2 management - School of International Business and ...

Hans H. Steinbeck
tronic Industry, such as Apple, do not manufacture their products themselves, but doing only the
design and the production is outsourced to companies like Foxonn or Solectron, mainly producing
in China now. The next step in this development are the Original Design Manufacturers (ODM)
like Quanta and Compal who are designing and producing consumer electronic products for other
companies, reaching a revenue of around 300B$ in 2008. So the argument can be, wether the
West has outsourced these processes to China, or if they have outsourced the sales to us. Over
time these companies will come up with their own brand names and sell the products under their
own name, such as Samsung has done it, being now one of the most competitive companies for
Consumer Electronics products. Another trend, besides reducing the level of vertical integration,
is the trend to integrate all production locations and their suppliers into one globally integrated
network. So the home location of such company is not important anymore, but the factories are
built where the most attractive markets are, balanced with the local production cost and the avail-
ability of qualified suppliers. So the productions sites, as well as the suppliers and the demand
management are integrated into a global network, supplying the world as one big market. This
requires an integrated Supply Chain Management (SCM), supported by central IT applications.
Implementing these as well as the required processes is a key challenge for all globally acting
companies. Few companies have reached this level however, of a fully globally integrated compa-
ny. IBM can be considered as one of the Best Practices today. These different levels of integration
are shown in Figure 1. Three different levels of integration can be defined, from the single factory
as on Level 1 to a fully integrated production network as on Level 3.
Figure 1 | Levels of Integration for Production
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