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Case Study – (Teacher’s Guide) Transforming an industry from OEM to ODM

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Case Study: Transforming an industry from Original Equipment

Manufacturing (OEM) to Original Design

Manufacturing (ODM)

(Teacher’s Guide)


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Author

Mr Li Yu-wai

Head of Department (Design and Technology)

Tang Shiu Kin Victoria Government Secondary School

Project Coordinators

Mr Li Yat-chuen

Senior Training Consultant

Institute of Professional Education And Knowledge, VTC

Mr Tsang Siu-wah, Ephraim

Training Consultant

Institute of Professional Education And Knowledge, VTC

The copyright of the materials in this Case Study belongs to the Education Bureau of

the Government of the Hong Kong Special Administrative Region.

Duplication of materials in this Case Study may be used freely for non-profit making educational purposes only. In

all cases, proper acknowledgements should be made. Otherwise, all rights are reserved, and no part of these

materials may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior

permission of the Education Bureau of

the Government of the Hong Kong Special Administrative Region.

© Copyright 2010

Note by the Institute of Professional Education And Knowledge, VTC:

Every effort has been made to trace the copyright for the photographs and images in this Case Study as needed. We

apologize for any accidental infringement and shall be pleased to come to a suitable arrangement with the rightful

owner if such accidental infringement occurs.


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Case Study - Transforming an industry from Original Equipment Manufacturing

(OEM) to Original Design Manufacturing (ODM)

(Teacher’s guide)

General Information

Subject: Design and Applied Technology

Level: S4-6

Learning elements:

Knowledge Contexts Process Impact

Compulsory Part:

Strand 3

Value and Impact

• Entrepreneurship and

enterprise

Elective Part: Module 3

Design Implementation

and Material Processing

• Processing and

manufacturing

• Investigate Original Equipment

Manufacturing and Original

Design Manufacturing from an

authentic advertisement from

an enterprise

• Analysis the factors when the

industry transforming from

Original Equipment

Manufacturing to Original

Design Manufacturing

• Use SWOT analysis to

evaluate the advantages and

disadvantages of Original

Equipment Manufacturing and

Original Design Manufacturing

• Group discussion and

presentation

• Realise opportunities

and threats that Hong

Kong enterprises are

facing

• Understand the

advantages and

disadvantages of

Original Equipment

Manufacturing and

Original Design

Manufacturing

• Evaluate the steps and

strategies needed

when the industry are

transforming

Case Study: Students should be made aware of the relevance of the technology they are studying to the real world. Case studies on technology and design enable students to put their learning into an authentic context, and so provide an additional resource that can add a new dimension to learning about technology and design.

Authentic Context: Students could explore entrepreneurship and enterprise through a case study on the transformation of enterprises in Hong Kong.

Topics Covered:

Compulsory Part Strand 3 - Value and Impact

Elective Part Module 3 - Design Implementation and Material Processing


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Teaching Notes

The advertisement banner of a real local industry quoted here is used to provide students

with a brief concept of what OEM and ODM are. The advertisement clearly contexts and

states the differences of OEM and ODM business nature. Surely, teacher can further

explain the ODM and OEM by definition and examples.

Activity 1

Suggested Answers:

(1) Can you get some ideas of what OEM and ODM are?

From the advertisement context, we know that this company runs both the ODM and OEM

operation. For the ODM business, it puts emphasis on “specialization”, “innovative”,

“making own design” and “Custom design”. In this case, assisting customers to develop

their new items is also regarded as ODM business.

For the OEM business, it puts emphasis on “professional and experienced”. They are

experienced in making “licensed” products which design are made by the large

international clients

(2) What are the major differences of OEM and ODM?

OEM is making products according to the design and requirements of clients whilst the

ODM is developing a new product that waiting for a client to order.


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What is OEM?

OEM is regarded as the manufacturers who resell another company's product under their

own brand name. It is a very popular business model that companies re-brand a product to

their own name and offering their own warranty, customer support and license.

Typically the component that is purchased as an OEM product lacks all retail packaging.

Take the differences of a hard disk that is being sold as an OEM and a retail product as an

example. For the retail version, it is often referred to as a kit because it includes the drive

cables, installation instructions, warranty cards and software packages that are used to

help configure or run the drive, whereas the OEM version, the drive will only include the

hard drive in a sealed anti-static bag without any other resources materials.

What is ODM?

ODM is quite popular in an international trade, where a local ODM is used to produce

goods for a foreign company. Here are some advantages in the transaction.

� low labor inputs (mainly designers, accounting, shipping and QC personnel, etc.);

� transport links (proximity to suppliers, vendors and clients if sold locally) ;

� proximity to markets (if sold in local domestic market).


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Activity 2

Suggested Answers:

1 Can you give any daily examples of OEM and ODM products?

Encourage students to have a small group discussion in class before answering this

question. Their familiarized products, like computer and electronic gadgets, have a lot

of OEM items inside.

For examples, the LCD display panel, the mouse and the earphones of the MP3.

2 What is the “Own Brand” manufacturer? Can you suggest one example of it?

“Own Brand” has no formal definition but it can refer to the manufacturer who

produce their own products carrying their own brand name, such as Fortress,

Giodano and Fancl are own brand manufacturers.

3 What conclusion can you make from the data in the diagram?

The percentage of OEM is about three folds more than that of ODM at this moment.

However, the future of ODM is destined to be more promising in the future.

Teacher can discuss and explain the reason for developing ODM business in the

lesson, such as more proactive in selling, higher profit margins in ODM business,

Less competition in ODM business, more potential customers worldwide, higher sales

volume, and much easier to enter into new market.


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Activity 3

Suggested Answers:

1 Why ODM business will be more proactive in selling?

As quoted from the advertisement in the earlier section, OEM products are just

licensed items from big foreign companies, such as stuffed toys of Sesame Street and

free gifts of McDonald. OEM customers lead the active role as they own the design

and product specifications. For ODM, manufacturers develop their own new items

according to market needs. The new products can help the clients to develop a new

market and may enjoy a higher return.

2 Why ODM business can have higher profit margins?

As the ODM product is usually a new item, competition in the market is less or even

none at all. The ODM product can sell at a higher price if the product is of high quality

and in the right market. .

3 Why ODM business will have less competition compared with OEM?

ODM product is a new item developed by the manufacturer’s R & D department. The

product is usually innovative, unique or patented. Competitor may need time to

produce a rival product.

4 Why ODM business can have more potential customers worldwide？？？？

Customers or merchanisers are looking forward to having a new product to develop a

new market and enjoy a higher sales return and volume. The ODM product is

welcomed by potential buyers. ODM firm can take the initiative to promote new items

to interested potential buyers worldwide.

5 Why ODM business can have higher sale volume than OEM business?

Usually the ODM is a new emerging item and open into a non-saturated market so

that it can have a higher sale volume. In addition, the ODM products can be open to a

number of potential buyers worldwide.

6 Why ODM business can entry into new market?

ODM product is a new item developed by the manufacturer or a custom design made

for clients. ODM firms aim at opening a new market.


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Activities 4 and 5: SWOT Analysis

Hints for students:

Students are encouraged to use a variety of approaches, such as brainstorming, small

group discussion and information search to complete this task. Examine OEM and ODM

using SWOT analysis provides a thorough and objective understanding of the topic.

Though the topic is transforming an industry from OEM to ODM, it does not imply that

OEM has no advantage at all. It just means under the competition from other Asian

countries where can offer lower cost and cheaper labor, Hong Kong enterprise needs to

consider the transformation to ODM or even Own Brand Manufacture. Below are the

suggested points for reference. Other reasonable answers are acceptable.

OEM ODM

Strength � Focus on production

� Less risk

� Simple organization

� Strong production base

� Own R&D

� Proprietary

Weakness � Weak in product design

� Weak in marketing

� No R&D

� Just order to make, passive

� Expose to risk

� High R&D cost

� Invest in marketing research

� Sale channel

Opportunity � Value-added service

� Custom design

� Reduce the manufacturing

cost

� Reduce the manufacturing

cycle

� High return

� More potential buyers

� More proactive

� New market and customers

Threat � Less profit margin

� Competition from others who

can make the same product

at lower cost.

� Wrong product positioning

� No market

� Short product cycle

� Obsolete.


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Activity 6: Discussion and Presentation

In the final group presentation, the suggested four guided questions are used to remind

students to present their information within the scope of works. They are still free to

determine the presentation sequences, contents and the depth of presentation. Also,

these guidelines are provided for reference only. Students are encouraged to use creative

presentation skills to convey their message and findings. Chart, storyboard other than

PowerPoint are recommended.

Final Presentation

(1) Key success factors for OEM to develop into ODM business:

� Product Positioning and Strategy

� Marketing Channels and Promotion

� Engineering Capability

� Product Technology

� Costing and Pricing

� Product Design and Industrial Design

� Time to Market and Project Management

� Technology Roadmap/Planning

� Market Research

� Manufacturing and Production

� Legal (e.g. patents and copyright)

(2) Barriers for OEM enterprises to develop into the ODM nature:

� Don’t know the market needs

� Cannot afford high cost of investment in design

� High market risk

� Don’t know how to promote new products

� Lack of technology capability

� Uncertain Return Of Investment

� Lack of project management

� Capability

� Loss of OEM business


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Pedagogy

Teacher should raise students’ interest by discussing the differences of OEM and ODM

products with some examples in the classroom, i.e. a hard disk of a computer may be an

OEM product whereas the LCD monitor may be an ODM product. Teacher can discuss

and explain the case context to the students to let them have some background

knowledge on the issues before going to the information search and small group

discussion.

In the end, the final presentation is like a press conference; students will introduce the

background stated in the case context and then present their findings and interpretation.

The provision of evaluation sheet helps them to summarize the ideas and be more

accountable for teacher continuous assessment. Teacher’s input and encouragement in

the small group discussion are the keys of their success. Teacher should remind students

of the case context and the tasks to be performed.

There are some hints recommended for the students to conduct group discussion:

1. Read the case materials at least twice and put down some footnotes or questions

aside the paragraphs.

2. Jot down a list of the problems and issues that to be discussed.

3. Try to add meanings to the numerical data presented in the case (if any) or any

findings discovered during their research.

4. Try to apply the concepts and analytical tools that they have learned earlier or in other

subjects.

5. Be thorough in diagnosis of the situation and make at least one page summary of their

group discussion.

6. Support any and all opinions among the group with well-reasoned argument skills and

data until they can say “here our analysis show that …..".

7. Use tables, charts, and graphs to present their findings or conclusion as far as they can.

Sometimes simple summary tables or a bulleted paragraph will work wonders.


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8. Prioritize their recommendations means make sure their practical recommendations

are really practical; make sure they can be carried out in an acceptable time frame with

the available skills and resources.

9. Review the recommended solutions to see if it really addresses all of the identified

problems and issues, advices from other groups can be consulted.

10. Be conscientious to recommend some solutions or conclusions that could not have

disastrous results if it doesn't work out as planned, remind them to be a responsible

and conscientious case analysts and is tackling a real case.

Teacher can take the role of a facilitator and recommend some worksheets in accordance

to the case context. The worksheets have some reflective questions so that they can be a

formative assessment to determine how students are learning and to make sure they are

engaging in the learning process. The worksheets with appropriate designed tables and

hints can help students to record their work systematically so that they can be easily

monitored. This makes their learning outcomes become tangible and assessable.

The follow-up activities recommended in this case study are the substantiation of contexts

through different learning and teaching strategies. We believe that students can acquire

generic skills and explore the problem in a greater depth through this series of interactive

activities. However, classroom implementation is up to the teacher’s professional decision

that is based on the teaching schedule and the learning outcomes depending on the

readiness of students, lesson preparation and planning.


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Schemes of Work

No. of periods: 6 periods

Duration of each period: 40 mins. X 2

Level: S5 or S6

Venue: Computer laboratory and/or DAT room

Period Teaching /Learning Activities

01

Understanding the case context and the task

� Introduce the case context;

� Introduce the concepts of OEM and ODM;

� Discuss and give daily examples of OEM and ODM products;

� Introduce the development of Hong Kong industries in Delta Pearl

River since 80’s;

� Complete Class Activity One

02 Forming groups and Class Activity

� Form groups of 3 to 4 students;

� Conduct small group discussion and information search;

� Consolidate concept by completing Class Activity Two;


� Form groups of 3 to 4 students;

� Conduct small group and class discussion;

� Completing Class Activity Three to understand the topic;


� Form groups of different 3 to 4 students;

� Conduct small group and class discussion;

� Completing the SWOT worksheets to conduct an in-depth

investigation of the task;

05 Group Presentation Preparation

� Prepare the presentation

� Complete the Information Search Record Sheet and Presentation

Preparatory Sheet;

� Conduct a group presentation;

06 Group Presentation

� Each group has 10 minutes for their presentation;

� Use scored rubrics for peer group assessment;

� Teacher comments and feedback after presentation.


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Assessment

The checklist assessment rubrics are given to each student for their self-evaluation after

each lesson. Teacher can discuss the checklist with them to perform formative

assessment. Teacher should record the checklist results and monitor the students’

progress.

The score rubrics are given to assess the final presentations by teacher and peers. The

rubrics criteria can be subject to change by the teacher professional judgment. The benefit

of using score rubrics is that students can know which areas they have performed well and

which areas need improvement. Students should know the assessment criteria before

working on the case so that they can divert their focus onto their learning.

For a fair assessment, students can request to be assessed individually instead of as a

group. They can state their percentage of contribution to the case before the assessment.

Scores can be calculated in accordance to the contribution percentage and allocate to

individual student.

Reference Materials / further reading materials

1. Hong Kong Productivity Council

http://www.hkpc.org/html/eng/common/index.jsp

2. Wikipedia, the free encyclopedia

http://en.wikipedia.org/wiki/Original_equipment_manufacturer

3. Trade development Council

http://www.tdctrade.com/

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