According to the latest study by Roland Berger Strategy Consultants, outsourcing engineering and design services allows for increased flexibility and cost reduction for both suppliers and original equipment and component manufacturers in the automotive industry. The main observed trends are:
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an increase in spending on R&D outsourcing by 4-5% annually in the coming years,
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benefits for suppliers and original equipment and component manufacturers in the automotive industry resulting from the outsourcing of design and engineering services include: cost reduction, increased flexibility, and access to missing knowledge and technology,
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the benefits of outsourcing can only be realized through proper management of the process. A lack thereof may lead to negative effects.
Suppliers and original equipment and component manufacturers in the automotive industry are under increasing competitive pressure. A response to this can be the outsourcing of engineering and design services, which offers the potential for cost reduction, increased flexibility, and access to missing knowledge and technology. In particular, entities from developing countries have a lot to offer. They have access to qualified engineers whose salary costs are lower than those in developed countries. Their advantage also lies in developed concepts for building low-cost cars. Due to a steep learning curve, these entities are developing their competencies very quickly by engaging established market players in cooperation.
There is no doubt that suppliers and original equipment and component manufacturers in the automotive industry will have to come to terms with a higher level of standardization and cooperation in terms of technology. This should allow for the optimization of rising R&D costs. One of the levers for optimizing these costs can be the outsourcing of engineering and design services. Even those entities that carried out these activities within their own structures (insourcing) during the crisis will need external resources to cope with the growing number of solutions and their technological diversity.
Compared to the outsourcing of IT services and other business processes, the outsourcing of engineering and design services on a global scale is a new trend in the automotive industry, but its importance is constantly growing. In 2008, the share of outsourcing in total R&D spending was 10%, while in 2013 it was expected to rise to 13%, which represents an increase of 4-5% annually. Total R&D spending in this period will decrease by 0.1% annually. Therefore, the largest increases will be recorded in the case of electronics and engines, while stagnation is expected in the case of interior equipment. The outsourcing of engineering and design services significantly contributes to reducing operating costs, increasing flexibility, and enables access to missing knowledge and technology. In the short term, cost reduction is seen as the most important benefit. Cooperation with engineering and design service providers allows for the reduction of one’s own fixed R&D expenses. Outsourcing requires additional costs resulting from the coordination and supervision of this process; however, these are still about 25-35% lower than the internal costs incurred as a result of insourcing. At the same time, outsourcing does not have to involve reducing one’s own staff. Often, the resources released as a result, both human and financial, are directed to other projects that are of strategic importance. This is nothing more than increasing flexibility. Companies using this model have access to a larger resource base and the ability to quickly increase, decrease, or relocate them. Furthermore, cooperation with engineering and design service providers allows for the acquisition of additional competencies. Currently, the trend of introducing electric engines to the market requires increased resource allocation for R&D in this field. This results in the need to increase the number of engineers, and properly selected outsourcing can very easily solve this problem.
The article comes from the magazine “Logistyka” 5/2010.