Mechanical engineering outsourcing has become a common practice for the product design and manufacturing industry worldwide. According to the Mechanical Engineering Outsourcing analysis report, the industry is said to grow with a CAGR of 7% to 8% from 2025 to 2033, reaching around $85 billion in 2033. 

Some of the most common outsourced services include computer-aided engineering, simulation-based prototyping and testing, additive manufacturing, and robotics engineering. 

Why is mechanical engineering outsourcing picking up pace?

Cloud platforms and collaborative project management tools have blurred the geographical boundaries and made it easy to manage projects seamlessly in teams sitting across continents. Cost optimization, access to the latest tools and technology, specialization, and a global talent pool are the drivers that have made mechanical engineering outsourcing a global trend. 

As a result, businesses are collaborating with engineering outsourcing partners for smoother project execution, high-quality deliverables, and higher ROI.

Is ROI Guaranteed? What can go wrong?

Companies do report higher ROI when outsourcing is strategically managed and the engineering outsourcing partner understands the company goals and quality requirements. However, this does not mean that ROI is guaranteed. There can be a lot of challenges. 

Challenges and Mitigation

Outsourcing challenges must be mitigated prudently and on time. Businesses must address intellectual property concerns and data security; mechanical engineering service providers must be vetted, and due diligence must be thorough before you onboard. Set quality benchmarks for deliverables and ensure that project timelines are met. Follow effective communication practices and chart continuous feedback and escalation paths. However, even after ticking away all prudent practices and checklists on paper, there can be a lot that can go wrong. It is important to identify these signals and take the right action at the right time. 

How to identify that your vendor collaboration is not working out?

Recognising the signs that vendor collaboration is not working early on is very important. It allows businesses to take corrective action or consider an alternate vendor. 

What are these signs?

• Lack of leadership and accountability with no designated project manager or point of contact.
• SLA breach in engineering services and poor deadline management causing missed deadlines and frequent delays.
• Poor communication and lack of transparency that includes hiding progress, vague updates and not sharing worklogs.
• Disregard for documentation leads to knowledge gaps. The result – project suffers and there are many mistakes and rework. Hence, loss of time and money
• Misaligned goals where the vendor team does not align with product value and business goals. As a result work is misprioritized and the backlog keeps growing.
• High attrition rate. The vendor is understaffed or the team keeps changing. This disrupts your project workflow. You have to keep spending time, money and efforts on frequent handovers and knowledge transfers
• Vendor is unable to grasp technical requirements and does not have the right tools, technology nor the expertise.
• Changing goals, loss of control and frequent oversight leads to mistakes, delays or oversight. These are tell-tale signs that vendor collaboration is not working out.

Analyse vendor performance metrics using a set of well defined KPIs for cost management, timely delivery, quality of work, productivity, customer and stakeholder satisfaction and ROI.

All the above mentioned signs will tell you that the vendor collaboration is not working out. Follow it up with a vendor performance analysis and it will help you make an informed decision for engineering vendor transition.

When is the right time to change vendors?

Once you decide in favor of engineering vendor transition, do not rush into it. Do not make this switch during critical stages in your project. Prepare for this transition so that you avoid making the same mistakes again.

How to Prepare for a Vendor Switch?

• Evaluate alternatives—prepare a shortlist—and interview your vendors
• Evaluate the team and past projects
• Once you shortlist a vendor, secure documentation. Knowledge transfer must be seamless.
• Develop a detailed migration plan specifying responsibilities and accountability
• Involve key stakeholders to ensure readiness across all business units
• Review the service level agreement (SLA) and address previous mistakes before onboarding a new vendor.
• Review NDA and security
• Switch between phases—do not make a switch during a critical phase.

What are the best practices for onboarding a vendor and ensuring a smooth collaboration?

• Allow phased handover
• Monitor new vendor for first few projects
• Align on clear KPIs and reporting frameworks
• Set up good communication practices 

Conclusion:

When you start seeing the early signs that vendor collaboration is not working out, and you find that there is no definite way to rectify that, know that it is time to switch vendors. List what went wrong with the previous vendor and make sure you mitigate all these mistakes in new vendor selection with due diligence, clear communications, phase wise transition and handover, defining KPIs, setting monitoring practices, and building a trustworthy partnership. If the partnership clicks, you will start reaping all the benefits of having an expert mechanical engineering outsourcing partner and rake in higher ROI.