Today’s manufacturers of highly engineered products are faced with the most challenging environment in history. Traditional cost pressures, demands for improved quality and increased customization are exacerbated by increased global completion from small and large competitors alike. So how is today’s domestic manufacturer supposed to compete? The traditional answer of growing top line revenues while reducing expenses still works, but most companies have already attacked their most basic problems and are cautious, for good reason, to take on large improvement projects.
One compelling process improvement is the use of embedded offshore resources. At up to one third the wage rate and with an average education level one to two times that of a domestic resource the cost benefit is obvious. However, just adding offshore resources isn’t enough. The correct application of embedded resources can make a substantial improvement to your business beyond that of simply lower cost resources.
In order for this to work it has to be done right. This white paper explores this premise in more detail.
Today’s U.S. based Engineer to Order (ETO) manufacturer faces a number of challenges. Customers, both individual and institutions, have steadily increased the pressure to:
Competition has grown to include international small and medium businesses (SMBs) along with large multinational corporations who are looking to continue to grow by increasing their share in niche markets they previous refused to serve.
So how is today’s domestic manufacturer supposed to compete? The traditional answer of growing top line revenues while reducing expenses still works, but most companies have already attacked their most basic problems and are cautious, for good reason, to take on large improvement projects.
Businesses are now focusing on smaller process improvement projects. The subsequent improvement to both customer facing metrics (on-time delivery, high quality ratings) and internal measurements (estimated vs. actual costing, mean time to project launch) can be accomplished in a number of ways
Today’s market for those providing highly engineered products and components are more challenging than ever before. Increased cost pressures, demand for customization, an explosion of the number global suppliers, and larger companies looking to serve niche markets are forcing manufacturers to change their business model. These pressures often manifest themselves in some less than effective work practices as SMBs and their employees struggle to keep pace. Some examples of these include:
The benefits of addressing these problems and pain points are numerous including:
There are a number of solutions to challenges outlined above, but all of them involve adding resources or improving technology and equipment. Ultimately it’s the business case and the underlying cost-benefit analysis that drives which investment into the operation is best. In this case let’s explore the use of embedded offshore resources.
Let’s first consider the fully loaded cost of a resource qualified to perform product or manufacturing engineering (2D drafting, CAD/CAM/CMM Programming, etc.).
Skilled Engineering Resource Cost:
Includes Social Security/FICA, Unemployment/FUTA, Medicare, Workman’s Compensation Premiums, Life Insurance, AD &D Insurance, Long-term disability, Health, Dental, Vision, Dependent Care, Tuition Reimbursement, Retirement Plans, etc.
This is compelling savings but the real win comes in the form of impact of improving the below business metrics:
Another, often unanticipated, benefit to customers of embedded offshore resources is increased employee satisfaction. The estimating/bid teams for most ETO companies is one of the most overtasked and stressful teams. By adding resources that remove much of the mundane work behind bid building, that team ends up focusing on the most critical portion of each bid coordinating with manufacturing, sales and other team members and orchestrating better bids that are more timely delivered. It doesn’t take this team long to learn that the embedded offshore team is there to help and not to replace them.
In order to facilitate accomplishing the above there are some critical of the best practices that success businesses follow.