FAQ

What are the advantages of having engineering assets close to the manufacturing base in China?

1. Integration of engineering and procurement near the manufacturing base has proven to lead to significant production and component cost reductions, especially when the design is completed before the suppliers are selected.  Engaging a supplier that can execute on a well designed engineering package will always result in a lower unit price than tailoring the design to meet on specific supplier’s capability.
2. Integration of Concept Design and DFM (Design for manufacture) will reduce a lot of doubled efforts (resulting in a better overall engineering budget), avoid program schedule resets and converge to the right cost from the start.
3.  Prototyping and Laboratory Testing are typically much lower cost in China that in the West.
4.  China-based Engineers will have a better understanding of available production technologies and materials. This will ensure the most efficient production possible.
5.  On-the-ground engineering reduces the cost of factory visits for trouble shooting / test runs and improves communication.

 How does Venture Tech engineering compare to other global options in terms of costs and service?

> In India you will get slightly lower CAD/Engineering rates than in China, but if the production is going to be in China, the savings resulting from local knowledge of available materials and production methods in China will easily out-weight the upfront savings of Indian based engineering labor.

 > Not only is N. American/EU/Australia engineering exponentially more expensive than Chinese, but also there are some common flaws:

a)      A western production set up is highly automated due to costs of labor while in China there is more flexibility thanks to lower labor rates.  A Western based engineering firm may not have a grasp on the realities of Chinese production.  The result might be overspending on tool & dies and designs that aren’t efficient on a China production line.

 b)      Western engineering firms tend to operate like law firms in that they bill by the hour, sometimes without even a cap on hours in place.  Also, they use junior staff behind the scenes to do as much engineering as possible in order to maximize their revenue.

 c)      Worst of all, engineers in the West tend to see their job as complete when the design is done, as opposed to China-based engineering that is more integrated into the trial runs and even production troubleshooting.

 d)      Because engineering is so expensive in the West, many engineering firms in places like the US and EU will quote engineering at/ below internal cost in exchange for a future margin or royalty when production starts. This is extremely dangerous because if the engineering firm is aligned with the supplier, they are designing for their benefit not the customers. Plus it is a common tactic to under quote the upfront engineering rates only to later raise the pricing on production once the client is locked in with the engineering/supplier partners.

 > Unfortunately, leaving the engineering to the Chinese manufacturer is not the best option for the following reasons:

a)       Intellectual Property Concerns! Non-Disclosure/ Non-Compete Agreements are very hard to monitor and enforce with Chinese companies.  Even if the supplier is paid for their engineering, they will feel a sense of ownership. That is very dangerous if you decide to change suppliers or stop production unilaterally.  Some manufactures will even leverage the engineering work done for your project to land other clients who may be your competitors.

 b)      Biased Designs! The manufacturer will engineer the product as they see fit in a way that benefits them, rather than you, the most. That means engineering to Chinese standards rather than international standards. The engineering will also be tailored to the production methods of that particular factory, which may or may not be the design which leverages the best production efficiencies and technologies available in China at a national level. Furthermore, the engineering may be tailored for the Minimum Order Quantity that the factory desires, rather than the expected order size of the customer.

After the DFM is complete, can VT help find suppliers and manage the initial production run to ensure targets for price, quality and leadtime are achieved?

> VT can help find strategic components, which are the main cost drivers, during the design process. This will prevent a design reset or cost increase later. After the DFM is finished VT can help find suppliers for the complete product package, and support the go-to production stage.

Why is DFM work invoiced on an hourly basis and EAS billed on a monthly retainer?

> DFM or the complete design process can be planned in advance and happens in a certain time period, driven by schedule and go-to market requirements. EAS is ongoing, unscheduled more or less, similar to a maintenance activity, for which the monthly retainer will average out the amount of billable time needed. The retainer will reduce the need for overhead on both sides by replacing the billing by small increments

> Venture Tech is the solution because we are Western engineers based in China. That means a pricing point for China-savvy engineering that is slightly more than a local Chinese firm but well below the hour rate back home.  We cap our engineering fees and refuse to accept any compensation from suppliers as corporate policy.  Try Venture Tech if you are looking for the best of the West, based in the East.  

download: VentureTech Engineering in China Fact Sheet (321.38KB) added: 06/05/2012 clicks: 20 description: VentureTech Engineering in China Fact Sheet summarized years of experience of engineering in China, the benefits, pitfalls and the VentureTech approach of a US/EU managed engineering group in China.