DETAILED SUMMARY OF OUTSOURCING PLANNING AND EXECUTION
Identify candidate projects for outsourcing. Conduct a cost-benefit analysis, to substantiate outsourcing merit.
Outline advantages and possible disadvantages. When outsourcing, direct costs probably may be higher than current direct costs—however, savings in indirect costs (overhead expenses) should lead to overall lower process costs.
Publish an outsourcing project schedule with milestone dates. Compile RFQ documentation including drawings, schematics, specifications, part files, and testing requirements. Manufacturing should perform a controlled build to the above documents as a sanity check. Assess the impacts to product structuring by proceeding with outsourcing.
Formulate a supplier statement of work for the outsourcing project that addresses
• Point of use delivery mechanics
• Targets for delivery and quality and how measured
• Packaging, safety, and warranty requirements
• Supplier use of current approved vendor listing (AVL)
• Rules for resolving defective material and supplier
• Forecasting process for the outsourced assembly
• Cost reduction goals
• Rules for resolving supplier problem notifications
• Configuration management requirements
• Testing and acceptance requirements.
Compile a bidders list with past performance history. Check for financial viability and current capacity. Issue a request for proposals. The RFP includes the current approved vendor listing (AVL) as well as an authorization letter to outsourcing bidders, to request and leverage current AVL pricing and lead times.
The RFP should define final transfer of all on-hand inventory.
Source selection is the process to find and choose suppliers. Suppliers must meet requirements for quality, pricing, delivery, reliability, and serviceability. Outsourcing bids are received and evaluated by the contract administrator, supplier engineer, and buyer/planner. Visit suppliers as necessary to fact-find proposals. Negotiations conclude with agreement on lead time, quality, and sale of excess inventory transfer for the outsourced assemblies. The supplier confirms the earliest date when outsourcing can begin.
Train the supplier in building outsourced assemblies by repeating the earlier manufacturing controlled build. The buyer/planner issues a purchase order to authorize build of first articles. The supplier engineer monitors and ensures successful first article completion, and ensures it meets form/fit/function expectations. Observe how the supplier plans to meet packaging requirements.
The buyer/planner retains sufficient inventory for in-house production and spares support until the supplier is fully able to meet production needs. Extra inventory is sold to the supplier. The buyer/planner should monitor demand trends prior to outsourcing to plan for and maintain sufficient safety stock for a seamless outsourcing transition.
Finalize an engineering change order (ECO) date for outsourcing deliveries to begin. Send the approved ECO to the supplier. The buyer/planner issues purchase order releases to authorize production quantity deliveries. Notify production that outsourcingproduction is approved and the planned date for receiving the first outsourced assemblies to the factory floor. Manufacturing will then begin initial steps in discontinuing internal "make" activities. Meet on a regular basis with supplier to ensure that outsourcing production is proceeding to negotiated and established targets.
To Be Continued
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