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Sub-contracting & outsourcing: control points and V cycle

Some preliminary definitions :
•    In house: everything is done in house
•    Sub-contracting : the customer designs, industrializes a product while the sub-contractor manufactures it.
•    Outsourcing : the customer specifies the product which is then designed and manufactured by the partner.


As soon as we are not dealing with in-house, there can be as many cases as you can imagine. But the real success key is how well you do manage the control points towards your business and the V cycle to ensure your customer’s satisfaction.
Golden rule: YOUR COMPANY IS FULLY ACCOUNTABLE towards your customer!

At the moment your name is on the product, you are held responsible for all issues which may happen:  you cannot be hands free while sub contracting any part of your product and thus have to define the key control points you do need to secure your business.


How to define control points ?

Control points differ along product life cycle:

 

Since key success factors are not the same depending of the product life cycle, control points will be focused accordingly.
 
Typically, for emerging market, concept and design will have to be under strong control. One can even wonder if outsourcing is wise to be applied: the differentiator will be embedded in the know-how of the partner…


For declining market, since profits are mainly coming from distribution than manufacturing and price is key, here also outsourcing have to be carefully challenged. Of course, there can be fine if the market is declining in one part of the world but still a mature one for the partner (ie: cord phones are declining in Europe while still mature in China…)

Control points differ according partner maturity:

 

You do need to properly evaluate your partner capabilities along processes. Best is to get it assessed by a multidisciplinary team which will have to look for evidences about processes deployment. Various referential may be used for this purpose but key point is the analysis of the evidences (that’s why a multidisciplinary team is mandatory to reach valuable assessment).

 

Typical control points:

 

Best is to split them into two families:
•    Operations related (all along production AND service period)
•    Product creation related (from concept/architecture till release for production)

 

Operations related:
They are the most obvious (and thus not detailed here) and are covering:
•    Costs related: material, added value…
•    Logistics: delivery reliabilities, flexibility, material liabilities…
•    Quality: first pass yield, box opening…
•    AND service related: quality in field, …

Product creation related:

 

Very often, there is not enough focus on these ones especially due to lack of resources and know-how. In fact, many companies neglect the fact that whenever development of product is being subcontracted, you do need to constantly assess the quality of design and therefore you need to maintain expertise in house.

 

We all know the typical V cycle shape of proper development cycle.
 
Of course, it is expected that the partner will apply such cycle…this has to be properly assessed by the multidisciplinary team as stated above.
First minimal level of control point: is of course the system Acceptance versus Requirements. But how effective is it to ensure total customer satisfaction? How are you able to verify all limit conditions?  What are the consequences to the time to market in case of any found issues?
Very soon, one comes to the conclusion that in case of outsourcing development, each step needs its related control point!
To be able to manage such an approach:
•    expertise and capacity is needed at your side

  •   requirements & System analysis
  •   components design
  •   verification and validation

•    real partnership is a must in order that your partner is collaborating on:

  •   clear reporting on bugs & issues
  •   resource planning
  •   any IP related issues

•    progress evaluation tools are needed to be predictable on Time to Market:

  •   product/modules maturity evolution
  •   Formal  milestones or end of phases reviews

Then this approach has to be customized according project complexity…

 

Formalism:

 

In order that above approach is effective, formalism is mandatory for BOTH parties. It means that:
•    Requirements are well designed, validated by the customer (you) and accepted by your partner
•    Any amendment to these requirements are documented (in terms of TTM and costs) and formally accepted (CCB)
•    Specific attention to be brought to any specific requirement (such as supplier or component choice) and related consequences on quality responsibilities
•    It has to be reinforced compared to in-house development
As conclusion, sub contracting (and even more for outsourcing) should not be considered as a quick money win. Numbers of major companies have been suffering for not having put in place proper control points and thus damaging their brand image, their most valuable asset.

If you are planning to go along this road (or if you are already operating this business model ), I can help you to remove these roadblocks.


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