Business alert: costly incidents on the rise in manufacturing outsourcing; supplier communication compromised

Product life-cycle management vendor Arena Solutions recently conducted a survey in conjunction with Symphony Consulting concerning the challenges of manufacturing outsourcing, and best practices for addressing them.

09/13/2007


Product life-cycle management vendor Arena Solutions recently conducted a survey in conjunction with Symphony Consulting concerning the challenges of manufacturing outsourcing, and best practices for addressing them. While 85 percent of respondents outsource part or all of their manufacturing operations, nearly two-thirds risk the associated savings because they lack adequate control and processes. These manufacturers still use manual, time-consuming processes such as phone calls, faxes, and emails with spreadsheets. The high occurrence of errors that often result from these methods can lead to hard-dollar costs that eat up the very savings companies are trying to achieve by outsourcing manufacturing in the first place. In fact,
"While outsourcing offers significant financial merits and enables companies to focus on their core strengths, it is not free of challenges," said Bijan Dastmalchi, cofounder and senior consultant for Symphony. "Outsourcing manufacturing without the proper infrastructure and control is a recipe for failure."
The study found a majority of companies that outsourced manufacturing faced a number of significant challenges when working with their contact manufacturers (CM), including coordinating new product introductions, managing and communicating product changes, and communicating information across organizational and geographic boundaries. Perception among these manufacturers is that more effective collaboration with their CMs is critically important and will address these problems. For example, nearly eight out of 10 believe closer involvement and tighter control and processes with their CMs would reduce new product delays.
"Shepherding a product from design through manufacturing is difficult, but introducing outsourcing into the process pushes it to a significantly higher level of complexity. Despite the cost savings associated with outsourcing, the management task becomes even more difficult and carries greater risk," said Dastmalchi. "For manufacturers who are using manual, linear, error-prone, and complicated processes for managing their product record, I recommend they think strategically about the kind of infrastructure they need for support in managing the challenges that come with outsourcing, such as new product introduction, compliance, and change management, for example."
Only 32 percent of respondents currently use a product lifecycle management (PLM) system as a shared "information infrastructure" to manage product information and share it with their CMs. These companies that have a PLM system report experiencing fewer outsourcing problems compared to companies that rely on manual processes for communication regarding new product introduction, change order management and environmental compliance management issues. Three out of four of the respondents who currently use manual processes recognize improvements are needed, and are taking steps to improve their systems.
The research showed even greater advantages came from using on-demand PLM software (also known as software as a service or SaaS) versus traditional client/server systems. On-demand PLM software requires no special hardware or IT staff, is easier to deploy than client/server software and is accessible from anywhere in the world through an ordinary web browser and Internet connection. Specifically, respondents who use on-demand Arena PLM report 40 percent fewer hard-dollar incidents related to excess inventory and unplanned rework. Leading to these results is the fact that Arena PLM users who responded to the survey report significantly fewer outsourcing problems than those using traditional client/server PLM, including:
—32 percent fewer problems with new product introduction;
—29 percent fewer problems with environmental regulatory compliance; and
—26 percent fewer problems with product change management.

"With manufacturing dispersed around the globe, companies need a common infrastructure for sharing product information with their CMs to reduce hard-dollar incidents that can result from common outsourcing issues. Hard-dollar incidents can take their toll on manufacturers, especially those in the mid-market where margins are often tight and reducing time and costs is critical, and consume expected savings from outsourcing," said Michael Topolovac, CEO, Arena Solutions. "Underscoring the magnitude of the risk is the common belief that the cost of product changes increases ten-fold each time errors move into the next development cycle, from design through manufacturing. Having a PLM system—particularly one that is easy to use and deploy—that helps manufacturers reduce the incidents of late-stage changes is crucial."
The results of the study shed light on a very important trend in manufacturing and offer insight to what steps manufacturers must take to be successful with their outsourcing. More information can be found at www.arenasolutions.com/newsandevents/events/index.html .





No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2013 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
The true cost of lubrication: Three keys to consider when evaluating oils; Plant Engineering Lubrication Guide; 11 ways to protect bearing assets; Is lubrication part of your KPIs?
Contract maintenance: 5 ways to keep things humming while keeping an eye on costs; Pneumatic systems; Energy monitoring; The sixth 'S' is safety
Transport your data: Supply chain information critical to operational excellence; High-voltage faults; Portable cooling; Safety automation isn't automatic
Case Study Database

Case Study Database

Get more exposure for your case study by uploading it to the Plant Engineering case study database, where end-users can identify relevant solutions and explore what the experts are doing to effectively implement a variety of technology and productivity related projects.

These case studies provide examples of how knowledgeable solution providers have used technology, processes and people to create effective and successful implementations in real-world situations. Case studies can be completed by filling out a simple online form where you can outline the project title, abstract, and full story in 1500 words or less; upload photos, videos and a logo.

Click here to visit the Case Study Database and upload your case study.

Maintaining low data center PUE; Using eco mode in UPS systems; Commissioning electrical and power systems; Exploring dc power distribution alternatives
Synchronizing industrial Ethernet networks; Selecting protocol conversion gateways; Integrating HMIs with PLCs and PACs
Why manufacturers need to see energy in a different light: Current approaches to energy management yield quick savings, but leave plant managers searching for ways of improving on those early gains.

Annual Salary Survey

Participate in the 2013 Salary Survey

In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.

Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.

2012 Salary Survey Analysis

2012 Salary Survey Results

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.