Cost cutting pressures, competition from lower-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.
An enlightening visit with Navaneeth Nandakumar, senior technical staff with San Jose-based Maxim Integrated, 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 costs, innovate products and increase the bottom line – i.e., net profit margins. This manufacturing model enables some semiconductor industries to have next profit margins as high as 30-35%.
“Business starts with the customer and ends with the customer,” stated Nandakumar, who noted that companies are constantly under pressure to deliver new products that meet end-user expectations.
Resource outsourcing helps avoid extensive capital investment by a single entity, freeing up resources to undertake multiple projects and hire new talents. Trustworthy IP relationships with outsourcing partners is key. In the semiconductor industry, for example, rather than investing in a new, multi-million-dollar photo-patterning machine, outsourcing shops in countries such as Taiwan can be effectively utilized. This manufacturing model helps reduce labor costs in high wage countries, and several strategies can be established for services such as joint IP generation, process improvements and offshore manufacturing, to name a few.
This concept can also be effective in the textile industry. The textile sector in economically emerging nations such as India can work with advanced textiles industries in Europe, Japan and other countries – serving 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 Nandakumar. “Resource outsourcing helps enhance profit margins, which are important from an investors’ point of view.”