Outsourcing's Alphabet Soup

February 1, 2003
/ Print / Reprints /
ShareMore
/ Text Size+


As outsourcing continues to evolve, it’s becoming more complicated. Indeed, depending on what acronym you use, outsourcing can mean different things to different people. The contract manufacturing landscape now comprises three distinct types of competitors.

Original design manufacturers (ODM) and joint design manufacturers (JDM) are beginning to blur the lines of distinction between themselves and traditional electronics manufacturing services (EMS) providers.

The EMS industry provides contract manufacturing and product support services on behalf of original equipment manufacturers (OEMs). Traditional services include PCB assembly, box-build and testing. Today, EMS providers are also providing numerous services such as product design, supply chain management, global distribution, logistics, customer support and product repair. These companies perform these services based on a specific order from an OEM customer for an existing product.

When working with an EMS provider, all intellectual property belongs to the OEM. The flip side of that strategy is the ODM sector, which is becoming an increasingly popular form of outsourcing.

"Outsourcing strategies are becoming so pervasive that OEMs are looking for more options concerning design ownership and the degree of systems integration done by another party," says Eric Miscoll, chief operating officer of Technology Forecasters Inc. (Alameda, CA).

According to Miscoll, an ODM is a company that manufactures products of its own designs, which are then sold under an OEM’s brand name. An ODM performs all the functions traditionally associated with EMS firms, in addition to actually designing products based on their own intellectual property. And, unlike most EMS providers, ODMs tend to specialize in one specific product area rather than dabbling in several.

Typically, "the ODM determines what products to build and the OEM simply purchases the items ready-made," says Miscoll. "More and more OEMs are considering the ODM model because it offers them a more complete turnkey solution, with less design and supply-chain interactions with the supplier."

Most ODMs specialize in consumer electronics, such as laptop and desktop computers. Typically, an OEM will use an ODM when it wants to boost its product line while minimizing development and manufacturing costs.

A JDM helps design products for OEM customers. "Distinction on who owns the IP (intellectual property) is murky at best in the JDM space and can surface as licensing problems for either," says Mark Zetter, president of Venture Outsource Group (San Jose, CA). "In many instances, any substance (intellectual property) is developed in a shared, contributing environment."

Zetter claims that the ODM market is growing faster than the EMS market. As ODMs improve and expand their manufacturing capability, OEMs are expected to shift business away from EMS providers.

"A common mix for some OEMs is to do a portion of the work in-house combined with some activity supplied by an ODM or JDM," explains Zetter. More and more OEMs are considering the ODM model because it offers them a more complete turnkey solution, with less design and supply-chain interactions with the supplier.

Some large EMS players, such as Flextronics International Ltd. (Singapore) and Pemstar Inc. (Rochester, MN), recently began offering ODM services.

Did you enjoy this article? Click here to subscribe to Assembly Magazine.

Recent Articles by Austin Weber

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

Behind the Scenes at Ford's Michigan Assembly Plant

People are the heart and soul of the 2012 Assembly Plant of the Year. This slideshow shows some of the men and women who build three different types of electrified vehicles alongside traditional gas-powered cars on the auto industry’s most flexible assembly line—Ford’s Michigan Assembly Plant in Wayne, MI. Photos courtesy Ford Motor Co.

Podcasts

Live from The Assembly Show, the hosts of Manufacturing Revival Radio sit down with Adam Malofsky, Ph.D., president and CEO of Bioformix to discuss his company’s innovative, energy-saving adhesives and polymers, which cure without the need for heat or light. 

More Podcasts

Assembly Magazine

assembly august 2014

2014 August

The 2014 August Assembly includes how to Produce in Synch With Sales plus much more. Check it out today!
Table Of Contents Subscribe

Machine Age

How old is the oldest working machine in your assembly plant?
View Results Poll Archive

THE ASSEMBLY MAGAZINE STORE

welding.gif
Welding: Principles & Practices

This text introduces students to a solid background in the basic principles and practices of welding.

More Products

Clear Seas Research

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications,Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.

Assembly Showrooms

ASSEMBLY Showrooms

STAY CONNECTED

facebook_40px twitter_40px  youtube_40pxlinkedin_40pxgoogle plus