The worldwide staff augmentation services market will surpass $81 billion by 2025. Why? Because, in simple terms, organizations need skilled professionals, but it doesn’t always make sense to hire them directly. That’s especially true when it comes to contract manufacturing.
In this guide, we’ll explore the basics of offshore staff augmentation, including how it works and why it’s the ideal solution for optimizing your overseas manufacturing operations.
What Is Offshore Staff Augmentation?
Offshore staff augmentation is a talent acquisition strategy where companies hire skilled personnel from other countries to work on specific projects or tasks without adding them permanently to the payroll. This approach allows businesses to temporarily extend their team by incorporating global talent, which can be managed directly by the company’s in-house team or through a partnership with a service provider.
Although most often associated with IT, the staff augmentation model cuts across many industries of all shapes and sizes. Indeed, you don’t need to be in search of tech talent or software developers to leverage the benefits of offshore resources.
From healthcare to construction, any organization with skill gap concerns can use augmented staff to its advantage. Yet, this approach may have the greatest impact on contract manufacturing. Why? Because overseas production demands a unique combination of specialized talent and local expertise — but more on that later.
How does an offshore staff augmentation service work?
First, a company identifies its talent acquisition needs. This involves evaluating the existing team to determine which skills or roles are missing and can’t be filled with in-house resources.
The organization then partners with a staff augmentation firm — a business that specializes in connecting companies to offshore talent. This staffing firm has access to a global talent pool, allowing it to easily pinpoint which skilled professionals would best serve the company’s needs in that particular region.
For instance, imagine an Original Equipment Manufacturer (OEM) needs a tooling engineer in its Vietnamese production facility. In this case, the staffing firm leverages its database to connect the OEM with a local expert to join the team.
Critically, the staffing service manages all logistical aspects, like recruitment, payroll, and compliance, while the augmented staff reports to the hiring company’s management. This eliminates the overhead costs associated with direct hiring while retaining the advantages of global talent.
Is augmentation the same as outsourcing?
The short answer is no. Traditional outsourcing involves handing over entire projects or business processes to an external organization that manages and completes the work independently. This might include services like customer support, data entry, or even complete manufacturing processes.
For example, many businesses outsource cybersecurity to a managed service provider. This entity leverages its in-house resources to protect the client from cyber attacks, but its dedicated team functions separately from the client’s everyday operations.
On the other hand, staff augmentation integrates external talent into your existing team, functioning as any regular employee.
Staff augmentation vs. other offshore manufacturing solutions
Aside from offshore augmentation, OEMs may consider other staffing solutions, like a Professional Employer Organization (PEO) or an Employer of Record (EOR). However, these options aren’t nearly as robust. Let’s break down the differences:
- PEO: The client company enters into a co-employment arrangement. This means they split responsibilities, with the PEO acting as an outsourced human resource (HR) department. It handles payroll, benefits administration, tax filings, etc. The hiring company retains control over employee management however, it also retains liability for certain compliance aspects. Likewise, most PEOs primarily operate within the same country as the client, making it a more suitable option for domestic applications.
- EOR: An EOR legally employs staff on behalf of the client company. This is particularly useful for businesses operating in jurisdictions where they don’t have a registered entity. The EOR handles all employment-related legal compliance, payroll, taxes, and benefits. Clients retain control over the day-to-day tasks and management of the employees. However, EORs may not provide specialized recruitment services or comprehensive team integration.
Unlike PEO and EOR, the staff augmentation model combines comprehensive recruitment, HR management, and legal employment services, ensuring you get the right talent while maintaining compliance with local labor laws. The third-party provider handles payroll, benefits, and administrative tasks, shielding you from employment liabilities and related expenses.
Why Use Offshore Staff Augmentation?
OEMs leverage contract manufacturing for numerous reasons: cost efficiency, expertise, facility constraints — the list goes on.
But maximizing these advantages isn’t simple. Without eyes and ears on the ground, overseas engineering processes and production workflows can quickly stray from expectations. Fortunately, staff augmentation services can offer a holistic and impactful solution.
To demonstrate, let’s explore some of the most common obstacles in contract manufacturing:
Skill gap challenges
According to Bain & Company, brain drain is impacting all geographies and is likely to continue in the coming decade. Almost three-quarters of engineering-focused companies report talent gaps, a divide that will increase as baby boomers exit the workforce. Furthermore, mid-career professionals are transferring to non-engineering roles, with the engineer turnover rate reaching 17% in 2023.
The point? OEMs need skilled professionals, but specialized skills are increasingly hard to come by. Even worse, the process of recruiting, hiring, training, and deploying an offshore team isn’t only time-consuming and complex, but costly, too.
Luckily, that’s what staff augmentation does best. With the right partner, organizations can leverage global talent exactly when and where they need it.
Workforce management
Managing offshore team members isn’t easy. Each country has its own regulations regarding wages, benefits, and working hours, which can make compliance a confusing uphill battle. Legal requirements, such as work visas, immigration documentation, and passport renewals, can also be time-consuming and costly.
Plus, sending internal talent overseas isn’t always practical. It involves providing transportation, moving their belongings, securing housing, and more logistical headaches. Most importantly, employers have a duty of care to ensure the safety and well-being of their employees abroad. This legal, financial, and ethical responsibility extends beyond borders, increasing an OEM’s potential liabilities.
However, augmented staff are employed directly by their staffing service. This means the talent acquisition partner assumes all of these legal responsibilities.
Competitive pressures
In the face of stiff competition, OEMs are pressured to enhance efficiency, accelerate new production introduction (NPI), and uphold high-quality standards. The drive to optimize operations can strain existing resources and necessitate quick scalability.
Staff augmentation can address these pressures by providing immediate access to specialized skills and additional manpower without the long-term commitments of direct hiring. By augmenting their staff, OEMs can quickly scale up their operations to meet increased production demands and accelerate development cycles.
This flexibility allows them to respond agilely to market changes and competitor moves, maintaining an edge by getting products to market faster and with the desired quality.
Communication challenges
Offshore manufacturing often involves navigating language barriers, dealing with significant time zone differences, and overcoming the lack of local knowledge. These factors can lead to misunderstandings, delays, and inefficiencies in managing overseas vendors.
That’s why offshore augmentation is so effective. With access to global talent, OEMs can mitigate cultural barriers with local experts who know the region inside and out. They not only oversee production cycles, but also act as liaisons by facilitating clearer and more effective communication between the home office and offshore team.
Supply chain inefficiencies
Supply chain difficulties, such as bottlenecks, poor supplier relationships, and suboptimal production processes, can cripple a contract manufacturer’s ability to deliver products on schedule. These inefficiencies lead to delays, increased costs, and reduced overall productivity.
Staff augmentation can improve supply chain optimization by bringing in specialized expertise in logistics, supplier management, and more. Augmented staff can identify and address bottlenecks in real time, optimize production schedules based on current demands, and improve supplier management. This direct involvement helps streamline operations and keeps the value chain flowing.
Quality control and IP protection
A significant challenge with offshore manufacturing is maintaining stringent quality controls and protecting intellectual property (IP), particularly when oversight is limited due to geographical and operational distances.
Leveraging staff augmentation to place quality control specialists and IP compliance officers on-site or in key locations can enhance oversight. These professionals can oversee production processes directly, ensure adherence to quality specifications, and monitor any potential IP breaches.
Additionally, having experts integrated within the local operations facilitates immediate corrective actions and continuous improvements, thereby safeguarding product quality and the company’s proprietary assets.
Benefits of staff augmentation
So, why entrust your offshore production to a staff augmentation firm? Simply put, the advantages are abundant:
- Talent when you need it: It provides a global talent pool of skilled professionals who can address specific challenges that arise during different phases of the manufacturing process.
- Scalability: Augmentation helps manage fluctuating production schedules and market demands without the burden of fixed labor costs.
- Quality control: Augmented staff can include quality assurance specialists who work closely with the offshore manufacturing units to ensure products meet the required standards.
- Risk mitigation: Local expertise empowers organizations to navigate international complexities and simplify compliance.
- Cost efficiency: Recruiting, hiring, onboarding, and training talent is difficult, time-consuming, and expensive. Offshore augmentation skips past these hurdles and cuts right to production. Plus, it hands all the costs of managing employees to an expert partner.
How To Get Started With Staff Augmentation
Follow these steps to kick-start your contract manufacturing processes with the power of strategic workforce solutions:
- Define your requirements: Identify the specific skills and roles needed for your projects that are either hard to fill locally due to skill shortages or are more cost-effective to source from overseas. At Supply Chain Resources Group, you can access any role critical to your scope of work, including supply chain managers, quality engineers, sustaining technical managers, and more.
- Choose the right partner: Selecting a reliable offshore staff augmentation firm is crucial. Look for vendors with a proven track record, strong testimonials, and flexible solutions. Ideally, your partner should help you shift labor resources to match the product manufacturing cycle.
- Set up reporting systems: Implement management frameworks that define how offshore staff will be supervised and how their output will be measured. Regular check-ins, progress reports, and performance metrics should be established to monitor productivity and quality.
- Adapt over time: Continuously monitor the effectiveness of the offshore augmentation strategy and make adjustments as needed. This could involve scaling up the team, refining processes, or offboarding talent as manufacturing cycles change.
Access Talent on Demand Today
Without visibility and direct oversight, overseas manufacturing processes can run off course — costing you time, money, and reputation. That’s why SCRG offers Talent on Demand.
As a staff augmentation model, this workforce solution strategically places offshore talent at critical points in your product manufacturing process. From supplier selection to sustaining production, our skilled professionals help you streamline operations, reduce risk, and save money.
Ready to optimize contract manufacturing? Contact our team today.