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. So, how can manufacturing industries, such as textiles, survive in this competitive climate? One tactic is to use resources and talents belonging to others, creating win-win situations. This is “Resource Outsourcing,” which is turning out to be a boon for industries ranging from semi-conductors, to biomedicine, to advanced textiles.
A conversation with Navaneeth Nandakumar, senior technical staff with San Jose-based Maxim Integrated, revealed the advantages he saw in resource outsourcing. Nandakumar, has a Ph.D. in chemical engineering from the research-intensive University of Illinois, Urbana-Champaign.
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 net profit margins. This manufacturing model enables some semiconductor industries to have net profit margins as high as 30-35 percent.
“Business starts with the customer and ends with the customer,” says Navaneeth, so 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 talent. Of course, it’s important to establish trust worthy IP relationships with outsourcing partners. For example, in the semi-conductor industry, instead of investing in a new photo-patterning machine, which will cost several million, 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 is joint IP generation, process improvement and off shore manufacturing.
This concept, which the semi-conductor industries in developed nations such as the U.S. have been following, can be borrowed by the textile industry. The textile sector in economically emerging nations such as India can work with the advanced textiles industry in Europe, Japan, and elsewhere, and it can serve as manufacturing and product development foundries, provided solid IP sharing with the established of protection strategies.
“It is important that companies remain competitive and increase their net margin,” says Navaneeth. Resource outsourcing helps by enhancing profit margins, which are important—particularly from an investors’ point of view, Navaneeth added.
Seshadri Ramkumar, Ph.D., CText, FTI (UK), FTA (Honorary), is a professor in the Nonwovens & Advanced Materials Laboratory, Texas Tech University, Lubbock, Texas.