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.  

 How much does China based Engineering cost? 
 > The cost is substantially lower thanks to a lower cost support structure, infrastructure, with  only senior western engineers and management being at western salary levels. Prototyping as part of engineering cost is also cheaper, and the proximity to the factories saves a lot of time and money on travel expenses, not to mention taking a real advantage of the better manufacturing cost in China by targeted engineering.   We also noticed a very productive around the clock communication process with clients in the US and EU: we engineer, they review and respond during our off hours, we communicate live during overlapping periods between the time zones.

Who owns the IP if I outsource my engineering?

> The client usually requests Venturetech to sign an NDA, basically assigning any project IP to the client. Sometimes clients feel that VentureTech contributed so much that we are invited to participate in the patent application process. Since we are a Western managed engineering company we respect the client’s IP, and we are accountable by Western legal standards.

How do Chinese based engineers know what the safety standards are in my home market?
> Shenzhen hosts many testing and certification agencies, who can participate early in the design process. A Dutch company recently engaged TUV from Germany to support their 3E efforts, to make their product smart grid ready, a future certification requirement. VentureTech has a long time experience designing and engineering reliable products, it’s in our DNA and we have the virtual testing tools (simulation) to support this and know how to specify environmental and durability tests at the agencies.

I hear the term DFM used a lot, what does this really mean?
> DFM means Design For Manufacturing, and the manufacturing process dictates the design rules. This process heavily depends on the project economics, volumes, budget, target costs and so forth. These economics play out very differently in China than in the West obviously.
VentureTech has enough experience and expertise to brainstorm the design direction and avoid a costly problem solving situation later on, or painful change of direction midway through the development process, while taking maximum advantage of China’s better cost factors.

How can I use simulation to predict my production costs and product performance?
>Besides making sure that the product performs over longer term under specific environmental conditions, simulation can really help saving on material cost by reducing wall thicknesses wherever possible, or allow a lower cost material to be used. Simulation very early in the game also substantially saves on engineering costs by avoiding multiple tests, redesigns etc, especially on new concepts. And the sooner the product is engineered right, the sooner the customer can go to market, earning revenues sooner.

What criteria should I use to select 3rd party engineering?

>The criteria depend heavily on how early the engineering company gets involved in the design process. Western thinking and communication are key in the concept phase, while  knowing a wide range of manufacturing solutions are also very important at this point This combination of thinking and knowledge is getting harder to find in the West, while communication can be a real challenge in the East, there are more cultural elements to concept stage communication than people realize. Imagination about the end use of the product and excitement about the opportunities are big drivers during the concept stage.

When engineering a new product to be manufactured in China, how does production in China differ from production in the West?

>We come across various differences between West and East: the better cost factor in China on one side, and also the lack of very advanced manufacturing processes in China on the other side. Injection molding tool prices and assembling costs are substantially lower in China, undoing some of the engineering thinking towards minimized assembly cost in the West. Very advanced manufacturing in China is sometimes only available for high production volumes because of the expensive machinery required, creating the need for a low tech but reliable approach. This is where Western ingenuity and creative thinking really helped with some past projects.

download: VentureTech Engineering in China Fact Sheet (197.87KB) added: 06/05/2012 clicks: 302 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.