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By:

Jose Vega
Rob Blakely
Suresh Madhuvarsu
MGB-282
Supply Chain Management

Flextronics
1
Flextronics Overview
2
CM, CDM and ODM Timeline
3
Key Case Issues
4
Beyond the Case
Agenda
Global Supply Chain Enabler
~120,000 Employees in Asia (~90,000 in China)
~$24 Billion in Annualized Revenue
200,000+ Employees Globally; 20,000 Logistics/Services
Operating in 30 Countries; 27M Sq Ft of Capacity; 9 Industrial Parks
Service Model
Design.
Flextronics employs over 4000 design
engineers.
Flextronics owns 364 patents

Capabilities
Industrial Design
System Architecture
Mechanical Design
Embedded
System Design
Software Systems
Product Launch/NPI
DFx Services


Build.
Flextronics runs 9 industrial parks
around the world focused on building
the worlds leading technology
products.

Capabilities
PCB/Flex Circuits
Optomechatronics
LCD Displays
Cables
Machining
Plastics
Metal Fabrication
SMT Assembly
System Integration
and Final Test

Ship.
Flextronics is involved in doing BTO
and CTO for many of the most
complex technology products in the
world from industry leading
companies such as Cisco, HP, Huawei,
Lenovo, RIM, Juniper, and many
others.

Capabilities
Build-to-Order (BTO)
Configure-to-Order (CTO)
Distribution and
Direct Fulfillment
Outbound Logistics
and Hubbing
Service.
Flextronics Global Services is the
global repair leader for electronic
products servicing 30M cell phones,
2M laptops, 9M PCBAs, and 2M game
consoles phones per year.
Global Services sites dedicated to
Service Parts Logistics process and ship
over 12M spare parts for customers
every year.

Capabilities
Repair/ Refurbishment and Warranty
Support
Service Parts Logistics
Remarketing
Retail Technical Services (RTS)
Asset Recovery
Reverse Logistics

Europe
Tczew, Poland
East Hungary
West Hungary
Americas
Guadalajara, Mexico
Juarez, Mexico
Sorocaba, Brazil
Asia
Chennai, India
Doumen, PRC
Shanghai, PRC
Sustainable Growth Limitless Scale, Repeatable Execution
Powerful Flextronics Differentiator
Operations revenue breakout by country:
9 Month Sales %
China $6,252,200 34%
Mexico $2,665,900 15%
U.S $2,531,400 14%
Malaysia $1,808,500 10%
Hungary $1,197,900 7%
Other $3,714,700 20%
Total $18,170,600 100%
Customers*
Products*
1
Flextronics Overview
2
CM, CDM and ODM Timeline
3
Key Case Issues
4
Beyond the Case
Agenda
Original Electronics Manufacturer (OEM)
Turnkey: they did everything

Product Design
and Marketing
Manufacturing,
Assembly, and
Testing
Distribution and
Sales
Birth of EMS
OEMs start outsourcing to Electronics
manufacturing Services (EMS) in the 80s into the
90s. Why?
1. Core Competencies (Strategic): OEMs better and
design and marketing. (better access to customer
data?)
2. Economies of Scale (Economic): EMS firms could
leverage their fixed assets more efficiently than the
individual OEMs.
3. Broad Geographic Presence (both Strate and Econ):
Reduced risks of OEMs from manufacturing in one
place.
OEM
Product Design
EMS
Manufacturing,
Assembly, and
Packaging
OEM
Sales and
Marketing
Industry in 1980s into 90s

EMS Industry Growth in 90s
OEM growth, especially in electronics, meant
more outsourcing to EMS for their manufacturing
needs
EMS companies rapidly expanded, usually
through the acquisition of underutilized OEM
manufacturing plants (they dont have economy
of scale)
Many acquisitions involved companies with
significantly cheaper labor (e.g., China) as much
as 75% cheaper compared to U.S. and Western
Europe
Two Segments of EMS firms
Contract Design and Manufacturing
(CDM)
Product
Design and
Engineering
Supply Chain
and Logistics
Contract Manufacturing (CM)
Manufacturing and
Assembly
Packaging and
Distribution?
Original Design and Manufacturing
As EMS firms tested the CDM model and became more vertically
integrated upstream, they started to infringe upon the territory of
Original Design Manufacturers (ODM)
ODMs would initiate a new design and market the finished product
to OEMs.
The model allowed ODMs to colocate design and manufacturing.
The ODM already knows the design aspects of the manufacturing,
so they can pass on that knowledge, which makes things more
efficient. In the end youre able to design something that you know
you can manufacture efficiently and ultimately remain competitive.
After studying the model of ODM in Taiwan, Flextronics VP notices
that because notebook computers are commoditized the OEMs feel
comfortable purchasing completed products from ODMs
1
Flextronics Overview
2
CM, CDM and ODM Timeline
3
Key Case Issues
4
Beyond the Case
Agenda
1997 1998 1999 2000 2001 2002
Flextronics $640 $1,335 $3,952 $6,959 $12,109 $13,104
Solectron $3,694 $6,102 $9,669 $14,137 $18,692 $12,276
Celestica $2,006 $3,249 $5,297 $9,752 $10,004 $8,271
Jabil Circuit $987 $1,484 $2,238 $3,558 $4,330 $3,545
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
T
o
t
a
l

S
a
l
e
s

(
M
i
l
l
i
o
n
s

$
)

Top CM Firms - Sales
1997 1998 1999 2000 2001 2002
Flextronics 1.8% 1.6% 1.3% 2.3% -3.7% -1.2%
Solectron 4.3% 4.1% 3.6% 3.5% -0.7% -25.3%
Celestica -0.3% -1.5% 1.9% 2.1% -0.4% -5.4%
Jabil Circuit 5.3% 3.8% 3.8% 4.1% 2.7% 1.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
P
r
o
f
i
t

M
a
r
g
i
n

(
%
)

Top CM Firms - Profit Margin
1998 1999 2000 2001 2002
Hon Hai 13.8% 12.8% 10.6% 8.5% 6.5%
Quanta 17.7% 12.3% 9.4% 10.6% 7.6%
Compal 13.1% 11.5% 8.0% 7.0% 6.8%
Acer 4.4% 5.7% 9.6% 1.1% 8.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
P
r
o
f
i
t

M
a
r
g
i
n

(
%
)

Top ODM Firms - Profit Margin
1999 2000 2001 2002
CM 42% 39% 24% -21%
ODM 29% 23% 28% 30%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
S
a
l
e
s

G
r
o
w
t
h

(
%
)

Yr/Yr Sales Growth - CM vs. ODM
1998 1999 2000 2001 2002
CM 2.0% 2.6% 3.0% -0.5% -7.7%
ODM 12.2% 10.6% 9.4% 6.8% 7.3%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
P
r
o
f
i
t

M
a
r
g
i
n

(
%
)

Average Profit Margins - CM vs. ODM
$0
$10
$20
$30
$40
$50
$60
$70
$80
CM CDM ODM
Revenue $80 $80 $78
Cost $75 $72 $69
Profit $5 $8 $9
$80 $80
$78
$75
$72
$69
$5
$8
$9
Cell Phone Comparison
Key Issues to consider for an ODM
Hiring and developing new people

The location of the design department

Relationship with customers
Cost & Benefits of becoming an ODM
Benefits
Aligned
Agile

Costs
Added risk
1
Flextronics Overview
2
CM, CDM and ODM Timeline
3
Key Case Issues
4
Beyond the Case
Agenda
IDCs EMS and ODM Revenue Growth Forecast
$191
$229
$267
$280
$233
$249
$274
$301
$329
$150
$190
$230
$270
$310
$350
2005 2006 2007 2008 2009 2010 2011 2012 2013
E
M
S

+

O
D
M

R
e
v
e
n
u
e
s

Source: IDC, Nov 2009
US$B
Growth Potential & Market Position
FLEX Portfolio
TOTAL
MARKET
FLEX
RANK
FLEX MARKET
SHARE
TOP CUSTOMERS
INFRASTRUCTURE
$34B No. 1 31% Cisco, Huawei, Ericsson
INDUSTRIAL
$25B+ No. 1 14% App Materials, Siemens, Philips
MEDICAL
$8B No. 2 10%
Boston Scientific, Medtronic, Agilent,
Johnson & Johnson, Smith & Nephew
ODM COMPUTING
$101B No. 7 1% HP, Lenovo, Dell
MOBILE & CONSUMER
$44B No. 2 19%
RIM, LG, Microsoft, Sony, Philips,
Kyocera, Motorola, Sharp, Toshiba
COMPONENTS
$109B N.A 2%
Apple, RIM, Motorola, Honeywell, Cisco,
Huawei
SERVICES
(Excluding Freight)
$22B N.A 7%
Apple, Dell, Verizon, Avaya, HP, Cisco,
Juniper, Toshiba, Huawei
Source: IDC, Prismark, Micro-Tech Consultants, Display Search, TSR, Blumberg Advisory, FLEX estimates
1
ODM and EMS Markets
5
2
3
4
Ethernet switches & routers
Broadband access
equipment
Servers and storage
Customer premise equipment
Set-top boxes

Optical transport equip.
Telephone switching &
PBX equipment
INFRASTRUCTURE
Capital equipment
Appliances
Smart grid
meters/controls
Automotive
Aerospace
Defense
Energy/Solar
Self service kiosks

Consumer diagnostic
devices
Diabetes products
Drug delivery devices
Lab/Life science equipment
Imaging & Patient monitoring
Diagnostic equipment
Disposable devices for
wound management
Catheters
Instrumentation
PC Desktop All-In-One
Desktop All-In-One
Notebooks
Servers
Storage

Netbooks

Smart phones
Cellular handsets
Data cards
Embedded modules
Digital cameras
Gaming consoles
Print & Copy
Security tags
Audio & Video
equipment
Including flat panel TVs,
DMPs and audio
accessories
INDUSTRIAL
MEDICAL
COMPUTING (ODM)
MOBILE & CONSUMER
Q&A

Thank You !

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