants and have worked on some modifications to existing facilities, but I'm sure they don't have the depth they did back in the 70s.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/

 

[plasgears]

One person indicated that you may be outsourcing overseas unintentionally. That is a distinct possibility even with large American material sources. Many have gotten into the bad habit of sourcing overseas to save pennies. Your material sources may be stocking from overseas even under highly respected American brands. The answer may be certifications and material and performance inspections.

The American aviation industry learned long ago to firmly control sources of high strength fasteners and other key commodities.

 

[Lion06]

Very interesting thread. I noticed that no "structurals" replied. Are any structural engineers seeing design services being outsourced? I would think this would be more difficult since the PE needs to oversee the engineering, but maybe I'm wrong about the difficulty.

 

[KENAT]

Thanks for the responses.

Just to reign it in a bit, I'm not talking about specifically outsourcing overseas, just outside our office as it were.

Also I believe at this stage we're only looking to outsource the actual design and then take care of manufacture our selves, though I don't have all the details and am not sure how prototype would be handled (also we only have assembly facilities not machine shop etc so most of our piece part manufacturing is already outsourced).

Ajack, what you mention about smaller streamlined companies is what I meant by “large organizations outsourcing non-core tasks to smaller nimbler firms” in my OP. My concern is that we aren’t that big of a company/site and if we can save significant amounts on that basis then we have other issues!


KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[vc66]

One other thing that I just thought of KENAT. Not sure if it was covered or not. One of the biggest problems that we have with outsourcing of designs is ownership. Make sure that it is stated CLEARLY in the contract that you will have ownership of the final product. The place we outsource to has a nasty habit of changing things to make it easier for them, but then not to tell us about the change. We might have a drawing at Rev. A when, in actuality, they have it at a C or D.

Fun.

V

 

[KENAT]

Thanks vc66, I believe for what we're doing we'd be owning the design and after initial approval would be doing the maintaining etc which should reduce that problem.

However, we do have that issue on something we already outsourced.

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[ctopher]

StructuralEIT,

The only thing that I have experienced personally due partly to outsourcing is the shortage of cement, causing prices to rise. Because of the industrial boom in China, they have purchase a lot of our cement. Two years ago I was going to widen my driveway, only to find out the price had doubled from the previous 2 years!

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

 

[BigInch]

That's not outsourcing, that's world "free" trade.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/