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Manufacturing Trend: Outsourcing New Product Development

Currently 29% of U.S. manufacturing companies are outsourcing part of their new product development process, with 41% reporting that they are evaluating outsourcing options within the next 12-24 months.

According to a recent survey by Boston, Ma.-based AMR Research Outlook authored by Lance Travis and David O'Brien, these outsourced services include not only the low-value activities that many would expect, but also encompass the complete spectrum of product engineering. Software-related activities are growing the fastest, but mechanical design and engineering analysis are also showing strong growth.

One reason for the growth of these outsourcing activities is cost savings. The study found that 57% of companies named labor cost savings and 47% report manufacturing cost savings as benefits of outsourcing. Additionally companies saw a 33% improvement in quality after outsourcing.

Furthermore, 45% of the companies reported improved time to market -- which is especially important since new product introductions can be problematic. Manufacturers have reported, in related AMR studies, that 50% of new product introductions fail.

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