Mastering Engineering Service Outsourcing in the automotive industry

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Mastering Engineering Service Outsourcing in the automotive industry
6. We have found that one proven approach is to have a set of preferred
ESO suppliers that specialize in selected domains and services. However,
excessively restricting independent choice among suppliers
prevents players from leveraging the skills and know-how provided
most efficiently by using a best-of-breed choice.
7. Companies thus need to define the goal of individual outsourcing work
packages and identify the key requirements and specifications to be met.
Once specifications and development goals are set, the market can be
screened for the most appropriate Engineering Service Providers.
8. In addition, a goal-/fact-based outsourcing decision-making process
must be established to identify, request and contract the right engineering
service provider from the vast pool of potential candidates
(there are at least 200 to 250 relevant and predominantly automotiveoriented
ESPs in the market).
9. Especially for Tier 1 suppliers, but also for OEMs, cost-driven outsourcing
or offshoring must be conducted along a well-defined set of
rules and processes based on Key Performance Indicators (KPIs). This
will help prevent any disruption along the value chain, for example if a
subcontractor suffers form quality issues or financial distress. For these
cases, a strong governance model and tight management control (e.g. by
acquiring a controlling stake in an ESP) should be evaluated to ensure
that the engineering tasks assigned are carried out without impairing
overall product development.
10. Finally, to benefit from the learning curve and to harmonize engineering
contractor sourcing, companies must set up a standardized
contract award procedure, defining the right performance metrics
scheme up front and putting an effective monitoring system in place
to ensure transparency with respect to individual engineering
sourcing projects.