Outsourcing: A strain and a solution
Want to hit a hot topic in the industry these days (or any days for that matter), just sit down in a room full of engineers and talk about outsourcing.
When it comes down to it, outsourcing various functions to a third party can save money, improve processes, and increase flexibility.
Take a look: General Motors will spend $15 billion to outsource its IT functions over the next five years, and German carmaker DaimlerChrysler will hike outsourcing of Research and Development to India.
DaimlerChrysler Research Center in Bangalore does R&D in encryption, image signal processing, telematics, fuel cell modeling, CAD, CAM, CAE, and PDM, for the company’s global requirements. The Indian center would assist the group in designing and technology upgrades.
“DaimlerChrysler is planning to significantly augment R&D works at (the research center) in these areas. Similarly, the group's outsourcing of components like motors and crankshafts from India is also going to grow," said Wilfried Aulbur, MD and chief executive, DaimlerChrysler India.
It is very easy to take the easy way out and say the U.S. needs to keep its jobs. But let’s face it, for some U.S.-based companies, outsourcing manufacturing, either down the street or across the globe, is the only way to survive. While for others, outsourcing is its only means of existence. In a global economy, there has to be a global solution.
Keeping an eye on this vital area of the industry, InTech conducted a Zoomerang survey taking a sneak peek at what engineers in the industry are saying about outsourcing. While this is an unscientific poll, it does give an idea on what is happening in outsourcing:
When asked if their company outsources engineering work, 79% of the respondents said yes they do, while 21% said no. When it came to how much they outsourced, 20% said from 0-10%; 33% said from 11-25%; 24% said 26-50%; 16% said 51-75%; and 7% said 76-100%.
Outsourcing engineering work is one thing, but when asked if their company outsources its manufacturing, 45% said yes, while 55% said no.
One of the other big topics is where does outsourced manufacturing go? Does it stay in the U.S. or head offshore? So, when asked does your company outsource its manufacturing offshore, 74% of survey respondents said no, while 26% said yes.
Then trying to nail down what country they were outsourcing manufacturing to became interesting. Not surprisingly, China and India were numbers one and two. China came in at 28%; India 22%; Germany at 11%; Mexico at 6%, and other multi sites came in at 33%. Conversely, from an international perspective, the U.S. came in at 6%.
A complete report on the survey will be in the March InTech.
Want to hit a hot topic in the industry these days (or any days for that matter), just sit down in a room full of engineers and talk about outsourcing.
When it comes down to it, outsourcing various functions to a third party can save money, improve processes, and increase flexibility.
Take a look: General Motors will spend $15 billion to outsource its IT functions over the next five years, and German carmaker DaimlerChrysler will hike outsourcing of Research and Development to India.
DaimlerChrysler Research Center in Bangalore does R&D in encryption, image signal processing, telematics, fuel cell modeling, CAD, CAM, CAE, and PDM, for the company’s global requirements. The Indian center would assist the group in designing and technology upgrades.
“DaimlerChrysler is planning to significantly augment R&D works at (the research center) in these areas. Similarly, the group's outsourcing of components like motors and crankshafts from India is also going to grow," said Wilfried Aulbur, MD and chief executive, DaimlerChrysler India.
It is very easy to take the easy way out and say the U.S. needs to keep its jobs. But let’s face it, for some U.S.-based companies, outsourcing manufacturing, either down the street or across the globe, is the only way to survive. While for others, outsourcing is its only means of existence. In a global economy, there has to be a global solution.
Keeping an eye on this vital area of the industry, InTech conducted a Zoomerang survey taking a sneak peek at what engineers in the industry are saying about outsourcing. While this is an unscientific poll, it does give an idea on what is happening in outsourcing:
When asked if their company outsources engineering work, 79% of the respondents said yes they do, while 21% said no. When it came to how much they outsourced, 20% said from 0-10%; 33% said from 11-25%; 24% said 26-50%; 16% said 51-75%; and 7% said 76-100%.
Outsourcing engineering work is one thing, but when asked if their company outsources its manufacturing, 45% said yes, while 55% said no.
One of the other big topics is where does outsourced manufacturing go? Does it stay in the U.S. or head offshore? So, when asked does your company outsource its manufacturing offshore, 74% of survey respondents said no, while 26% said yes.
Then trying to nail down what country they were outsourcing manufacturing to became interesting. Not surprisingly, China and India were numbers one and two. China came in at 28%; India 22%; Germany at 11%; Mexico at 6%, and other multi sites came in at 33%. Conversely, from an international perspective, the U.S. came in at 6%.
A complete report on the survey will be in the March InTech.
1 Comments:
At the recent World Economic Forum in Davos, Harvard University President Larry Summers said, "The integration of four-fifths of the world where people are poor with the one-fifth of the world where people are rich, has the potential to be one of the 3 most important economic events in the last millennium,alongside the Renaissance and the Industrial Revolution."
Outsourcing/Offshoring/Offsourcing is a mega trend integrating all economies and jobs globally.China as the world's factory for manufacturing and India as the world's back-office for services
is a necessity for organizations seeking maximum business value
in global competitive markets.
What career and business strategies would work ?
First, being global is not a choice, but a strategic imperative. A Virtual 24 Hour Factory or Overseas Office cuts development times and costs drastically. It's economic implications are too attractive to ignore inspite of cultural and distance related working challenges.
Second, even though it is a flat world as coined by Thomas Friedman, in reality it is not flat. It is a world of High Quality Mountains and Peaks and Low Quality Valleys and Pits. Wherever one is located globally, whether Boston, Bangalore, Boswana or Beijing, one has to be focussed on qualitative work, or else risk getting banished into obvilion.
Third, there are great opportunities in adapting US products for emerging economies like India. It's large Billion plus population along with high economic growth rates is a huge magnet for value priced appropriate technology products and services. US Brands also have a natural edge and affinity in India.
Best Regards,
Mahesh Khatri.
Kaytek, Mumbai, India.
http://www.kaytek.co.in/offsview.htm
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