Most open-source hardware projects (including Arduino) seem not to have taken advantage of the distributed manufacturing models enabled by the open nature of their designs. Instead, we mostly see two conventional distribution models: centralized manufacturing and artisanal production.
The centralized manufacturing model
The centralized manufacturing model is a simplified form of the process followed by most corporations. Here a manufacturer (the small red dot) produces the product and sells it to multiple distributor. Each distributor marks-up the product (represented by the red rings) and resells it to consumers. This makes the product available in many places, but increases the cost to the consumer, as the manufacturer and distributor both take a cut. It works well for assembled products, where economics of scale continue to improve at relatively large volumes. This is the model followed by Arduino.
The artisanal production model
Many other makers of open-source hardware produce and distribute products themselves, a model similar to that of an artisan. This keeps the costs low because there's only one party profiting from a product, and they may not focus on making money. It can, however, limit the product's availability to those places easily reached by the producer. This model works well for kits, which limit the production effort to a level that can be handled by an individual or a small group.
The open-source hardware distribution model?
The natural model for open-source hardware (particularly kits) would seem to be distributed manufacturing. This would involve a number of smaller groups independently producing the same design for local distribution. It would make the product available in many places, but avoid the cost increases associated with a separate manufacture and distributor. PCB production and component purchase seem to yield much of their economies of scale at quantities of around one hundred, so this model would not require a large volume from each producer. The documentation and instructions could be created collaboratively and housed centrally, as all the products would be the same. I'm surprised that I haven't seen many open-source hardware projects following this model. It seems to offer a means for the collaborative production of products, a system that matches the philosophy of open-source hardware.
This blog post comes from a presentation I gave at the Grounding Open-Source Hardware Conference (GOSH) in Banff, Canada.