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 / Summer 2007 / Issue 47(originally published by Booz & Company)


Making Offshore Engineering Pay Off

For example, an automobile’s wiring harness — the basic electronic circuitry for switched devices like headlights, wipers, heater, and starter — has relatively low product complexity but very high integration complexity because the part must be woven into the architecture of the entire vehicle. On the other hand, a satellite digital audio receiver is a highly complex product from a design perspective, but sufficiently stand-alone to reflect limited integration complexity. A traditional lead–acid car battery is neither complex nor integrated; its design is based on a set of standard requirements with extremely minor customization for holding brackets, labels, and the like. And an automotive telematics system, by contrast, has a high degree of both complexity and integration, because it must communicate with satellite receivers for radio traffic information, with navigation systems, and with servers via mobile phone networks. Assessment of product and integration complexity thus produces a matrix of four possibilities, each with its own preferable strategy for engineering location:

High Product Complexity, High Integration Complexity. Example: telematics system. This category requires a deep well of technical talent, diverse skills, and extensive customer contact. The supplier and customer are part of one extended value stream. Consequently, the supplier’s technical horsepower must be in close proximity to the customer’s design center. With the skills and teamwork required to make a product like this, offshoring is not a feasible option.

High Product Complexity, Low Integration Complexity. Example: digital audio receiver. Because there are few (or no) customer touch points, product performance is a critical driver of success in this category. Offshoring to a locale with a broad base of engineering talent is feasible.

Low Product Complexity, High Integration Complexity. Example: wiring harness. A great deal of customer interaction is needed to ensure that parts in this category dovetail with other components, most of which are made by different suppliers. Because of the nature of the parts’ configurations, these items should be designed close to the customer’s factories in either developed or low-cost nations — what is known as a lean, distributed footprint.

Low Product Complexity, Low Integration Complexity. Example: lead–acid car battery. Leverage existing design capacity and mass production for these products. Because minimizing expenses is a critical factor in profiting from these commodities, all additional engineering needs should be offshored to a low-cost location.

At Delphi, in formulating a mixed engineering footprint strategy, we endeavored to go beyond the simplistic strategy of shifting low-tech work to low-cost countries. Instead, we hoped to create a systematic approach that defines how a company might deploy the right capabilities at the right place at the right time and at the right cost.  This would allow us to better meet customer needs while improving the effectiveness of the company’s engineering processes. 

Author Profiles:

Anil Verma ([email protected]) is global director of engineering and manufacturing strategy at the Delphi Corporation. He spent eight years in the company’s Asia/Pacific region and was president of operations in India.
Serge Lambermont ([email protected]) is Delphi’s director of electronics and safety engineering in Japan. He has spent 10 years in Asia/Pacific and six years in Europe on regional engineering development projects, including a stint as chief engineer for Powertrain Electronics in Asia/Pacific.
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