FOSTER CITY, CA – “Outsource manufacturing is becoming the de facto strategy.”

So says PLM software provider Arena Solutions, which, with Symphony Consulting on Tuesday, announced results of their joint outsourcing survey.

Mark Holman, senior VP, operations, for Arena, discussed findings after surveying more than 800 mid-market OEMs, 85% of which have some level of outsourcing.

Of survey participants, 41% have an engineering role of some kind; 36% are involved in manufacturing procurement; 9% deal with quality issues, and 4% listed “other.”

High-tech was the largest group of respondents, which Holman believes reflects the importance of outsourcing in the high-tech industry. 10% fell into the industrial category; 10% were in medical arena, followed by consumer, automotive and other.

Some 72% of respondents’ firms have below $250 million in revenues, while about half have below $50 million annually. Seventy-eight percent have less than 1000 employees, and more than one-third have less than 100 employees.

Virtually all participants (97%) suffer from communication and collaboration challenges, Holman said. And a full two-thirds have not put something in place yet to abate these challenges.

The challenge of NPI coordination received a 65% response. NPI management is slowing the ability to get product to market, said Holman. Product change management was the second most noted challenge, at 64%. Fifty-seven percent responded that inter-company communication is a challenge.

Sixty-five percent don’t involve contract manufacturers in the design change process, and less than 15% are informing their second-tier suppliers of changes.

Forty percent said compliance management is a problem. Holman attributes compliance being a lower number than some of the other challenges because it hasn’t quite reached the enforcement stage yet (based on audits); he believes this could still be a larger issue in the future.

The majority of respondents have experienced “hard dollar impacts” from poor processes and procedures, said Holman. Fifty-two percent experienced hard losses because of wrong or obsolete parts – or even recalls, to name a few. More than half have not just had soft impacts, such as delayed products. 

Holman noted, “Mid-market OEMs have complex supply chains. They are emulating Fortune 1000 companies and are outsourcing with multiple contract manufacturers.”

Fully 25% have outsourced a product entirely, according to the survey, and 92% have some level of outsourcing procurement. Virtually all have a multi-plant configuration.

Twenty-five percent of respondents said they are satisfied with their outsourcing infrastructure, while 60% are investigating solutions; only 15% are actually in the process of implementing solutions.

“Outsourcing is becoming a fact of life, a core strategy for manufacturers of all sizes,” summarized Holman. “The challenge of leveraging outsourcing is that you must have the right implementations so as not to erode the benefits.” And Arena believes on-demand is the right answer. 
 

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