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Outsourcing of System Development and Smart Customization: The 5 Advantages

Published: Richard van Lieshout

Many high-tech machine builders are currently dealing with a shortage in capacity, especially in the realm of engineering. Consequently, problems arise. Examples of such issues are excessively long lead times, struggles in the field of innovation and a lack of flexibility toward the market. Many companies choose to hire temporary employees with specific knowledge to fill the gap. Yet often, this fails to yield the desired result. Even though the outsourcing of system development and/or smart customization is a smart alternative, it is an often overlooked option.


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Outsourcing expands beyond the boundaries of a project

First of all, let’s explain how outsourcing can be defined in this context.

The outsourcing of system development or system optimization expands beyond  a single project. What it really revolves around is the creation of a relationship that allows you to offer your customers their desired flexibility.

Since some companies make full use of their engineering capacity, they are searching for an extension of their organization. Understandably, these businesses are hesitant to share confidential data and information with others. In this sense, it is wise for an OEM to establish a partnership with a companion that understands the DNA of the organization. When you choose to outsource, you should choose for a trustworthy partner – your knowledge may not be shared outside of this collaboration.  

Now that we have defined the term ‘outsourcing’, we are going to look into the most crucial advantages:

Advantage #1: Innovation thanks to far-reaching and domain-specific knowledge

A valuable development partner is not only knowledgeable in your own market and domain; this company owns extensive knowledge and skills in other domains as well. This enables them to suggest solutions and innovations that take your product to the next level.

Suppose a customer is in the semiconductor industry. During the development phase of a new product, the system supplier discovers similarities between the agrofood sector and the semiconductor industry. It may well be possible that some of these familiar principles in agrofood have not yet been applied in the semiconductor industry. By applying these valuable ‘hidden’ principles – and by taking a broad perspective – a great partner shapes and creates innovations.

Advantage #2: Contribution to the realization of your roadmap

Each organization has specific wishes. A partner that truly adds value to your company examines your roadmap too. For example, achieving significant cost reductions – including an annual decrease in cost price – may be a goal for your company. In turn, your partner should take this into consideration and work together with you to continuously improve your roadmap outcomes.

Advantage #3: focus on total cost of ownership

The right partner thinks and operates in terms of Total Cost of Ownership (TCO). If a certain product is too expensive, you do not sell anything. Many organizations merely examine initial costs and disregard additional development costs and user costs.   

Roughly 80% of the total cost price is determined during the development phase. During this stage, it is pivotal to make the right choices – regarding system architecture, technology, hardware, software and materials. The manufacturability of the machine should be guaranteed as well.

The result? You will not have any additional costs and you can split your investment into smaller expenditures.

Advantage #4: increased flexibility 

Machine manufacturers often experience a volatile market with inconstant product flows. Consequently, you have to be flexible to be able to meet customers’ wishes and expectations. By choosing for an outsourcing strategy, you increase the flexibility within your organization.

The reason why is relatively simple: through outsourcing you employ additional capacity, meaning you can do more in any given time span. In the end, this makes you more flexible. The available engineering capacity determines your flexibility to a large extend. In case insufficient engineers are available, you cannot start any new projects.

 

Advantage #5: Shorter lead times

Development often focuses on the functional aspects of a system: it should be working – preferably better than the customer expects it to function. It is essential to meet deadlines in the planning, to ensure the desired lead time become a reality.  

Regularly, we observe a rather unsuccessful new product launch. The machine or system is too complex, sometimes overspecified and as a result too expensive. The design failed to take industrialization into consideration. Because of this, your company will have to execute another iteration to ensure the system is ‘production proof’. The outcome? Double the workload, double the money and double the time. 

We are not only talking about the development of innovative machines, we involve serial production and total cost of ownership too: Can the product be produced at the lowest possible cost price? By utilizing the engineering capacity of a development partner, you can produce more in any given time period. Moreover, by collaborating with a partner that is knowledgeable in the field of industrialization you can launch your products more quickly into the market. A partner who can achieve the latter simultaneously takes care of the development process and industrialization process. For example, the first prototype already considered manufacturability, serial production and the ease with which the machine can be assembled. This results in a relatively short lead time.

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To summarize, the outsourcing of system development or smart customization to a partner with far-reaching knowledge in the fields of engineering and industrialization brings you many advantages. It is a smart way to enlarge your engineering capacity and to improve competitiveness.

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