You and your company consider a variety of factors in deciding whether to offshore: market location, skilled worker pool, regional risk, etc. Apparently, innovation opportunity is not high on that list.
That was an early takeaway from our most recent Velocity webinar, which we held Tuesday, Feb. 19, and which is now archived.
We asked a series of questions during Wade McDaniel's hour-long presentation, “Is Outsourcing Dead?” One of those questions: “When considering offshoring, what is your most important consideration?” Market location was the top response, followed closely by the location of skilled workers. Innovation brought up the distant rear at 3.4 percent.
What gives? Innovation usually equals savings and time-to-market advantage, and one would think that might get more of a positive response. What's your take on this? Do those response rates resonate with you?
Let us know below and take the poll we’ve posted.
In addition, I invite you to check out McDaniel’s webinar. His thorough insights on and definitions of outsourcing trends were complemented by some really thoughtful questions from the audience.
In addition, help us flesh out the data by taking the poll nearby, which directly addresses this question.
If you survey USA companies about outsourcing for innovation I guess the response would be “no” but if you surveyed a developing country I would bet the answer would be “yes”. I encourage people from all over the world to fill in the survey so we get a measured response.
@Flyingscot Good point. If you want a truly global response, you need to be sure to reach a globally representative sampling.
@flyingscot… and @ariela… good inputs. Would you be willing to help “crowdsource” a global survey on the topic with us? (i.e. help craft the questions and scope?)
@Brian…outsourcing is largely a function of capacities and capabilities assessments. If I know what it takes to build my product, then I go looking for a CM with the experience, equipment, and efficiency that will help me get the best manufacturing results at the best costs. It wasn't too long ago that I needed some BGA package rework performed. The equipment for a thorough job included desoldering, reballing, and X-Ray inspection gear. One assembly house was disqualified immediately because they only had 2-D X-ray. The latest innovation was 3-D. In other words because they could not absolutely guarantee 100% solder integrity, they were going to have to charge for extra inspection methodologies. I found a house with 3-D and went with them. Over time, any assembly house is forced to adopt the latest innovations to remain competitive. So, your poll is time sensitive. Yesterday's innovation is today's standard. So, if innovation ranked low on the survey, consider the phenomena described above and re-ask the question, “when you consider off shoring, how important are capabilities and capacities?” Both are driven by innovations, but are hidden in priority being previous generation considerations that have evolved into “givens.” “Givens” eventually level the playing floor and therefore take a back seat to primary consideration discussions.
Douglas, good insights… need to think more about this…
Offshoring innovation has in general resulted greatly delayed products with poor quality and hence reduced market share. It may look lower cost for innovation, but when hidden cost is added to achieve same quality product, offshoring becomes more costly and not very attractive.
It would be a good way to get the task done quick and get a broader response range.
@FLYINSCOT,
Good point about surveying the right representative sample. But I do thing that responses from polsters from Western countries will matter the most as Western- based companies are the most concerned. What do you think about that?
Location of skilled workers matters in choosing the right offshoring location and a second important factor is operational cost. A third one would be market location.
Brain, 'is outsourcing dead', I don't think so. In my personal view still outsourcing has scopes, but may not from one country to another. It's happening with in the country/states across different countries. In my company, some of the functionalities are outsourced to third party agencies outside the company and within the country.
HH, it’s difficult to get all the favorable factors at one location. So companies are targeting to the best inorder to maximize their profit. Another option is outsourcing to other agencies with in their locality, so that both of them have the privileges of tax holidays and other privileges from states/countries.
Jacob, thanks for your comment. Could you expand on that a little bit? What country are you in and what functions are being outsourced as you describe? Thanks! Brian
Rather than outsourcing, we should be talking about concentration. Whether in the US or China, companies are worried about being too concentrated / dependant on one company or country.
How can they work around it? How feasible is it to have redundant supply chains?
The analyst Malcolm Penn was quoted this week as saying the semiconductor industry is now effectively single-sourced. This is 180-degree difference than 30 years ago when you have had to have a second-source because the processes were suspect.
Now granted, this is for silicon manufacturing which is complex and breathtakingly expensive today. But it's a trend that going to bite the industry in the butt at some point.
The $64,000 question, to your point, @Mr. Roques, is when to buy that redundancy insurance. It can't be purchased in silicon manufacturing, but it's still an option in other sectors of electronics.
Brain, am from India and my company are mainly in to embedded/ubiquitous domain. We have different departments for various functionalities staring from feasible study, design to end production. At various levels we had outsourced the works to third party companies/agencies for a smooth operation ans to reduce company's liability. For example some of the designs are outsourced to third part vendors, acquiring some of IPs from different vendor, purchase and procurement from another vendor etc. The only thing is we will do various quality checks at different levels.
“Rather than outsourcing, we should be talking about concentration. Whether in the US or China, companies are worried about being too concentrated / dependant on one company or country. How can they work around it? How feasible is it to have redundant supply chains?”
Roques, why can't. We always have a L1, L2, L3 suppliers for the same component. So if L1 is not able to provide the necessary items in time and quality, then the order goes to L2. So there is no dependency.