Analysis of the supply chain of laptop

Abstract

The computer industry has evolved into an epitome of hyper efficient globalized production while also navigating a maze of corporate and geopolitical sensitivities. All computer manufacturing companies outsource a part or their entire manufacturing to Asian countries like Taiwan and China where the local companies procure components from across the globe and ship out the assembled products, all in a matter of days. Participating countries include the United States, China, Japan, Singapore, Germany, South Korea and Taiwan. The fast-moving computer industry is known for falling prices and continuous innovation. This dynamism and falling prices have been brought about by the specialization and inherent economies of scale obtained by horizontal specialization. The Laptop production network took on a global nature almost from the beginning. IBM sourced some parts for its original Laptop from Asian suppliers whereas U.S. suppliers of components such as disk drives and printed circuit boards set up production facilities abroad in order to reduce costs. In order to tap these emerging supply networks and gain access to foreign markets, IBM and other Laptop makers began locating assembly plants around the world and sourcing many parts as well as complete systems from foreign suppliers. The resulting production networks were global, but were concentrated most heavily in the Asia-Pacific region, where earlier investments by U.S. and Japanese electronics firms had created an existing supplier base. The Asia-Pacific production network was concentrated in Southeast Asia, particularly Singapore and Taiwan. In Singapore, many U.S. and other MNCs set up production of computer hardware, especially disk drives. In Taiwan, entrepreneurial local companies found opportunities supplying the major Laptop makers, beginning with simple parts and moving up to more sophisticated components, subassemblies, and final assembly of Laptops and peripherals. Over time, laborintensive activities were relocated to low-wage locations such as Thailand, Malaysia and China, with Singapore and Taiwan coordinating production in these sites and handling more sophisticated manufacturing processes at home. Japan and Korea were less successful as global Laptop assemblers, but were the major suppliers of high volume components such as memory chips and flat-panel displays. The laptop industry comprises of a complex network of companies involved in different segments of the industry such as microprocessor and other components, assembly and complete systems, operating systems and applications. Each of these companies specialises in a specific activity of the value chain, seeking to derive maximum profits from the network. The big laptop brands outsource much of the manufacturing to control costs and concentrate on their core activities of marketing, design, logistics and delivering to customers. The production base is largely concentrated in a small area around Taiwan and the Shanghai area in China allowing Original Design Manufacturers (ODMs) to harness the efficiency and effectiveness of a tightly clustered supply chain. These ODMs are supplied by a multi-tiered layer of suppliers, increasing complexity and introducing inefficiencies in the system. With increasing cost pressure from the OEMs, and declining profit margins, the ODMs seek to optimize every link of the supply chain. Implementation of a digitally integrated supply-chain will allow optimization of inventory levels and help in planning and forecasting demand relayed to suppliers downstream in the network. Also, in the face of increasing competition between contract manufacturers many of them are looking to diversify as well as provide value-added services to differentiate their products.