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Structural options for the R&D network need to be assessed for the right balance between the consolidation of technologies and resources for critical mass, coordinated programmes and overall control, and decentralisation to leverage local market knowledge and technical expertise.

Outsourcing and offshoring R&D

Outsourcing and offshoring can raise R&D efficiency but it should also support the strategic growth objectives of the business.

If you want to take cost out and raise the efficiency of R&D then implementing lean is an effective option and the benefits are substantial. To take cost out of R&D but also to grow into new emerging markets, businesses are looking increasingly to outsourcing and offshoring R&D activities to those regions. Most manufacturers already source from low cost regions or have set up production there and understand the complexities involved. With R&D, however, the risks are higher and a pivotal question is when should businesses consider relocating their R&D to emerging markets? The answer is now, but preparation is everything and your commitment must be long term.

PA has identified key elements that, when addressed effectively and comprehensively, can improve the R&D network:

  • More R&D is taking place offshore however innovation is still centred at home

  • Don’t offshore your R&D just to get access to lower wage costs

  • Despite the risks, parts of R&D activity can steadily move offshore

  • Preparation must be meticulous but a long term perspective is vital.

Outsourcing and offshoring R&D is not without risk, its challenges remain high. However, the benefits are huge. Global giants sell more into China than they source and have long recognised the opportunity that emerging markets represent. Relocating manufacturing to achieve competitiveness will not sustain a business into the longer term but designing, developing, manufacturing and selling innovative products that are designed for local markets will. To achieve this, businesses need to move R&D closer to these markets – it is a question of when, where and how rather than if.

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