Supply Chain Risk on the Silk Road

Abstract

Contents 10.1 Introduction ........................................................................................ 170 10.2 Growing Trend of Outsourcing Design to Asia ................................... 17010.2.1 Electronics Manufacturing Service Industry ............................ 170 10.2.2 Design Outsourcing Activities in Asia ..................................... 17210.3 Driving Factors of Design Outsourcing .............................................. 173 10.3.1 ODMs Gain Design and Engineering Capabilities .................. 173 10.3.2 OEMs’ Need to Streamline Product Development Processes ... 174 10.3.3 OEMs’ Strategic Shift to Focus on Core Competencies ........... 175 10.3.4 Benets of Concurrent Engineeringand Design-for-Manufacturability ........................................... 175 10.3.5 Serving New Market Entrants with No Prior ProductDevelopment Experiences ........................................................ 176 10.3.6 Academic Views on Design Outsourcing ................................. 17610.4 Issues and Challenges in Managing Design Outsourcing .................... 177 10.4.1 Diluted Product Di‚erentiation ............................................... 178 10.4.2 Fostering Competition by New Market Entrants ..................... 178 10.4.3 ODMs’ Dependence on OEMs ............................................... 179 10.4.4 Product Quality ....................................................................... 179 10.4.5 Working Conditions in ODM Firms ....................................... 18010.1 Introduction During the last few decades, the growing demand for electronics and computer products has given rise to a new breed of manufacturing rms in Asia, the socalled original design manufacturers (ODMs), for example, Flextronics, Quanta, Compal, etc. ‹ese companies provide design, manufacturing, and other valueadded services to original equipment manufacturers (OEMs). In this chapter, we provide an overview of this new outsourcing practice by analyzing its key characteristics, decision factors, and implementation challenges.