Download
the successful management of offshore development manufacturing projects n.
Skip this Video
Loading SlideShow in 5 Seconds..
The Successful Management of Offshore Development & Manufacturing Projects PowerPoint Presentation
Download Presentation
The Successful Management of Offshore Development & Manufacturing Projects

The Successful Management of Offshore Development & Manufacturing Projects

198 Views Download Presentation
Download Presentation

The Successful Management of Offshore Development & Manufacturing Projects

- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

  1. The Successful Management of Offshore Development & Manufacturing Projects Developed by Martin Wartenberg for UCSD EPSE September 24, 2012

  2. Workshop Topics In Scope • Role of Management • What types of projects are most suitable for outsourcing/off-shoring? • Which of the current business models is most suitable for your organization and project? • Some consideration as to which Country to select for your off-shoring venture. • Some Technical issues related to Global Product development (Hardware or software) Martin Wartenberg for UCSD EPSE

  3. Workshop Topics Out of Scope • Discussion as to whether Outsourcing is a good or bad practice or political issues • Detailed discussion regarding implementation and execution of Multi-Site projects • Detailed discussion of managing complex technical product development Martin Wartenberg for UCSD EPSE

  4. EPSE Industry Perspective EPSE 2011 Graduating Class • Commercial Aerospace • Military Aerospace • Ship Building • Government Telecom • Commercial Telecom • Commercial Product Development (HW, SW & Mfg) • Pharmaceutical Development and Manufacturing Inputs in Appendix

  5. Outsourcing & Off-Shoring Have Been Around For a Long Time! • The Swiss Guards (US & other Security firms in Iraq and Iran) • Hessian Soldiers • Food Services • Security Services • Personal Items * Cleaning * Gardening service * House Cleaning * Child Care Martin Wartenberg for UCSD EPSE

  6. Definitions • Process or Product Outsourcing (Design, Manufacturing) • The transfer of management and execution of an entire business process to an external service provider, including technology, people, and process. In engaging BPO services, clients are buying access to executed business processes and business outcomes from their BPO providers. • The delegation of one or more intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics. (Gartner) • The transfer of a function previously performed (or considered to be performed) in-house to an outside provider.

  7. More Definitions • Near shore Sourcing: sourcing services from geographies within close proximity to the location in which the services are consumed or contracted. • Offshore Sourcing: sourcing services from geographies at a considerable distance from the location in which the services are consumed or contracted. • Global sourcing: a corporate sourcing strategy that identifies and leverages those human resources and assets, regardless of geographic location, most appropriate for meeting the organization’s needs, often coming from both near shore and offshore locations. • Insourcing: sourcing services internally as opposed to through a third-party provider. Often provided in a centralized shared services environment. • Global Product Development for complex engineered systems

  8. Martin Wartenberg

  9. Roles and Responsibilities • Executive Management (C Level) Strategic cost, marketing and technical issues • Middle Management (D Level) Convert strategic objectives into tactical approaches and methods • Line Management (M and S Levels) Carry out and execute on the strategies and objectives developed Martin Wartenberg for UCSD EPSE

  10. Questions to C Level Executives • What are the business reasons? • Do you understand the outsourcing process? • Do you know what the impact will be on the organization? • Do you understand your own operation and the costs involved? • Do you fully understand the economics of the outsourcing? • Will you be able to downsize to realize the cost savings? (if applicable) • Who will lead the effort and be responsible? • Have you figured out how you will manage the outsourced service for the future? • Have you thought through the global risks (Earthquakes, Tsunami’s, wars, political unrest) Martin Wartenberg for UCSD EPSE

  11. Risk Management: Intellectual Property • IP Risk: the greatest barrier to improved international business • Recent study: Software Piracy is rampant around the globe* • 30-40% in India, Vietnam and China (2nd shift products) • 80-90% in Russia, Ukraine and Bulgaria • R&D may want your services but Corporate Attorney says No due to IP risks • References (current and reputable) • Honest communications throughout… • The Need for Consortia and New Legislation *Gartner report quoted in CIO.com

  12. What types of projects are most suitable for outsourcing/off-shoring? • Software - Development (IT, System, sub-sets) • Designs (System & Subsystem, Component, ASIC, Circuit, etc.) • Business Processes • Manufacturing – Continual Flow not Job-Shop • Help Desk, call centers, • Pharma R&D / Low cost production • Clinical Trials Martin Wartenberg for UCSD EPSE

  13. Key Items for Consideration • Relationship to the organizations core competencies and competitive advantage • Ease of specifying the necessary design services – what we learned from Mfg • Potential for changes and iterations due to external factors • Local availability of key resources • Relationship of product or service needs to the three project variables of cost, schedule & performance • Is it safer to build to print or build to spec.? Martin Wartenberg for UCSD EPSE

  14. Steps for Implementation • Determine and articulate why you are out-sourcing- Charter document like any project • Identify and get inputs from key stakeholders • Select the functions/projects to be out-sourced • Bench mark current costs and parameters for performance • Prepare a business case for the outsource efforts Martin Wartenberg for UCSD EPSE

  15. What Countries or Regions Can I Choose From? • India Dubai • China Poland • Malaysia Czech Rep. • Mexico Brazil • Philippines Chile • Fiji Argentina • Hawaii Quebec • Russia • Eastern Europe • Israel • Egypt • Argentina • Canada • Ireland • Singapore It Depends on ?? See Appendix for Kearney Index Martin Wartenberg for UCSD EPSE

  16. Things to Consider in your Selection! • Proximity • Importance of Proximity • Language • Availability of Infrastructure • Cultural differences • Availability of best practices (i.e.: CMMI ISO, ANSI, or other standards) • Stability and Safety • Protection of IP Project Management and Development Best Practices Martin Wartenberg for UCSD EPSE

  17. Outsourcing Plan • Document objectives • Options/Alternative analysis • Define the scope and boundaries of services • Prepare and validate service requirements • Identify potential sources and determine their qualifications • Involve appropriate level of management in the review and selection process • Communicate with all personnel likely to be effected by the decision and selection • Short-list potential suppliers and prepare a definitive request for proposal (RFP) • Evaluate suppliers proposals and make a selection • Identify the internal outsource project management team • Negotiate the contract and agree on the service level and other key methodologies • Manage the transition and the contract Martin Wartenberg for UCSD EPSE Successful IT Outsourcing - Sparrow

  18. Contracting Methods • Firm Fixed Price (FFP) • FFP Incentive • Cost Reimbursable • Cost Reimbursable – fee negotiable • Time and Materials (T & M) • Fixed Price – Award Fee • Body Shop – Negotiate • Others Considerations – Liquidated damage clauses, personnel assignments, etc. Martin Wartenberg for UCSD EPSE

  19. Contract Determination • Find a Contract Administrator is has experience in the specific country • Depends on how well you know the specifications • Depends on how well you know the vendor • Depends on how you will handle changes • If you are going into China or Vietnam, it doesn’t really matter (current issue) • Other factors to consider? • The type and wording of your contract is absolutely critical Martin Wartenberg for UCSD EPSE

  20. Simple Total Cost Non-Recurring Costs: Qualifying Costs New Product Introduction Quality or Reliability Issues Warranty Requirements Travel Requirements Initiatives such as Lean or 6 Sigma Recurring Costs: Purchase Price Logistics Costs Administrative Costs On site Labor Source Charlie Barnhart & Associates LLC

  21. Comprehensive Total Cost Previous Slide Plus – Factors to Accommodate: Geography of Supplier Engineering Change Activity Lot Size Product Mix Product Complexity Lead-Time Flexibility Compliance Cost of Money Required Inventory

  22. True Total Cost of Global SourcingFrom the USA (Manufacturing) Mexico Add 21% Eastern Europe Add 25 % SE Asia Add 21 % China Add 19 % Source Charlie Barnhart & Associates LLC (revised for 2011) “These are estimated costs based on additions including both legal and quasi legal issues, re-work, transportation, etc.

  23. Global Product Strategies Local and International Environment Firm’s Internal Situation Competitive Situation Product Strategies Customer Needs & Price Elasticity

  24. A Testable Framework of Product Adaptation Product and Industry Technology Orientation of Industry Product Uniqueness Cultural Specificity of Product Type of Product EXPORT MARKET COMPANY Similarity of Legal Regulations Firms International Experience Product Adaptation - Upon Entry - After Entry Promotion Adaptation - Positioning - Packaging/Labeling - Promotional Approach Export Sales Goal for the Venture Competitiveness Of Export Market Product Adaptation - Upon Entry - After Entry Promotion Adaptation Positioning Packaging/Labeling Entry Scope Product Familiarity Of Export Customers h Source: S.T. Cavusgil, Shaoming Zou, and G.M. Naidu. “ Product and Promotion Adaptation in Export Ventures: An Empirical Investigation,” Journal of International Business Studies 34, no7, (2010-,485).

  25. Sourcing Location for Complex System Design Make Offshore Buy Offshore Make Onshore Buy Onshore Coordination Requirement Low High Low High Strategic Content and Value Martin Wartenberg for UCSD EPSE

  26. Development Process for Complex Systems • Component or task development Component or task development Systems Integration Systems Architecture Development Maintenance and support Manufacture Martin Wartenberg for UCSD EPSE

  27. Intel Microprocessor Development • Multiple “owned” locations • Two main parts multiple cores supported by uncore • All facilities validated to be able to do all designs using the same tools and methods • Teams co-located at designed “home site” (drawn from all sites) • Standard four stage methodology Martin Wartenberg for UCSD EPSE

  28. Lead Design Specialty Sites • California – design productionization • Oregon – Desktop series UP • Colorado – High-end UP design • Massachusetts – High end UP design • Israel – Mobile technology • Moscow – Under development – generic designs • Bangalore – Under development – Mobile designs • San Diego & LA – Embedded software (Windriver and Trillium Divisions) Martin Wartenberg for UCSD EPSE

  29. Phase Development • Phase 1 Global Architecture at Home Site • Phase 2 Core Processor design – at many sites • Phase 3 Chip Integration – Home Site • Phase 4 Productionization and Manufacturing Preparation • Manufacturing at many sites Martin Wartenberg for UCSD EPSE

  30. Cessna Aircraft Division of Textron Industries • Divided Mid size business jets and turbo prop utility aircraft into 6 sections and 7 Distributed Systems Empennage Engine Package • Distributed Systems • Structure • Avionics • Electrical System • Hydraulic System • Flight Controls • Pneumatics • Fuel System Cockpit Tail cone Cabin Wings Martin Wartenberg for UCSD EPSE

  31. Design Approach • Cessna joined the Textron Global Technology Center in Bangalore India • Part of the design center specialized in Cessna specific technologies • Cessna Corporate remained responsible for over –all systems design and integration • Detailed interface designs used to manage global vendor supply chain – Interchangeable sections and distributed systems (very mixed results) • All vendors/partners/divisions followed the Textron based 7 step New Product and Service Introduction (NPSI) design process • Vendor and partner engineering teams co-located during the initial design and development activities Martin Wartenberg for UCSD EPSE

  32. Honeywell-Aerospace Task Based Off-Shoring • Task assigned to the Advanced Manufacturing Engineering Group • Options included Local Current sites (Arizona and New Jersey), Medium cost sites close to local sites (Rural USA, Puerto Rico), Low cost distant locations including India, China, Vietnam Martin Wartenberg for UCSD EPSE

  33. AME Decision Process Steps Step 1: Create a full list of tasks that AME is responsible for carrying out – tasks that had to remain on-shore identified including tasks that should be co-located. Step 2: Identified those tasks that required a lot of coordination and ranked based on complexity of tasks and likelihood of ambiguity Step 3: For each task considered for outsourcing – team identified all labor costs including any extra coordination or travel or other ancillary extra costs Step 4: For each potential location – rates and efficiency factors were applied (Not all locations are equal) Step 5: An optimization model was created to balance all factors and determine recommended approaches and places Martin Wartenberg for UCSD EPSE

  34. Marty’s Personal Recommendations • If you are interested in only cost savings (35-50%) and have no strategic goals stick with top name Indian firms (WiPro, Infosys, etc.) If you understand your requirements well enough to spec. them well and don’t have many changes. In hardware go to established firms like Flextronics • If you want to extend your firms capabilities and wish to save 10 to 20% in cost – try Canada and especially Quebec Province • If its your first venture – try near shoring to Canada (Burnaby BC, Quebec and Toronto) or the Philippines or Puerto Rico • Don’t outsource your competency ever • Plan on traveling to the ODC for regular reviews • Don’t plan on saving money in the first year of your out-sourcing experience • If your IP is important to you, stay away from certain countries that will steal your stuff Martin Wartenberg for UCSD EPSE

  35. Hardware Lessons Learned at QSC Audio • Large Manufacturing Company in Costa Mesa (High end Audio Eqpt.) • Plants in U.S, China, Vietnam, Indonesia • Vendors in Europe, Malaysia, Korea & China • Does not do “build-to-print” • Requires build to spec with local QA and testing • Only does business in China with Taiwanese or Hong Kong owned business • Relationship established at the CEO level Martin Wartenberg for UCSD EPSE

  36. Design Lessons Learned at Pulse Link • Venture based Ultra Wide Band Products • Complex ASIC’s subcontracted to a Russian Firm • System Engineering subcontracted to consulting firm • Product delays and loss of key technical edge Martin Wartenberg for UCSD EPSE

  37. Lessons Learned at Wind River & Trillium (Now part of Intel) • Medium sized Embedded Operating and Specialty software companies. • Picked a reputable Indian Partner in WiPro • Build a pilot program for the first 5 developments for each company. • On-site WR & Trillium representative in Bangalore and Lahore and a WiPro Rep in Alameda and Los Angeles • Frequent reviews both in U.S and India • Relationships established at the working level • Mutual respect and a continual cross-flow of personnel Martin Wartenberg for UCSD EPSE

  38. Hints for Future Implementation • Mistake proof your design or build documentation – language, culture, ambiguity, etc. (Poka Yoke) • Train out-source project or functional managers and make sure they are suitable (Communications, temperament, other sensitive issues) • Be prepared to travel to site on a regular basis for both formal and informal reviews • Be prepared to establish relationships outside of work • Set-up good communications systems with sites and common tools • And for all your sakes don’t completely rely on E-Mails or texting as your primary communication media Martin Wartenberg for UCSD EPSE

  39. Any Questions? The “Follow the Sun” approach is a myth in most cases – Did it work at Qualcomm? Martin Wartenberg for UCSD EPSE

  40. Appendix Materials • Global Index • EPSE 2011 Perspectives • Alternatives to Outsourcing • References Martin Wartenberg for UCSD EPSE

  41. McKinsey Study from 2009 and reported by WiPro (India) Gartner reports indicate that India is dropping from an 80% SW support market share to 58% by early 2012) Canada Dubai Quebec Czech Poland Updates through 2011 from interim Gartner reports Martin Wartenberg for UCSD EPSE

  42. Kearney Global Consulting Off-Shore Attractiveness Index for Software • India (90)-dropped to 82 • China (72) reduced to 68 based on recent Quality Issues (CMMI) • Malaysia (70) • Dubai (66) • Czech Republic (60) • Singapore (66) • Philippines (60) to 66 • Quebec Canada (54) • Poland (50) • Hungary (50) • Canada (50) • New Zealand (44) • Chile (48) • Brazil (52) • Israel (56) • Ireland (46) Index is based on a combination of cost, depth and quality of software engineers, infrastructure and government support, stability, language skills, understanding of business practices and five other factors. Martin Wartenberg for UCSD EPSE

  43. Kearney Global Consulting Off-Shore Attractiveness Index for Manufacturing • China (80) • Malaysia (74) • Mexico (48) down a lot • Bulgaria (68) • Czech Republic (64) • Singapore (64) • Philippines (60) • Poland (56) • Hungary (56) • Canada (50) • New Zealand (50) • Chile (44) • Brazil (46) • Israel (46) • Ireland (40) • Vietnam (52) up a lot Index is based on a combination of cost, depth and quality of workforce, infrastructure and government support, stability, language skills, understanding of business practices and five other factors. Martin Wartenberg for UCSD EPSE Medium Technology

  44. EPSE Class Inputs from 2008 through 2011 Examples of Doing Outsourcing/Off-shoring Right!

  45. These are your inputs! • Goodrich Aerostructures • Hughes • NASSCO • Illumina • Teledyne • ViaSat • BAE Systems • HP

  46. Industry Perspective • Commercial Aerospace • Military Aerospace • Ship Building • Government Telecom • Commercial Telecom • Commercial Product Development (HW, SW & Mfg) • Pharmaceutical Development and Manufacturing EPSE 2011 Graduating Class

  47. Software Development • HP experience (HP facility)– Expertise level of “off shore partner” group (keep work level low and periodically “throw them a bone” (i.e.: a little more challenging work) Skill levels plus time zone issues • Hughes experience – Issues with culture and quality of results (some good teams) • BAE Experience – Specialized areas (Info security, etc.) on a sub system basis (Localized and isolated) Some issues with interdependencies • Teledyne – Some problems with new development error rates but no worse than local design

  48. Product Development & Build • NASSCO – Mostly Good experience with some problems with turn-around times and lost damaged materials (Mexico & Korea) Have worked through most process issues • Goodrich Aerostructures – Very good results – can be identified as a tight coordination and on-going work with outsource partners (globally) Have had to cancel contracts and do some hand holding • Teledyne – Circuit boards, etc. – late delivery problems periodically • Illumina – Some design, manufacturing – some culture issues but mostly going well.

  49. Lessons Learned • Very similar to most industry problems • Design to spec. and define work early and often • Check on work while in progress. • Provide hands-on assistance until they can stand on their own • Take action when your not getting what you want/need • Do it incrementally as you keep getting better

  50. Alternative to Outsourcing for Engineering/Programming Projects • What are your technical and scientific folks really doing? • Internal Productivity improvements by actually using what their degrees are in! • Provide lower cost technical support (Look at the Medical Model) • Use Lean Six Sigma to improve the design and development process • Really understand the impact off outsourcing on burden/OH rates and impact on other work. Bring work home! Martin Wartenberg for UCSD EPSE