Outsourcing Engineering
Redefining Priorities for New Age Engineers

February 1, 2007
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Sometime between 1990 and today, outsourcing migrated from a trend to a way of life for food engineers. Professional skills haven’t been devalued but rather redefined to better fit corporate business models. Reduced headcounts are essential for a lean organization, and the business model requires a focus on core competencies and a shift away from hands-on engineering.

The balancing act that engineering teams must master is outsourcing nonessential jobs while retaining the personnel and talent necessary for innovation. Put another way, organizations would like to have their cake and eat it, too.

“Never outsource an activity that is part of core competency” is the golden rule of outsourcing. The challenge is limiting outsourcing to non-critical activities outside the organization’s strategic focus. If in-house engineering resources are stretched too thin, the temptation is to use outsourcing as a stopgap.

In their report, “Framing the Engineering Outsourcing Debate,” Duke University professors Gary Gereffi and Vivek Wadhwa distinguish between dynamic engineers and transactional engineers. Transactional engineers “are typically responsible for rote and repetitive tasks in the workforce,” they write, and those tasks can be easily outsourced or even offshored. Dynamic engineering jobs, on the other hand, “are difficult to outsource” and require “strong interpersonal skills, technical knowledge and the ability to communicate across borders.” Individuals with these talents are needed in house if engineering core competence is to be retained.

Systems integration work at Pepperidge Farm’s Bloomfield, CT, greenfield project was outsourced, but systems engineering manager Harry Pettit (left) provided strict oversight to manage project risk.

Coordinating competencies

Downsizing of corporate and plant engineering staffs began in earnest in the 1980s. Civil and structural engineering work on the first Plant of the Year selected by Food Engineering in 1983 was done in-house; today, those tasks are performed by architectural engineering firms. The change has freed staff engineers to focus on project management, process engineering and technology integration.

“Freedom” might not be the word of choice for engineers in extremely lean enterprises. “I know engineers who are responsible for 15 dairies,” marvels Vern Jackson, vice president and director of global food & beverage at Englewood, CO-based CH2M Hill. “They spend 40 weeks out of the year on the road.” Aggressive travel schedules are unavoidable, however, as organizations try to turn the collective knowledge of their organizations into a competitive advantage not easily copied.

The justification for outsourcing is to fill in gaps in expertise and meet fast-track schedules, maintains Glenn Wright, project engineering manager-bakery and frozen at Norwalk, CT-based Pepperidge Farm Inc. Core competencies are demonstrated in the integration and coordination of multiple tasks and technologies, Wright told attendees at last year’s Food Engineering Food Automation and Manufacturing (FAM) conference. “Just because a skill is critical doesn’t make it core,” said Wright. “For us, robotics is a core competency,” and that competence resides in a number of areas of the Pepperidge Farm organization. Harmonizing the development and integration of robotic systems may involve outside experts, but project management is always done in house, he explained.

A team of 12 corporate and 19 plant engineers is in place at Pepperidge Farm. The pool includes professionals with degrees in mechanical engineering, chemical engineering, electrical engineering and masters of business admin- istration. But a broad knowledge base isn’t the same as core skills and competencies, and the role of staff engineers often is to oversee and manage projects to ensure “a seamless technology transfer from a supplier,” Wright said. “Automation is changing from month to month, and you may not know the latest change without going outside the organization, which we do on a regular basis. There is strength in knowing what you don’t know.”

Knowing what to delegate and how to maintain oversight has become more important in today’s manufacturing environment than engineering execution. Staff engineers were heavily involved in designing an integrated process for Pepperidge’s Bloomfield, CT, bakery (Food Engineering’s Plant of the Year in 2004). The process leveraged their core competencies in quality control, line efficiency metrics, rapid product changeovers and other areas. The actual controls integration work was farmed out, though the firm’s systems engineering manager “remained very involved, watching and monitoring the quality of the work,” Wright said. “We never walk away from managing the risk.”

Transactional engineers who will perform hands-on services on a contract basis will become more common, some predict, while food companies will keep dynamic engineers on staff. Source: SEW-Eurodrive.

Meet the new boss

In-house equipment innovations have been a casualty of outsourcing, some engineers believe. Consequently, “vendor innovation has been driving equipment innovations over the last 10 to 15 years,” says Greg Crnkovich, director of planning-food & beverage projects at the Austin Co.’s Atlanta office.

That doesn’t mean in-house innovation doesn’t occur, he hastens to add. Improved maintenance, added flexibility and greater throughputs are being engineered, and the enabling tools are data acquisition systems, integrated controls and manufacturing execution systems (MES). While the data define the opportunities, the installation of the data-acquisition technology has become a prime candidate for outsourcing.

The complexity of MES and controls architecture is driving even vendors to take a second look at outsourcing. They may call it collaboration or a strategic alliance, but outsourcing of systems integration work is occurring in the equipment fabrication community.

The relationship between systems integrator Bachelor Controls Inc. and AZO Inc. stretches back a dozen years. Memphis, TN-based AZO fabricates highly engineered ingredient handling systems, and information technology to manage those systems has become extremely sophisticated. Two years ago, a half-dozen controls engineers on AZO’s staff officially became part of the Bachelor organization when Sabetha, KS-based Bachelor established a branch office in Memphis. Today, the office has a staff of eight, according to company president Ray Bachelor, performing all of the controls work for AZO as well as systems integration services for other firms.

“It’s easy to start an integration company; it’s not easy to maintain one,” Bachelor observes. His firm employs 30 engineers, computer science experts and a computer engineer, and the training, certification and best-practices challenges to remaining current in this rapidly changing corner of the automation world are daunting. As current chairman of the Control System Integrators Association, Bachelor advocates outsourcing of controls engineering to certified systems integrators with industry-specific knowledge. “People who don’t understand the industry damage all of us,” he says.

Tomorrow's engineers

Many of the consultants and outsourced service firms assisting food and beverage engineering staffs today used to sit on the other side of the desk. Many were “downsized, right-sized or capsized,” jokes Austin’s Crnkovich, who worked for a dozen years at Frito-Lay and, before that, with Ralston Purina before joining a systems integrator and finally an A/E firm.

Layoffs in the 1990s permanently sidelined many food engineers. Continued cost-cutting pressure and burgeoning numbers of offshore engineers are generating anxiety about the profession’s future. “There are investment groups that ask, why even have engineers?” notes CH2M Hill’s Jackson, a chemical engineer who worked 16 years in food plants before taking a consulting assignment in 1990.

Duke University’s Gereffi and Wadhwa dispute the notion of the endangered US engineer and a loss of American technological leadership. In their report, they challenge the belief that China and India are developing more engineering talent. (Other articles have pegged the number of annual US engineering graduates at 70,000, compared to 600,000 in China and 350,000 in India. But many offshore students receive only basic engineering training, the professors argue.) By excluding sub-baccalaureate students and including computer scientists and information technology specialists, they conclude the US generated 222,335 new scientifically skilled professionals in 2004, slightly more than India and more than a third of China’s 644,106. More importantly, “almost one third of the globe’s science and engineering researchers are employed by the United States,” they write.

Jackson is less sanguine about offshore engineers. “We’ve got several hundred people working in our China office today, and a lot of our 3D CAD work gets done in our Buenos Aires, Argentina, office,” says Jackson. “There is such a thirst for knowledge in China; they’re in the office working early, and they’re in the office late honing their language skills. I tell my college-age kids, ‘You better work hard, there’s a tidal wave coming.’”

While US industry still leads the world in engineering, the trend is troubling. “A decade ago, close to 40 percent of total engineering work hours were based in the US,” points out Pradeep Khosla, dean of Carnegie Mellon’s College of Engineering, in an article published last year in Chief Executive magazine. “Current predictions are that by 2010, only about 10 percent of those work hours will be in the US.” The US continues to dominate in higher skilled work, Khosla allows, but future leadership will depend on “our ability to manage the global process of innovation.”

That will require both creativity and the cultivation of skills not traditionally associated with engineering, such as project management, team building and communication. Food engineering staffs are moving in that direction, and time will tell if the change occurs quickly enough.

For more information:
Greg Crnkovich, The Austin Co., 404-564-3960
Ray Bachelor, Bachelor Controls Inc., 785-284-3482
Vern Jackson, CH2M Hill,
503-736-4053, vern.jackson@ch2m.com

Sidebar:
The Great Debate

Food Automation Conference to feature session on outsourcing engineering projects

The issue of balancing outsourced engineering with the need for in-house innovation will be addressed at the Food Automation & Manufacturing Conference, scheduled for April 15-18 in Orlando, FL. The debate will feature Sam Casey, director of engineering, HJ Heinz Co.; Chuck Hollingsworth, engineering manager, Coca-Cola Co.; Jeff Steinhart, vice president-engineering, Anheuser-Busch Inc.; and Bob Johnson, director of process engineering, General Mills Inc. Leveraging staff strengths and knowing where to draw the line on outsourcing are among the issues they will address.

Heinz operates 27 plants throughout North America. Traditionally, they functioned as distinct business units or divisions. The goal is to develop better cohesion and information sharing to promote innovation. “We’re expanding our engineering organization and focusing on ways to leverage the resources we have internally to share ideas and best practices,” explains Casey.

Coca-Cola retains project leadership in house, regardless of whether the actual engineering is done at the plant or by a vendor. Hollingsworth directs a staff of nine corporate engineers, and “we’re all certified project managers,” he says. Financial considerations dictate how a plant or equipment project is executed-up to a point. “If it entails any intellectual property,” says Hollingsworth, “that’s where we draw the line.”

The panel will debate the pros and cons of maintaining engineering core competencies on staff, and how their decision supports company strategy. Topics will include core competencies; effective management of large numbers of outsourced projects; innovation and competitive advantage; and how engineering capability supports manufacturing and R&D during new products launches.

Don’t miss the opportunity to hear the “Great Debate on Engineering Sourcing” in the food and beverage industry.

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