ODM channel behind S. Korean manufacturer’ robust growth

April 19, 2014 Leave a comment

ODM channel behind S. Korean manufacturer’ robust growth

2014.04.13 17:53:27

As early as a decade ago, South Korea’s apparel company Sae-A Trading produced its goods entirely through OEM (original equipment manufacturer) channel. The apparel company recorded 1.3 trillion won ($1.2 billion) sales last year, as high as the amount generated by a large company. The driving engine behind its robust performance is ODM (original design manufacturer) channel. 

After shifting to ODM type in 2001, Sae-A Trading’s sales jumped as much as 867 percent in 13 years.
Head of Sae-A Trading said, “we turned to ODM type as OEM distribution channel does not guarantee our survival. We faced a strong call for price cut under that channel,” adding “one big change is that fair relations have been established between purchasing companies and manufacturers.”
Korea Kolmar and Cosmax are the Korean manufacturers which adopted the ODM channel in the 1990 when the method was rarely known in Korea. They produce foreign brands’ cosmetics including L’Oreal, Mary Kay and Bobbi Brown.
Korea Kolmar saw its sales cross the 10 billion won mark for the first time in 1994. Its sales expanded over 17 times in 13 years from 36.2 billion won in 2000 to 629 billion won last year.
Compared to 20 years ago, its sales soared over 60 times. Cosmax posted 379 billion won worth of sales last year, up over 30 times in 17 year from 10 billion won in 1997 to 24.8 billion won in 2000.
Kim Se-jong, vice president at Korea Federation of Small and Medium Business explained, “even large companies rely more on ODM method to cut cost and strengthen core capabilities. The method has been solidified as the propeller of the nation’s manufacturing industry.”

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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