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Engineering Projects Outsourcing

09/12/2009 7:52 AM

Hi,

I wonder if anybody here has ever dealt with outsourcing some parts of their manufacturing process like engineering projects? I would like to hear some ideas of the people who practise such things at their companies, which exactly projects you put out of in-house processing? What are the prices you pay for such service? In fact I run a business focused on helping organizations to manage the engineering part of work and I am looking for information regarding this business strategy. I'll be really appreciative if you spend some time to comment the thread.

Thanks!

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#1

Re: Engineering Projects Outsourcing

09/12/2009 12:26 PM

Let's see.............................. You come to an engineering forum to ask how to eliminate engineers?

I don't think so.

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#2

Re: Engineering Projects Outsourcing

09/12/2009 3:34 PM

Apparently due to quality control issues, along with intellectual property rights, many companies are finding that outsourcing is less and less desirable.

Recently this has been discussed here on this forum, though right now I cannot remember exactly where.

I do know of a company local to me that first was making their product in China, but actually has returned their manufacturing stateside.

I believe issues of language, customer service and transportation were also mentioned as factors that have caused a number of companies to take a more jaundiced view of outsourcing.

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#3

Re: Engineering Projects Outsourcing

09/13/2009 12:10 AM

Let's see if I understand you correctly.......you "run a business focused on helping organizations to manage the engineering part of work" So I'd assume you have a fair understanding of what engineers do in the enterprises with which you are concerned.

If an organization needs to outsource engineering work first it must be ready to direct that work in one way or another. This direction has to be some combination of clear specifications with verifiable deliverables and direct detailed supervision. Typically direct detailed supervision of another company's employees at a remote location is difficult and costly and should only occur where clear specifications are not practical.

If your client wants to outsource because he lacks the capability or resources internally then he should be prepared to spend more for the work. If the resources lacked include the ability to create a detailed specification of the work then a preliminary contract may be needed. This is often the case in major facilities construction where the first contract is given to an architect and then an engineering firm gets the contract to design and build the actual facility.

It's been my experience that outsourcing of routine engineering work due to inefficiency of the in-house engineering organization is a costly way to deal with a management problem. Often these costs are not felt until sometime later as the company slides toward business failure.

Here in Western USA manufacturing industries outsourced CAD drafting costs in the range of $50/hour working from existing 2d layouts or 3d models. Actual 3dCad design maybe 50% more. In depth engineering design involving analysis as well runs around $100-$125 per hour and the involvement of specialist with an advanced degree can run to $200/hour. Prototype machining and construction will be in the $100/hour range as will simple testing and report preparation where test equipment is readily available.

If you expect to enter into a fixed price engineering contract with an outside company be ready to prepare a very detailed design or engineering specification of work to be done including deliverables and schedules. Expect much time to be spent negotiating a final price with the outside company. Few manufacturing companies have internal resources capable of doing that unless such activity has been a regular part of their business. (some consumer product manufacturers come to mind here). Usually the internal person faced with that job is the already overworked engineering manager faced with headcount limits and budget constraints.

But the whole key here is being able to communicate to an outside engineering supplier exactly what you want and having him believe that you will be able to verify the deliverables have met the contract requirements. You cannot expect the purchasing manager in the average company or the quality assurance people to do that. You need a real engineer.

Ed Weldon

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#6
In reply to #3

Re: Engineering Projects Outsourcing

09/13/2009 11:09 AM

Ed,

Thanks a lot for your time spent on such a detailed explanation of the situation. Everything seems to be quite simple until it boils down to implementation of the idea. Thanks for having brought some figures in your comment! You mentioned it starts from $50 per hour for the simplest project and gets higher with the demands of a company outsourcing a project.

What would you say if I declare we are able to handle projects five-seven times cheaper while keeping the same quality level? Yea! I believe we can! Is it worth trying to outsource in this way or you still stick to the idea the eventual result will inevitably be costly at the end?

Thanks!

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#7
In reply to #6

Re: Engineering Projects Outsourcing

09/13/2009 1:42 PM

Best3d..... Please read what Thomas Coyne (tcinc002) said. Then read it again.

The key is communications; before, within and after the contract. Before the contract the customer must determine the capabilities of the contractor. Within the contract the requirements must be clearly and completely stated. During the execution of the work communications, negotiations and decisions over questions and changes must be clear, honest, timely and competent. In my experience with product design the rule of thumb is that no more than 5% of the cost of any engineering project should be effected by technical issues that are not completely known, understood and executable with planned resources. Although I never worked in the world of civil engineering I suspect that 5% number is more like zero because they have the unpredictable forces of nature to deal with. I would think that in the outsourcing situation for any kind of engineering that 5% is too high. Better the number approach zero as close as possible also.

This line of thinking drove my last employer to develop a system and process for creating design specifications for new product development. This process took up valuable time and effort on the part of engineers and managers and all too often consumed available lead time before fixed date objectives (in our case major trade show dates). But the design spec made the engineering management process a lot easier. Our problem was that in the world of "High Tech" new products tend to have enough unknowns associated with them to make the 5% maximum hard to achieve. Inevitably the issues developed at the system integration stage, a step that we seldom could put a detailed plan and schedule on.

All of the abovementioned activity requires the work of high level (in other words "highly compensated") employees on both sides; all of which the customer pays for eventually. This is not "funny money" just because the accounting department cannot easily measure it. It is very real. You as the contractor must understand that a failure will be on your reputation; not just that of your customer. In our country, just as in yours, the senior business managers all talk to each other.

Ed Weldon

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#13
In reply to #6

Re: Engineering Projects Outsourcing

09/15/2009 3:22 PM

No, I wouldn't believe it. Give me a price quote, here on this forum, for engineering the mounting a GA-35 gps antenna on panel 261JT of a Dhc-8 aircraft, including a valid structural analysis.

A relatively simple job.

When you give me a price I'll tell you if it's 57 times cheaper.

Hooker

PS - I've told you everything I tell my FAA Design Engineering Reps. Anything else needed is available from the relative vendors or FAA specs.

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#4

Re: Engineering Projects Outsourcing

09/13/2009 2:21 AM

If the companies you work for have a limited, permanent staff then it may be necessary to outsource, especially if it a small company and cannot afford a large staff and only need them part time or other conditions of business survival. Under these circumstances you can see the need to seek outside, partime or project related help. Also if you have an American company dealing in American standards, non-metric and local codes, you might seek outside assistance.

This can be done by bringing in consulting help to direct the conversions if it is a foreign project and the consultant(s) know the foreign standards, codes, material standards, available sources of materials and equipment, blah, blah. And the consultant will accept liability not only for the work, but the timeliness, etc.

Or it can be outsourced to an entity in the location of the project that will meet all the items listed above and put up a guarantee bond in a US bank to be drawn on in case of failure to meet their obligations.

Or you can hire or make a JV with an engineering company abroad that will assume the risk of failure and meeting all the standards, codes, etc. for the singular project or a long term JV for areas where that entity knows and can accomplish the tasks at hand. (Called an engineering/construction Licensee)

However if the American company justs wants to save money or yield a larger profit on the project than outsourcing can be done, but there will be entanglements. The company must provide full time supervision on every aspect of the engineering and every discipline. This means that additional costs of long term travel and costs be added to the project budget.(the norm calcullation for this is his salary times 5). The company must accept liability for all the work including all the outsourced work, as no outsourcing company, no matter what they say, will never accept liability for doing what you tell them or your basic design, "quote-flaws" that you gave them. And no arbitration panel in the world will make the outsourcing company liable either.

My opinion on the matter is that you can hire outsourcing people or companies to do some of the engineering or design but you better bite the bullet and prepare to do the work yourself and expect long delays, no matter where they are located. If you have heard the horror stories of trying to get Microsoft or AOL to fix a problem on your computer and weeks later you have to buy a new computer and lose all the work that you had, and the people you talked to could not speak, read or write proper Enlish then you have faced only a percentage point of what you will find with outsourcing. Example: on a project i directed in India in the 90's, not very big-only a $30 million job, the US company decided to outsource the detail engineering and fabrication details to an Indian structural engineering and design company. I wasn't born on that day or the day before and had experienced this type of beancounter mentality at corporate before and I strongly protested but lo and behold when they saw the money that could be saved and the Chistmas bonuses it would bring they jumped on it with both feet. We had originally budgetted the drawings at about 40 hours each drawing and at the then US engineering costs of about $60 dollars an hour meant a US cost of $2400 per drawing even with conversion costs for metric and all done on CAD. The anticpated number of drawings was about 150, including changes, etc. This was not a singular design but the 25th time that it was repeated with a few minor changes to the layout. Total =$360,000

The outsourcing quote came in at $40 per drawing, estimated to include any and all revisions. Hmmmm! $6000. The company went absolutely nuts and the spending of profits started, new office furniture, parties and what else. I was stuck in India to deal with the outsource. I had all previous project drawings sent over and started to correspond and discuss the activities. Gradually I became almost full time with the local engineers, teaching and correcting, finding every possible mistake that could be made was being made. I found that their training had been in Russia, that their structurals were interpretations from days gone by from England and they had converted all international standards and codes to an Indian code but since they could not meet the codes in manufacturing of the steel, then they wanted to use substandard grades. Then the client wanted to get involved and since I would not accept a lesser quality of materials and had to go higher in specs they wanted to go lower to reduce capital and still make us liable. I could see Bopal all over again. In the meantime the outsourcing company, of course stated that they would have to have more money since all these changes were coming anf they were not at fault.

Bottom line-Every drawing finally had the full alphabet used from revisions, the project was delayed by 2 years, the US company threw up their hands in disgust and walked away before commissioning. I stayed to clean up the mess.

Outsourcing? Train the US engineers and designers, and management, and the sweepers in global and international methods, systems and cultures. Give them all a plane ticket and tell them to get some exposure, AND DO NOT COME HOME WITH AN "UGLY AMERICAN", THOUGHT IN THEIR HEADS, but with increased knowledge they will be able to handle the jobs here.

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#8
In reply to #4

Re: Engineering Projects Outsourcing

09/13/2009 6:05 PM

GA. Very interesting reading. Good taste of sweet in the bitter, Ky.

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#5

Re: Engineering Projects Outsourcing

09/13/2009 9:17 AM

Hi Best,

Here in India we have best talent for such work. There are many consulting organisation who undertake such jobs. You can search on google or if you need any help I can locate such organisations here.Please give details about nature of the work you would like to outsource.

Suresh Sharma.

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#20
In reply to #5

Re: Engineering Projects Outsourcing

09/19/2009 11:12 PM

"then why are you avaliable for less than a $1?

The Best talent comes at a higher price

Anthony@alno

anthony@alnoproductservices.com.au

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#9

Re: Engineering Projects Outsourcing

09/14/2009 12:27 AM

Good advice below. While involved in a full bore product development team, we were often asked if we could outsource some of our work. While not philisophically opposed to outside help, we rarely accepted outside design assistance.

The first question we always had to ask ! "Will these people take our needs and timelines as seriously as we will ??" Do they REALLY understand the field of interest as well as we do, and are they really capable of moving as fast as we do at the same level of quality design.

I have to say, that although we were a smallish but rapidly growing company, we had dedicated a huge comittment to rapid prototyping. We had built a model shop that had 14 CNC milling machines, two injection molding machines, and all the usual mills, lathes, and support equipment. We had a dozen highly talented machinist and a pair of lesser experienced young machinists. They could turn out high quality parts almost as fast as the designers could think them up.

Tough to find anyone who could meet our schedules. As the Purchasing guy for the group, I never had to apologize to outside suppliers for begging them for their best effort on quick delivery. They knew that we would be using the parts as soon as they delivered.

Repeated attempts to utilize outside sources showed us that they simply were not accustomed to managing such a rapid pace. We expected that when one process was completed, there was someone ready to move the components to the next machine. That included No time to finish at 2 PM and have the part wait for another day to move to the next step. this pace applied to design elements as well.

So, your question started with cost ! Ours started with capability questions, then we expected to pay the real cost for the level of service we demanded.

BEWARE, most cost accounting systems do not really understand the true costs involved in offloading work to others. Usually, the engineering oversite and the general business oversight never get rolled into the program in house, so aren't understood when looking for outside help. Good luck, education of both the customer and your own people is key here.

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#14
In reply to #9

Re: Engineering Projects Outsourcing

09/16/2009 5:51 AM

Well, good comment! To be honest I didn't expect so many people would react on my thread. Looks like the topic is really interesting and if this tactic put in a right way it'll bring benefits. However the key point here is to persuade people to believe that you are the right choice they have made. Again we face the marketing planning here. Lots of things to think about. Money never comes cheap indeed.

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#10

Re: Engineering Projects Outsourcing

09/14/2009 10:06 AM

We also do Engineering and are located in the Dom. Rep. which is a quick hop from the states. All engineers are bi lingual (Spanish / English)

www.pcprecisioneng.com

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#11

Re: Engineering Projects Outsourcing

09/14/2009 10:33 AM

Don't help this guy!

Best3D, ***** and the horse you rode in on.

Unemployment for electrical engineers is now at an all-time high and exceeds the overall rate (per IEEE from Gov.t statistics).

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#12
In reply to #11

Re: Engineering Projects Outsourcing

09/14/2009 11:27 AM

Sorry guy. Our time is past. (I'm a retired mechanical engineer.) That was the work of the 20th century. We needed lots of EE's, ME's, and Aero. Engineers.

Going forward the demand for those skills is way down and will focus on the best and the brightest with modern computer skills (read that as younger engineers). Frankly I don't see a long term demand for outsourced engineering work in developing nations in East Asia for some of the reasons that have been already discussed here.

This is the 21st century. This is the time for the civil , biomedical and controls engineers. Electronics has become the world of the physicist and the software engineer. The civil engineers will find their realm spreading out into specialties requiring more mechanical and electrical engineering skills as their work encompasses development of new large scale energy production processes.

My oldest son is an experienced mechanical engineer who is taking those skills and making a shift into civil engineering type work within the solar industry. He's a rare bird that way. I think he is doing the right thing. His current paycheck certainly reflects that.

My best advice to EE's is to bite the bullet, retrain yourself to meet the engineering demands of this century and if you have it in you get a PE license that reflects the new demands for engineering talent. You all have a few years of hard work in front of you where some of life's recreational pleasures may get shoved aside in favor of pounding the books. Or you can just cry in your beer and apply for a job at Wally World.

By the way, remember that it took a pretty decent level of intelligence to get through engineering school. Even in today's economy there is a serious demand for high level technician skills in automotive mechanics and CNC machinists. So retraining should be easy study. I'm sure that there are other areas like that. Working in such areas even for just a few years will produce a terrific launching pad for a new engineering or entrepreneurial career.

I'm not sure that this is off topic; but if you think so, you won't hurt my feelings if you hit the "off topic" button.

Ed Weldon

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#15

Re: Engineering Projects Outsourcing

09/16/2009 9:02 AM

I posted message 13 requesting you to post a cost for a common antenna installation on an airplane. You replied to me with a PM essentially soliciting my business at a cost of $10/hour.

I posted with the intention of having you reply (directly to this thread) with a total cost to see if your 57 times cheaper claim has any validity to a real world job that I face every day.

Are you here to actually hear our ideas? Or is this a back door (and unethical, IMO) attempt to solicit business? I don't outsource at per hour rates. I issue "not to exceed" purchase orders to my vendors based on their "total job" quotes.

Hooker

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#16
In reply to #15

Re: Engineering Projects Outsourcing

09/16/2009 4:43 PM

Well, first of all I was talking about 5-7 times.

If you would like to know the total quote for that product implementation please provide me with more information. It's just impossible to set a price if I don't know exactly what you want. If you want to make a 3D model from your drafts this is one situation, if you need this antenna to be designed or redesigned or whatever, that's gonna be absolutely another thing. Why I named the price per hour because it really depends on the volume of efforts put into the project, and this is the point to start from. I guess no one is able to answer your question without asking for more information. In this way please give me all the details you have, want, with detailed instruction regarding the project and only after that I can name the cost!

Thanks!

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#17
In reply to #16

Re: Engineering Projects Outsourcing

09/16/2009 5:09 PM

Ooops, my bad. I misread the five-seven times thing. I have a tendency to speed-read sometimes and it came out fiftyseven in my brain. My apologies.

Anyway, what I was using as an example to be quoted is to have a commercially available Garmin GPS (GA-35) antenna mounted on a fairing on the front of the wing fairing of a DeHavilland (Bombardier) Dhc-8-100 aircraft. The job would entail designing a "doubler" (a reinforcement plate under the fairing that reinforces the area the antenna is mounted), the mounting method of the doubler to the fairing, and the mounting method of the antenna to the fairing/doubler combination. This would also require the inclusion of a structural analysis that proves that the mounting methodology is sound and within structural and aerodynamic limits.

This is pretty much the point I was trying to make. By the time I "educate" you (or most any other contract house) on the requirements I probably could do 10 of these installations. This is pretty much what has happened with any contract house I've ever tried to deal with in the aerospace industry. They are rarely target experienced for my needs.

Good luck,

Hooker

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#18
In reply to #17

Re: Engineering Projects Outsourcing

09/17/2009 4:18 PM

Yes, hooker, even though we do not deal with aerospace industry and with Dhc-8-100 very often I can say it's possible to carry out that project. Yes, it takes some time and efforts of both sides involved into the business but, in fact, it's meant to bring positive results in the long run. So, when you say you don't wanna waste your time 'educating' people might be it's a good idea to have at the end of your mind the prospective outlook of outsourcing for the future prosperity?

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#19

Re: Engineering Projects Outsourcing

09/19/2009 11:08 PM

Best 3D Solution......are you into cad design?

Outsourcing happening everywhere in all businesses.....all the time

What type of manufacturing are you intrested in?.... Best 3D Solution

or is it information regarding a business strategy sales aproach you are looking for?

We do outsource...what would you like to know?

Anthony

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#21

Re: Engineering Projects Outsourcing

09/19/2009 11:22 PM

the best 3D solution......the marketing approached in these forum.....have a lot of people looking at the post with very few people responding.......or the same people responding over and over again....go to the cad forum to get your work...have you got any work out of this or just pissed people off!!!!!!!!

this is for maufacturing not wankers!

oh and you can respond my details are in the last post we need out soucing in the toliet

RRRRRRRRRRRRRRRRRRRRRRRRR

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#22
In reply to #21

Re: Engineering Projects Outsourcing

09/19/2009 11:52 PM

G'day Tony

If an Australian accent and sense of humor is no problem could I have the job. It'll put a dint in your wallet but would keep me busy and with you as my boss we could do inspections together and marvel at my handy work. I can handle the soft substance, with the hard word attached to it, and responding here should prove my point, I hope.

Gosh what would we be with out humor? ;-D , Ky.

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