By: Seshadri Ramkumar, Professor, Texas Tech University, USA
Cost cutting pressures, competition from low cost countries and constantly emerging incremental technologies have become industrial norms these days.
How can industries such as textiles and manufacturing survive in these competitive climates? It is a luxury to utilize resources and talents belonging to others by creating win-win situations. This is “Resource Outsourcing,” which is turning out to be a boon for industries ranging from semiconductors to biomedicine to advanced textiles.
A enlightening over an hour tête-à-tête with Navaneeth Nandakumar, senior technical staff with San Jose-based Maxim Integrated, who has a Ph.D. in chemical engineering from the research-intensive University of Illinois, Urbana-Champaign exposed me to the advantages of resource outsourcing. Maxim Integrated, a leader in the manufacturing of mixed signal integrated chips is effectively utilizing the resource outsourcing concept to cut cost, innovate products and increase the bottom line, i.e., net profit margins. May be this manufacturing models enables some semiconductor industries to have next profit margins as high as 30-35 percent.
“Business starts with customer and ends with customer,” stated Navaneeth. Companies are constantly under pressure to deliver new products that meet end-user expectations.
Resource outsourcing helps to avoid extensive capital investment by a single entity and so frees-up resources to undertake multiple projects and hire new talents. It is important to establish trust worthy IP relationships with outsourcing partners. Citing an example in the semiconductor industry, instead of investing in a new photo-patterning machine, which will cost several millions, outsourcing shops in countries such as Taiwan can be effectively utilized. This manufacturing model helps to reduce labor costs in high wage countries. Several strategies can be established such that there are joint IP generation, process improvements, off shore manufacturing, to name a few.
The above concept, which the semiconductor industries in developed nations such as the United States have been following, can be borrowed by the textile industry. Textile sector in economically emerging nations such as India can work with advanced textiles industry in Europe, Japan, etc. and can serve as manufacturing and product development foundries, provided solid IP sharing and protection strategies are established.
“It is important that companies remain competitive and increase their net margin,” stated Navaneeth. Resource outsourcing helps by enhancing profit margins, which are important from investors’ point of view, added Navaneeth.
Next wave in manufacturing is “Resource Outsourcing,” which needs to be serious sought after.