Top Reasons to Outsource

Reasons to Outsource Product Design & Development

Many competitive industry's require firms to utilize every possible resource, both internal and external, to stay ahead of the curve. While many companies have been capitalizing on the benefits of outsourced labor and manufacturing for years, only recently have upstream functions such as product design and development become a major part of the outsourcing trend. Manufacturers are realizing that they can capitalize on external engineering expertise to gain several advantages, such as market leading products and reduced time-to-market, without jeopardizing trade secrets or intellectual property.

There are many factors that must be considered to determine if outsourcing product design and development is a strategic fit for your company. Outlined below are 10 key benefits that manufacturers can realize by contracting these functions.

1. Leverage Multidisciplinary Expertise

Two heads are better than one, as the adage goes. This is particularly true for product design and development, where truly innovative products rely on a multitude of concepts and theories for differentiation and market leadership. A design team with industry-spanning expertise can apply the best technology to the product concept. A team of engineers confined to one industry does not have this pool of knowledge from which to draw, and this can impede finding the best solutions to complex problems.

There are many cases of breakthrough products that were a result of fresh ideas and cutting edge technologies from unrelated disciplines.

2. Quickly and Easily Expand Internal Engineering Capabilities

Some projects require rapid scale-up of manpower for short-term assignments. Hiring fulltime employees is not economical and adding temporary help is time-consuming and presents confidentiality risks. Outsourcing, on the other hand, allows you to assign your partner’s full-time staff to device development projects quickly and cost effectively. The proper amount of the targeted expertise can be applied at the right time. Companies can therefore avoid paying for excess labor and engineering costs.

3. Capitalize on Technology Forecasting

Experienced partners have foresight as to what future technologies can play a role in developing products and how these advancements will impact your business. These firms have the time and resources to survey the field and look at what is coming down the pike. They also have networks to rely upon for up-to-date information. Larger engineering firms have the ability to test emerging technologies in their laboratories, providing an additional benefit to the outsourcing relationship.

4. Manage Project Timeline

Many design projects fall victim to mismanaged or unmanaged timelines. With internal engineering and management resources stretched thin, it is often hard to fully commit resources to product development projects. Outsourcing partnerships offer an advantage because the engineering firm not only assumes project time management responsibilities but also assigns and manages resources. The partners will agree on a program timeline at the start of the agreement and schedule periodic meetings for status updates. A contract with established deadlines and deliverables for each party helps to keep projects on track.

5. Control Project Costs

Similar to providing project timeline management, external engineering partners can help companies keep product development costs within budgeted goals. At contract signing, the project budget is set and resources allocated, with written approval required for any changes. Reports are developed and delivered on an agreed-upon periodic basis to keep all parties abreast of current expenditures versus budgeted amounts. As opposed to internal product development, during which it can be difficult to account for time and resources, outsourcing relationships provide clear dollar values for each project stage. This will prevent costs from unknowingly spiraling out of control.

6. Reduce Time-to-Market

End-to-end solutions are another benefit of working with external design teams. Qualified partners can provide complete guidance from concept development to product development through equipment design, build and installation. Having one point of contact for all aspects will lend efficiency to the project. Additionally, experienced firms can apply knowledge of similar projects and technologies to enhance productivity and overcome technical obstacles that can delay product introductions.

7. Maintain Confidentiality

One of the major misconceptions about outsourcing product design and development is that it will compromise corporate trade secrets. However, working with a third-party engineering firm can actually provide stronger protection for a company’s proprietary position than would internal development. First, outsourcing engineering functions can reduce the threat of an employee takeover by competitors because engineering partnerships provide anonymity. Competitors will not be able to track down the engineers responsible for the development of your market leading device if the design was outsourced. In addition, reputable and well-established design firms sign confidentiality agreements and provide competitive exclusivity to their clients.

8. Create a Proprietary Market Position with Innovative Products

To gain market ownership, companies must develop products that provide an innovative solution to some unsatisfied need. An experienced partner will be fluent in industry trends and up-to-date on current happenings and can therefore gauge which niche your company can effectively fill. Innovative products are also difficult to replicate, leading to complete and lengthy market ownership. Manufacturers can get caught up in the modification maze, making small alterations to existing products and re-launching them. However, these types of projects do not command price premiums. Relying on external sources for product design and development brings novel ideas and wide-ranging expertise to the table, leading to innovative products.

9. Protect Intellectual Property Rights

Manufacturers can outsource upstream product development functions without compromising intellectual property by working with partners that agree to assign IP rights after the program’s completion. This means that the engineering company will either cooperate in preparing patent applications or will maintain the development process as a trade secret.

10. Because the Competition is Outsourcing R&D

Manufacturers are increasingly allocating funds to outsourcing product design and development functions. Whether their strategy is to maintain or gain market leadership, an increasing number of companies are recognizing that outsourcing product design and development is a critical strategic tool.

SIDEBAR

Answer true or false to the following statements to find out if your product design and development process can benefit from outsourced engineering.

1. Internal resources are stretched thin.

2. Development projects often run over budget.

3. Product launches are often delayed, costing the company a significant dollar amount due

to lost sales and extended expenses.

4. My company has not released a market-dominating product in several years.

5. My engineering staff’s expertise is concentrated in a few core industries.

6. Our R&D department has several new ideas, but we cannot develop efficient manufacturing processes.

7. It is difficult to keep up with the competition in terms of new product development.

If any of the above statements hold true for your company, outsourcing product design and development may be the solution.

Adapted from an article by Robert R. Andrews.