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Outsourcing stage 3 - Design Tasks
10

Outsourcing stage 3 - Design Tasks

Outsourcing stage 3 - Design Tasks

(OP)
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: Outsourcing Checking (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 toowinky smile 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 standwinky smile
 

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

My friend Joe, in reference to manufacturing, said "Farm out the easy stuff; keep the hard stuff in house."  For him, it mostly worked... but he was talking about _making_ widgets, not _designing_ them... which _is_ the hard stuff.

I suspect/ predict/ fear that anything positive you say about outsourcing will be heard much more clearly than the cautions you have already expressed about the need for detailed oversight... and when it all goes sideways, you will be blamed for the whole mess.



 

Mike Halloran
Pembroke Pines, FL, USA

RE: Outsourcing stage 3 - Design Tasks

Are there prototypes included of the design, or just a package of CAD data?  Will this end information be transmitted electronically or through couriers?  You (your company) could treat this as simple as purchasing a system from a vendor State-side.  Your company might not get the end results they were hoping for though.  I think you've got the major bases covered above.

You definitely need detailed project/program plans, and make your outsourcing agents meet those deadlines.  You will need great communications, and from what you've stated above you don't even that in-house.  Notice any rats jumping ship yet?

"Art without engineering is dreaming; Engineering without art is calculating."

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RE: Outsourcing stage 3 - Design Tasks

Most consumer products are already designed in China.  The only thing that happens in the US is the marketing and styling.  Those functions are unlikely to move until the US market for junk dries up (i.e. Monday).

-b

RE: Outsourcing stage 3 - Design Tasks

3
(OP)
So some additional information.

We don't make consumer products - they are metrology tools/instruments related to nanotechnology.

At present (though this can I'm sure change) they aren't looking to outsource this design abroad.  In fact the first place they are looking at is in-state less than a days drive away.

Thanks for input so far.

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

At my last company, they built a mfg plant in China.
All of our commercial drawings were sent to them for mfg.
They trained the Chinese workers to  build, QA, inspect, etc.
Then they hired a Chinese engineer, trained him how our products are designed, then gave him the freedom to translate the drawings to Chinese, non-US specs, and metric!
Over the past 6 years this has almost killed the company. This year they laid off half of the employees!
They learned that a lot of the products became more expensive to mfg in China, but it's too late.
China now has US technologies and know-how.

IMO, outsourcing is killing the US.
Boeing no longer does mfg, only assy. Almost all of the parts are outsourced to other countries. Now Airbus, China & Russia are going to 'squish' Boeing. No more American made anything...

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

RE: Outsourcing stage 3 - Design Tasks

I reckon that the outsourcer might see a headcount reduction of 50% at best, but the heads you typically lose are the cheapies - the cad grunts. The difficulties associated with supplying engineering type info (eg measured fatigue loads in my case) to another company, and having to explain stuff that is already known in-house, pretty much increase the workload in some areas.

The exception is if the outsourcee is more experienced than the outsourcer in which case the project might run smoothly, if they trust each other.



 

Cheers

Greg Locock

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RE: Outsourcing stage 3 - Design Tasks

To expand on the list in your original post:

As you noted, the design and performance requirements must be robust and quantifiable.

You will need to be able to determine exactly who's stuff isn't working correctly when you start trying to integrate the designs from a hodge-podge of different designers.

Your design contracts need to be iron clad.

To do this right, you need a staff of integration engineers that would probably be as large as the staff of design engineers required in the first place.

It's far easier to do it wrong.

RE: Outsourcing stage 3 - Design Tasks

KENAT-

If your side does it the way our side does, I will tell you exactly what will happen.

The contract will state something extremely close to, "We don't give a crap what you give us, just make the CAD models look pretty. We'll take it in any way, shape, or form. Really! We don't care. Just give us anything."

And then, when it comes in, "finished", you will be the one to have to change everything that they did wrong. All the while, upper management will think everything went swimmingly, because none of the engineering managers have enough cajones to tell them that outsourcing design was a REALLY stupid move.

That's currently what I'm in the middle of now.

Hence, my comment in Mint's motivation thread.

V

RE: Outsourcing stage 3 - Design Tasks

My two cents being previously a design contract engineer working on outsourced projects is the following:

* You must have the design requirements fully spelled out(Tolerances, materials, ICD's, environments, weight, finishes, pressures, dynamic/random vib, etc...)

* You must require the outsourced company to work in the same software (orphaned .stp models are no bueno)

* Time and materials contracts are to the contractors benefit not yours (FF contracts make them bid responsibly)

* Contractors working on sight are preffered to one's located oversea's (can oversee their work better)
 

RE: Outsourcing stage 3 - Design Tasks

(OP)
VC66, that's kind of what happened with our outsourcing to 'specialists/experts'.  I'm hoping, though not optimistic, we can either shoot this down or at least get a framework in place to reduce the inevitable pain.

Apparantly our site/division exec VP, did it at previous employer and him & my VP thinks it's a good idea to do here.  Director of Engineering isn't so sure and my Boss is highly sceptical, having got his fingers burnt at a previous employer.

As Greg & Mint have alluded to, my concern is that to do this properly we'll substitute say 10 staff of varying experience levels (designers, interns, junior & mid level engineers) for 5 or probably more Systems/Integration/Project Engineers of on average higher 'cost'.

I think they are looking at this primarily as a way of getting more work done without increasing staff (possibly decreasing staff).  Now we are not that good at detail design of non core technology (I swear no one here had heard of tolerance before my boss started here) so the idea of getting better quality work done externally does have some appeal.  I'm just sure they wont want to put in the management effort to make it work, and given that cost is the major driver we may be getting cheap not necessarily good work done externally.

Thanks everyone.

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

At a former employer "engineering" or "design" was synonomous with "making drawings".  When you think like that, then yeah, any crap that comes in the door is fine, as long as the paper is covered with lines and text.  And of course, doing a better analysis is a bad thing, because it then takes too long to put the lines on the paper.

You might ask them if they have considered outsourcing the management, as it can be done cheaper overseas as well.

RE: Outsourcing stage 3 - Design Tasks

I don't see the benefit for your company. If the work is being outsourced within reasonable driving distance, the economy there can't be much different. The only benefit would be if it were being outsourced to a company with lower wages/benefits, in which case it may be cheaper to outsource it. However, I suspect that you will get what you pay for. If the employees at the outsourced firm were as qualified as your current designers, why don't they move for better wages/benefits? Maybe the economy down the road is better (ie if it's out of a major city, lower cost of living, so lower wages). Maybe the firm that you would outsource to is just good at picking up good technical people that have trouble getting a better position (I suspect there are a number of good designers out there that have been down-sized for reasons other than the quality of their work).

I would still advise caution, as I personally find that you DO get what you pay for, and 85% of the time that you try to find an exception, it will come back to bite you...

-- MechEng2005

RE: Outsourcing stage 3 - Design Tasks

(OP)
"I don't see the benefit for your company" - it was the exec VPs idea, need I say more?

The place they're looking at isn't just down the road, it's a fair distance, maybe 4-5 hours drive+.  Although it probably has similar cost of living to our location.  We're in Santa Barbara, they are somewhere in the Bay area.

The one thing I can think of is that I think the first package they are looking at is packaging of electronics in enclosures, both 19" rack and similar size desktop.  If this shop is an expert in electronics packaging it may have merit but I'm still inclined to think it's more hassle than it's worth.

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

Howdy,

Interesting thread. Anybody read "The World is Flat" by Thomas L. Friedman? It contains a very interesting history of Outsourcing related to a bunch of different industries. It certainly seems that this concept will not soon go away. From what I can see the best thing to do is - learn how to manage it well. There has been some good suggestions here. Just wanted to put my two-cents in :-) .

Tobin Sparks
www.nov.com

RE: Outsourcing stage 3 - Design Tasks

3
While there's a bit of spotlight on Boeing, earlier, w.r.t. outsourcing, this is neither a new trend, nor is it strictly outsourced to foreign suppliers.  The Big 3, Boeing, Raytheon, Lockheed Martin, Northrop, have all been doing some level of outsourcing or "System of systems" procurements for quite some time.

AC Delco is an example of domestic outsourcing, although it did start off as a captive supplier.  In aerospace/defense, there are dozens of 2nd and 3rd tier suppliers that are outsourced to by the big defense contractors.  At one company, we were working on some nifty systems, but our BD guy snorted and said, "We are not a component company," to mean that our company was not going to waste its marketing muscle to peddle a $300K system when the same guyg could be peddling a $300M system.  Even my current company, which is a 2nd tier supplier, outsources smaller subsystems to 3rd tier suppliers

This is the nature of human history and development.  There was a time when every adult person alive knew how to grow his own food, build his own house, and make his own clothing and tools, etc.  Even 20 years ago, the average teenager could strip and rebuild a carburetor.  

So, we, as individuals, are also outsourcing our needs to the grocer, the gardener, the oil change shop, the clothing store, etc.  When that happens, we lose direct control over the quality.

Anyway, outsourcing, to domestic or foreign suppliers, is not going away, simply because the leveraging of smaller systems into larger systems is where the bigger profits go.  The lowest tier supplier is always squeezed for cost savings.

Unfortunately, there are an infinite number of paths to failure, and relatively few paths to success.  Nonetheless, there are some things to do:
>  Clear, quantifiable, and measurable requirements.  Minimize the motherhood requirements.

>  A System Requirements Review to ensure that the supplier understands the requirements to be the SAME requirements as you do.  Often, what looks like a solid requirement to the writer looks like Swiss cheese to the supplier.

>  A detailed Integrated Master Schedule and Plan.  Look for reasonable time spans allocated to the work required.  

>  Earned value tracking.  Frequent status reports that go beyond, "Everything's fine, don't worry."

>  Design reviews, preliminary and critical.  Look for tolerancing, margin analysis

>  A solid verification plan and procedure.  Everything that was specified should be tested to verify compliance to the requirements

>  A solid product readiness review.  How are they going to handle the production volume?  Do they have the facilities, equipment, material suppliers, and labor force?  Is their production plan realistic?

TTFN

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RE: Outsourcing stage 3 - Design Tasks

(OP)
IRstuff, that's the kind of 'outsourcing' I was involved with in a previous life working in defence/aerospace.

This largely falls under my "large organizations outsourcing non-core tasks to smaller nimbler firms" category for the most part, with some of the 'outsourcing to experts' thrown in.  These were the places that took it seriously and devoted a fair amount of effort to managing it.

My concern is that my employer will just want to put together a very vague requirement, perhaps competatively tender it but likely sole source it, place the PO then forget about it till it's due.

Anyway, thanks for reminding me how it's done and thanks to others too.

(How the heck did I get a star when I'm the one asking the question?)

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

Well speaking from the other side as someone who owns a contract design company obviously I do not agree with a lot of the views above. Contracting out work can be very beneficial, if done correctly.

I pretty much agree with everything IRstuff says but would also add that finding a company you wish to work with over a period of time is paramount. Relationships need building and there are always going to be problems along the way, think of it as developing a product, there are nearly always tweaks that need making to get the finished product you require.

The two things that would concern me most are Kenats comments

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

""I don't see the benefit for your company" - it was the exec VPs idea, need I say more?"

Firstly yes if you cannot put the procedures in place and supply the information to make things work internally, you can bet your bottom dollar things will be worse if you outsource. But that is an internal failing not a problem with outsourcing.

Secondly going back to my rugby playing days, I cannot remember winning many games I did not believe we would win, that does not however mean that we did not lose games I thought we would win, but if you believe something will fail you can be sure it will.

Design companies need happy customers, that is how we pay next months bills and wages, the happiest in my experience are the ones that work closest with you.
 

RE: Outsourcing stage 3 - Design Tasks

Ah, by outsourcing I assumed Kenat meant overseas.

The auto industry outsources all the time, and has ever since I started work. For example there are several consultancies who will take on an engine redesign project, or noise reduction, or whatever. Almost all those pretty showcars that the fanboys love are outsourced. Even some manufacturing jobs are outsourced - Steyr Puch builds all sorts of cars and trucks, for instance.

Yes, your own engineers become project managers/system integrators/spec writers. Your contract lawyers become an important part of the team. Your CAD guys become experts at translation and database management.

 

Cheers

Greg Locock

SIG:Please see FAQ731-376: Eng-Tips.com Forum Policies for tips on how to make the best use of Eng-Tips.

RE: Outsourcing stage 3 - Design Tasks

KENAT,

Quote:

The one thing I can think of is that I think the first package they are looking at is packaging of electronics in enclosures, both 19" rack and similar size desktop.  If this shop is an expert in electronics packaging it may have merit but I'm still inclined to think it's more hassle than it's worth.

   I have designed a lot of electronics packages, like 19" rack mounted boxes.  Are your electronics people together enough to finalize all their information, in sufficient time for the subcontractor to take on the job, follow rigourous design procedures, and send drawings out to desireable (i.e. busy) fabricators?  

   I have spent a lot of time working with electronics hackers who want nothing more than to get parts in house as quickly as possible.  Then, they can attach their stuff, drill holes, file things down, and take stuff to the machine shop for modification.  Eventually, they get it working.  It is too bad if you are the schmuck who has to manufacture it, because you don't have mechanical assembly drawings, often don't have cable drawings, and you probably cannot reproduce the phone calls that went out to the machine shop to get things modified.

   The advantage of a subcontractor is that you can discuss the a**hole who f***ed up the drawings loudly and explictly, anywhere in the office.  The subcontractor won't be around to overhear any of it.  It is quite possible, they were competent, and tried very hard to do the job properly, but were unable to collect the information they needed.  

   Good electro-mechanical, or opto-mechanical, or opto-electro-mechanical design requires a lot of communication.  Sending part of it out of house is a good failure strategy.

   I can see a good case for subcontracting where you have a system or module that requires specific expertise that you do not have and do not want to develop, in house.  You can define a simple interface, like a 9U 19" rack box, and a few connectors, and some DC voltage and current.  Then, you can let the experts do it.  

                          JHG

RE: Outsourcing stage 3 - Design Tasks

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

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RE: Outsourcing stage 3 - Design Tasks

(OP)
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,

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RE: Outsourcing stage 3 - Design Tasks

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.

RE: Outsourcing stage 3 - Design Tasks

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.

RE: Outsourcing stage 3 - Design Tasks

(OP)
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,

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RE: Outsourcing stage 3 - Design Tasks

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.
 

RE: Outsourcing stage 3 - Design Tasks

(OP)
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,

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RE: Outsourcing stage 3 - Design Tasks

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

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RE: Outsourcing stage 3 - Design Tasks

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

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RE: Outsourcing stage 3 - Design Tasks

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.
 

RE: Outsourcing stage 3 - Design Tasks

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/

RE: Outsourcing stage 3 - Design Tasks

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

RE: Outsourcing stage 3 - Design Tasks

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/

RE: Outsourcing stage 3 - Design Tasks

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.

RE: Outsourcing stage 3 - Design Tasks

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.

RE: Outsourcing stage 3 - Design Tasks

(OP)
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,

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RE: Outsourcing stage 3 - Design Tasks

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

RE: Outsourcing stage 3 - Design Tasks

(OP)
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,

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RE: Outsourcing stage 3 - Design Tasks

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

RE: Outsourcing stage 3 - Design Tasks

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/

RE: Outsourcing stage 3 - Design Tasks

StructuralEIT,

My company recently hired a sub-consultant to review a complicated connection design.  The company was in Ohio.  The companies engineers were located in the Philippenes (we didn't know this when we hired the company).  Their engineering was so so.  The coordination was very difficult.  The "engineering manager" in Ohio didn't know much about engineering, and the engineers in the Philippenes didn't speak good english.  

They were quick.  They worked 7 days a week, more than 10 hours a day.  The cost was $70/hour

I personally wouldn't go that route again.   

RE: Outsourcing stage 3 - Design Tasks

Gumpmaster-

I am assuming they didn't have to stamp anything.  Is that true?  If they did have to stamp something, would they have someone available to stamp?   

RE: Outsourcing stage 3 - Design Tasks

I don't think it matters what size of company you are; you will have reason to outsource.  Look at us, companies of "one," yet, we outsource a lot of stuff our ancestors used to do themselves.

For small companies, you have the added difficulty in keeping someone who is an SME on a particular subject being able to keep interested and busy, while only getting to do his thing once every few months or once every few years.

TTFN

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RE: Outsourcing stage 3 - Design Tasks

You need to have supervision on site, say include a project manager and enough engineers to review the work as its done.  If you do that, it can be very cost effective.  I've supervised work done that way in Colombia and Venezuela for pipelines built in those countries.  Of course language skills are always good to have in those situations.

The Philippenes is the second largest speaking country in the world.  Granted they have their own "style", but once you get used to it, I think its actually pretty good.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Outsourcing stage 3 - Design Tasks

StructuralEIT,

We didn't have them stamp anything.  One of our east coast offices often uses them to design connections.  I'm assuming they submit stamped calcs in that case.  I'm betting they "review" the calcs in Ohio and stamp them.  That's just a guess though.   

RE: Outsourcing stage 3 - Design Tasks

BigInch-

Did you mean second largest English speaking country? I believe pretty much all countries speak. poke wink

V

RE: Outsourcing stage 3 - Design Tasks

(OP)
I was guessing Spanish.

BigInch, by supervision on sight did you mean for actual construction type projects?

I've worked in a company that was the 'outsourcee' for design type tasks and we didn't have onsite supervision.  Our customers made visits as required and we had emails, phone calls etc. but no permanent presence.

For my current situation having a permanent presence at the vendor would nullify much of the perceived advantage.   
 

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RE: Outsourcing stage 3 - Design Tasks

Ahhh, Spanish makes sense too.

V

RE: Outsourcing stage 3 - Design Tasks

(OP)
Oops, as well as emails & phone callse we had site visits/meetings as required.

Just did a quick google and doesn't seem like spanish is the correct answer.

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

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


While I can't speak directly of B&W, I can speak of S&W.  S&W is owned by Shaw, which also has a 20% stake in Westinghouse.  Lots of mingling going on there, and as someone else mentioned, plenty of overseas work in both new construction and maintenance contracts.  You should start to see a fair amount of this spilling over domestically now, but I think the upcoming election will play a role in just how quickly things come together.   

RE: Outsourcing stage 3 - Design Tasks

Quote (KNAT):

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).

Make sure the designers know about your manufacturing capabilities and limitations.  If you are not careful, the cost will rise.  From what I have been involved with, the design will come in-house, you'll spend a week getting drawings up to your standards, and will do the purchasing of components as normal, then receive everything and attempt assembly.  During this attempt, it would be good to have the designers there to turn a wrench or two.

"Art without engineering is dreaming; Engineering without art is calculating."

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RE: Outsourcing stage 3 - Design Tasks

(OP)
MM, I'm really not sure what the detail plan is, I'd think they'd have to have some input on the prototype/initial production.  When I did outsource design we were usually involved in the manufacture too.

I think to some extent it depends how 'full service' they are/we expect them to be.

KENAT,

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RE: Outsourcing stage 3 - Design Tasks

Of course we outsource various details of our designs; the difference is that outsourcing to China is destroying our home industries. And the Chinese are taking great glee over this. Here is a supporting story.

The pastor of our church adopted a Korean boy, who is now attending college in China. We attended a slide show covering the pastor's trip to China last year. He mentioned a district some distance from Beijing that is building up rapidly to meet demands for outsourced products to the US. Unconsciously, he reflected the Chinese view that what they are doing is helping destroy American business, and they are enjoying this prospect.

We as a family have decided to vacation in our home state and buy American whenever possible. We buy Whirlpool, a Michigan enterprise. Our cars are US brands. We try to keep the money here in the US and in Michigan. May I recommend that you do likewise in your own state.

RE: Outsourcing stage 3 - Design Tasks

plasgears,
Look deep under the hood of some GM cars. Some of it comes from Toyota or other manufacturers.
There are many U.S. products that are still 100% American made, but fading away each year.

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

RE: Outsourcing stage 3 - Design Tasks

Yeah, I tried "Buy American" when I bought my first (and current) new car, and realized it was pointless because of what ctopher brings up.  I ended up buying a Mazda; I have no idea which parts of it were made where (I know some Mazdas, or some parts of some Mazdas, are made in the U.S.), but the company itself has more U.S. ownership at the moment than Chrysler.

Hg

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RE: Outsourcing stage 3 - Design Tasks

plasgears,

   The Chinese had better not enjoy destroying American industry too much.  The Americans owe them too much money.  

                             JHG

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