In this series of blogs, Mark Danna, Owens Design’s VP for new business development, will highlight common mistakes that can cause an outsourced partnership to fail and detail a methodology for approaching an outsourcing agreement that can minimize the risk and costs involved and help ensure a successful partnership.
In When to outsource: Ask the right questions and avoid pitfalls, we discussed some of the key questions that need to be asked to determine if outsourcing is the right solution for your company. Today, we’ll cover the questions to ask when you’re looking for the right outsourcing partner on a particular project.
August 31, 2011 — When choosing a partner for a strategic outsourcing alliance, you first must assess your own company’s attributes. What problem are you trying to solve, and what strengths do you have that you can bring to bear on the problem? Having a clear picture of what you are bringing to the table can give you a much better idea of the kind of company you want sitting on the other side, and what it is you want them to bring to the partnership.
Company size is one of the more important and oft-overlooked attributes to consider at this point. It’s your company size that determines the optimal size of your partner. If you are a small start-up, for example, you may want to avoid the problem of ‘the tail wagging the dog" that can occur when partnering with a big company. In general, it’s best to partner with a company whose economic stake in the success of the shared project is equal to your own.
Once you’ve examined your company’s attributes, do the same for your potential outsourcing partner. What kind of experience does the vendor have in your particular markets? What kind of track record does it have collaborating with companies on projects similar to yours? This includes not only successfully completed projects, but the way in which they were completed. Does the vendor in question have a history of being responsive to its clients? Is it reliable in terms of delivering on time and at cost? How many repeat customers can they point to?
What about the personnel the vendor will be assigning to your project (number, level of expertise? If your company competes in a variety of regional markets, does your potential partner have the capability to provide you with the needed level of technical support in those regions? Asking these questions at the beginning of the outsourcing process can help narrow the field.
Having determined the general attributes you want in your outsourcing partner, determine the kind of partnership you want. In most cases this will depend on project complexity and its current stage of development. In any case, this is something that should be decided long before you settle on a final partner.
There are generally two approaches to outsourcing. In one, the outsourcing partner accepts the project as presented and simply executes on the specifications presented. In the other, the outsourcing company works with its partner to clarify the scope of the project and actively contributes to the development and possibly the manufacturing process. The first approach may work if the project under consideration is relatively simple and straight-forward. The more complex the project, however, the more the second approach becomes the optimal solution. This is also the type of approach that most often results in a long-term, win/win relationship for the two companies.
The final issue to consider is the current state of the project. If the project is at an early stage in the development cycle, for example, you may require outsourced support for development, design and testing. If the project involves ramping up production of an already proven product, then the necessary outsourcing support is more likely to involve volume production. As many a company has discovered when trying to take a new product from design to manufacturing, different skills are required at different points in the product development cycle. Does the outsourcing partner you are considering have the skill set that matches the problem you are trying to solve?
Picking the right outsourcing partner is one of those critical decisions that can significantly impact the success or failure of a particular product in terms of production cost, quality and time to market. Asking the right questions at the beginning of the process can minimize the risks involved. There are really two sets of questions: one internal to the company seeking an outsourcing partner, focused on the attributes needed and the kind of relationship desired; and the second about the project itself, scope, and the stage of the development process. Once you’ve settled on an outsourcing partner, then there are another series of questions that must be answered before the project can go forward: ownership of particular responsibilities, intellectual property confidentiality, costs, timelines and final deliverables.
Catch up on this series by reading When to outsource: Ask the right questions and avoid pitfalls
Next, we’ll have "How to qualify your outsource selection before you write the check."