THOUGHTS

Outsourcing New Product Development: Why is it the new trend and what can it do for companies?

Jul 24, 2020

Companies and manufacturers across all industries partake in new product development once at the least through their lifecycle of operations. If conceptualized, planned, developed, and launched strategically, the new product development process can lead to significant growth and success for the company. However, the product development process is neither easy nor short-term. Due to the amount of cost, effort, time, manpower, and skill that is required through the process, companies may outsource the process.

These outsourcing services can either handle the entire new product development process or take control of a certain part of the manufacturing process. Certain more specific activities, such as software development, or engineering skills, may not be readily procured internally, in which case, outsourcing becomes the most favorable option. For instance, in the automotive industry, some key players outsource up to 75% of the product development of a new vehicle. Outsourcing helps companies reduce costs, effort, and improve time-to-market substantially. In this article, new product development strategy experts at Infiniti discuss the types, benefits, and challenges of outsourcing.

Deciding to Outsource

The new product development process is long-drawn and requires highly efficient strategizing to be successful. Through this process, the company must ask a set of crucial questions before deciding, so they may be aware of their choices and decisions. In the case of outsourcing, the question to be asked is, “Who will lead the new product development strategy?” While companies may be equipped in terms of finance, manpower, and skill, handling multiple projects simultaneously can be detrimental to current and developing projects. At this point, choosing to outsource is the best option.

New product development is a difficult process and requires brilliant strategic planning. Speak to our experts to learn more about Infiniti’s new product development experts.

Categories of Outsourcing

Companies may choose to outsource the entire product development process or a certain set of functions. The outsourcing process can be divided into the following four categories, as per the functions that are provided:

  • Professional Outsourcing: Outsourcing functions such as legal, accounting, purchasing, and administrative jobs fall under this category.
  • IT Outsourcing: Functions relating to software or technological development are considered under IT outsourcing.
  • Manufacturing Outsourcing: This involves any part of the manufacturing process, be it the entire product, or a certain section of it.
  • Project Outsourcing: This includes the outsourcing of the entire project, such as outsourcing the whole product development process, to the point that it needs to be launched.

The Benefits of Outsourcing New Product Development

Outsourcing is used widely due to the various benefits it offers. When it comes to new product development, these benefits can be crucial to the success of the newly developed product. Five of these benefits are discussed below:

Lower Costs

Outsourcing most often results in quicker, more efficient results due to the dedicated resources and heightened focus, as compared to in-house product development. Additionally, outsourcing services save the cost of hiring temporary or permanent employees for the process of new product development. Many companies outsource to countries with substantially lower labor costs. These various factors combine to reduce costs by a large margin.

Workload Distribution

While in-house permanent employees would be ideal for producing a new product in many cases, the workload may be too high. However, in the case of outsourcing, current employees can focus on the maintenance of existing products, while other professionals focus on new product development. This allows for efficiency and perfection across the board without losing quality due to quantity.

Innovation

As professionals, engineers, and other skilled employees work in the same space over time; their ability to ideate something radically different may be compromised. Outsourcing allows for the addition of other experts in the same field, to view the product, strategy, and development process in a different and unique light. Combined suggestions may lead to a product that is better than the original idea.

Expertise

In certain cases, the expertise required for a process may not be within the skill set of current employees. Guidance on engineering something different or manufacturing a new product type can help successfully deliver a product with the right expertise. With outsourcing, it is possible to acquire expert guidance through the process without investing in a new team of employees solely  to develop a new product.

Time Management

Outsourcing service providers have dedicated resources for the product that is being developed. Additionally, one team of employees attempting to maintain current products and developing new ones will increase the time to market. However, outsourcing reduces time-to-market and, in turn, leads to higher profits, faster returns, and proper maintenance of the systems already in place.

Outsourcing can be highly beneficial for many companies. Get more information to gain more comprehensive insights into the benefits of outsourcing.

Challenges of Outsourcing – New Product Development

New Product Development

Outsourcing is highly beneficial for the process of new product development. However, there are certain challenges of outsourcing. More particularly, certain details that companies must keep a note of when they choose to outsource. The following are three major challenges of outsourcing:

  • Control:

When outsourcing major functions such as manufacturing, it is crucial to ensure that quality is maintained. Clarifying the amount of control the company has over the entire process and being adequately involved in the process to ensure quality control is a major step towards avoiding losses and poor-quality products.

  • Communication:

As is the case with all business partnerships, clear communication is exceptionally crucial. Having clear project guidelines and continuous communication through the process can help reduce challenges, losses, and time-to-market.

  • Resources:

All companies must ensure that they are outsourcing to a provider who has the ideal equipment, skillset, culture, and manpower to provide the best results. As the new product development process is carried out, issues with machinery or expertise can take a toll on the entire process and the company, causing significant losses.

While it is highly beneficial, outsourcing can be a challenging step forward. Request a free proposal to strategically approach and develop the ideal new product development strategy.

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