OEM and ODM have often been found in the design and production industries, and people stay confused as they are pretty similar regarding the distinctions between the two names. The words ODM, OEM, describe various configurations of fabrication activities. The distinction between these production systems is the extent to which a brand owner undertakes design, engineering, and production activities.
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If you have an idea for a new product and are looking for a reliable manufacturer to partner up with and bring your products to market. Before you contact a manufacturer, you'll need to understand the key differences between these two unique business services, and this article covers everything you need to know.
An ODM, or 'original design manufacturer,' is a company that has the capabilities to design, develop, manufacture and sell products themselves. ODM often designs and develops products independently, or in collaboration with a client. All you need to do is give them the idea of the design you want, and they can also show you their existing product lines, and you can choose from them.
Advantages Of ODM Service
1. You don't need to make large upfront investments for R&D and setting up a custom production line.
2. You can save a lot of capital because you don't need to control the tooling costs.
3. you can focus more on marketing your products.
4. don't have to worry about expertise or resources that meet your design specifications.
5. Save money even if you are purchasing low volumes of products. This is because ODMs usually produce significant quantities to sell in smaller lots.
6. Usually faster to market than OEM
Disadvantages Of ODM Service
1. Changing suppliers is difficult because they have the design.
2. If your sales volume is high, the supplier is likely to compete with you.
3. It is highly likely that your product appears similar to that of your competitors
4. Other companies may start selling the same product as you
5. You don't get the protection of intellectual property
6. You are responsible for any problems during sampling and product control
There are many industries that partner with ODM manufacturing firms, ODM products are more common in more R&D and capital intensive industries.
ODM More common industries: Electronics; Machinery; Medical devices; Kitchen utensils
ODM Less common industries: Clothing; Home textiles; Accessories
OEM stands for 'original equipment manufacturer,' which refers to a company is in charge of developing, constructing, or selling the product to another company or company which is responsible for the distribution of its product following its standards. For example, the Apple iPhone was created and built by Apple and subsequently licensed to create Foxconn.
If you are a manufacturer and don't have the capabilities to design, create, test, and brand products, you should offer OEM manufacturing and provide basic manufacturing services to help businesses mass-produce products.
Advantages Of OEM Service
1. You will own all intellectual property rights. Your product specifications will also be protected from copyright infringements.
2. You can quickly get quotes from manufacturers because you will have detailed specifications and designs.
3. You have a better bargaining position and can easily switch to other suppliers.
4. It may be more difficult to copy your product
5. Less risk in manufacturing because a working prototype is available
Disadvantages Of OEM Service
1. Changing suppliers is not easy because you need to change the entire supply chain.
2. It isn't easy to negotiate a slow price increase.
3. Material or process changes may have a serious impact on product quality.
4. Product development can add significantly to the time it will take to get the product to market
It depends on your needs. Do you already have a finished product design ready for manufacturing? If so, an OEM is a right partner for you.
If you are considering developing a product or are already in the process, we generally suggest working with an ODM partner. We believe that getting your manufacturing partners involved right at the beginning of the process is a best practice you should follow.
If you're thinking of starting an OEM or ODM business you should consider the following things:
There are three primary ways to find OEM and ODM manufacturers.
The biggest factories for manufacturing you can contact online are Alibaba, Made in China, and Global source. The suppliers explain their services details to potential customers. Some of the services they provide are OEM, ODM, Customizing. All this information is listed on the product listing page. Social media platforms also have many suppliers where you can check out a variety before reaching out to them. However, most are wholesale websites, so be specific in your search.
You may find it unreliable to find suppliers online. Another option is physically visiting wholesale markets in your locality to identify suitable suppliers. This is advisable if you are in big manufacturing countries such as China. Meeting a supplier physically is convenient, and you are assured of quality since you can see the products for yourself.
If you live far from China, you can invest in a trip to a trade fair. It will cost you, but it will be a one-time and worthwhile investment since you will find a reliable supplier who can become a lifelong partner for supplying your business.
New importers mostly prefer sourcing agents. However, ensure you engage a professional sourcing agent. The agents have many resources and information on the best supplier or manufacturer to meet a client's needs.
Like Union Source: our services include: guiding you to choose a suitable manufacturer, negotiating prices, following up on production, ensuring high or standard quality is met, testing the products, and arranging for shipment. As a customer, this is very convenient for you since you don't have to get your hands dirty. No upfront charges, no experience needed. We will guide you step by step.
Whether you find a supplier offline or online, there are key indicators of finding a suitable manufacturer that you should follow:
Here are seven main steps in the process of OEM China & ODM products. They may step vary for different products.
Step 1: Creating a prototype or designing your product
The factory will determine the most suitable formula according to your needs and produce pre-production samples to meet customer needs. The customer receives the model for testing and proposes modifications or approves mass production.
Step 2: Inspection factory
After the test, the customer must go to the factory for internal inspection. This is assuming that they are satisfied with the samples and their pricing. Other factors that customers will check are R&D capabilities, production capabilities, and workshops.
Step 3: Signs a contract with the factory
After the customer visits the internal factory, he signs a contract with the factory. The factory charges customers a deposit for mass production, which varies from factory to factory.
Step 4: Packaging designs
Packaging design and purchasing packaging are the responsibility of the factory. This is usually a free service. However, customers will guide them based on the type of packaging design they like. Then hand over the work to a professional packaging factory to make several samples for selection before the contract.
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Step 5: Product Testing
Confirm materials, ingredients, and packaging design. The factory entrusts the FDA to conduct product testing and filing.
Step 6: Delivering
The factory conducts product filling, packaging, and QC processes. The whole process takes fifteen to twenty days to complete. After the manufacturing process is completed, the customer pays the balance to the manufacturer.
Step 7: Shipment
If no purchasing agent is involved, the factory will arrange the delivery. Choose the transportation method according to the delivery time and the number of goods.
OEM focuses on manufacturing products according to customers' preferences for design and specifications. Therefore, it is the customer's responsibility to conduct research and develop the products they want. The project may take several months to complete.
On the other hand, ODM caters to all these processes. Since the project is completed faster, this is an excellent advantage for the time factor. You can also save a lot of money because you interact with fewer people in a shorter time. However, the client does not own the IP. The customer must compete with the product and customize the options provided by the model.
Choosing the best model between OEM and ODM depends on the customer's product, market, and goals. However, OEM is recommended in most cases because you own the IP. ODM is a cheaper option, but having IP is more important.
ODM and OEM are common terms in manufacturing. Although both of these terms sound pretty similar, they are completely different from each other. Manufacturers operate in different capacities. Sometimes, they design and manufacture products on their own. At the same time, others use custom designs to manufacture products.
Manufacturers fall into two categories: ODM and OEM. We'll explore each in more detail below.
The term ODM refers to the Original Design Manufacturer. An ODM is a company capable of designing, developing, manufacturing, and selling its products.
The ODM model works as both a designer and manufacturer of products. ODM model manufacturers can accommodate your private label request.
OEM means Original Equipment Manufacturer. OEM companies will produce products according to the client's needs (client's design & brand).
When you use OEM manufacturers, you need to design the products yourself. The OEM business will provide you with expertise and labor to push the manufacturing process.
You can think of an OEM as a handyman. When you present your product idea to the original equipment manufacturer, they will assist you in turning your idea into reality.
The business models of ODMs and OEMs have evolved over time. To put it simply, ODM products are limited to a particular design, whereas OEM products can be customized to meet any specification.
Do you want to know more about ODM and OEM here? Let's look at the details below to understand this better.
As we know, the ODM meaning is Original Design Manufacturer. ODM refers to all the companies that provide manufacturing services. An ODM business leases its designed products to brands on a white-label or private-label basis.
ODM businesses help customers save more on product research and development expenses.
When you choose the right contract manufacturing partner for ODMs, you don't have to spend time and resources on product design here.
If you want to start your business quickly, ODM is preferable. Use the ODM manufacturer to customize your own brand name to products. This business model can shorten your time to launch a product and get it to the market. Finding a reliable manufacturer to make the private label product will be wise.
The ODM company doesn't need you to design your product. ODM manufacturing can save you from spending money on prototype design. Expenditures on these business activities cost hundreds or thousands of dollars on average. And by eliminating or vastly reducing product development expenses, importers can focus more on marketing strategies.
They are choosing an ODM manufacturing business to cooperate with means having access to finished products with engineering prowess and manufacturing expertise. Moreover, the minimum order requirements are usually less than OEMs.
Tech giants in the industry have already contracted most ODM businesses. That means you will get to work with manufacturers with extensive experience. They have tested product manufacturing processes and are experienced in dealing with different products.
The main advantage is that ODM manufacturing can serve as a one-stop solution. Working with an ODM eliminates the need to subject your potential products to extensive testing. In addition, you do not have to worry about obtaining licenses. ODM companies have completed all these steps before putting their products on the market. It is more trustworthy to work with an ODM if you wish to sell electronic products since you will need several types of certifications to sell your products.
ODM doesn't guarantee you a unique product for your brand. Due to the lack of customization options in ODM manufacturing.
Using private labeling to overcome this issue requires clients to invest more time and money.
At the same time, ODM business models usually have higher competition in the market. Even though ODM requires less start-up capital, price competition tends to be steeper, resulting in slimmer profit margins. Moreover, opting for legal protection is also difficult in this case.
OEM businesses provide original equipment manufacturing. OEM works as a handyman for your brand's operations. You need to provide a product idea, and the original equipment manufacturer will assist you in turning your idea into a manufacturing process. Apple, Adidas, Nike, and Samsung are examples of OEM business models.
Do you want to know what benefits your brand can get by choosing OEM manufacturing? Here are the pros of OEM products you must know:
Even though an OEM manufacturer can advise you on optimizing your production process, the company will not interfere with your product design process or patents. Therefore, you will be able to have a greater degree of creative control over your products.
OEMs usually have a network of suppliers to work with. They can buy the required material in bulk from those suppliers at a competitive price. Consequently, you can get more competitive service rates from OEM businesses.
Working with an OEM can be cost-efficient as you can cut costs on buying production equipment and its maintenance. Moreover, an OEM model can reduce production and material acquisition costs. Additionally, you can negotiate a specific price per set of manufacturing for a certain period. This practice protects you from offensive price increases.
OEMs are manufacturers that other businesses hire. They provide manufacturing services for buyers' specifications. Therefore, the minimum order requirements in this manufacturing model are usually higher. Besides that, OEM manufacturing also has associated overhead costs. These costs are associated with market research and product design. Moreover, ROI cannot be guaranteed.
To understand them, we have presented some business cases for OEM and ODM. Do you want to know about them? Let's look at the real-life examples below for a better understanding.
ODM businesses operate on white-label manufacturing principles. For instance, Apple is a popular tech company that invented and designed the iPhone. Apple hired Foxconn as its OEM supplier.
Foxconn factory provides OEM services to produce smartphones for Apple. This business model is exclusive to Apple. However, Apple carefully manages its smartphone production through its contracted manufacturer.
Production of third-party chargers is another business case for ODM products. For instance, if you search for chargers online. You will notice the product is available from different manufacturers yet has the same design. Even though the chargers have the same basic design, they are different in colors, branding, packaging, etc., as per the specifications of their seller's needs.
Both OEM and ODM business models come with their pros and cons. However, choosing the most suitable business model for your brand comes from your available resources.
For instance, do you have a research and development budget? Or do you have enough time to spend on market research and creating a business prototype? You can choose OEM as your ideal business model to create a fresh product.
On the other hand, if you want to launch your products with a limited budget quickly, then ODM is your option.
For example, you should choose OEM if you want more creative control over your products. If you wish to introduce a unique product to the market with little competition, OEM is also a suitable choice. By utilizing this business model, you can design your product and launch it on the market. Most importantly, this is an appropriate solution for brands waiting for a rational time-to-market strategy.
When working with OEMs, it is always advisable to manage your expectations. It is not enough to hand over the design of your product to OEMs. OEMs are not responsible for researching product compliance and legalities. Thus, before developing any innovative product in this manner, it is essential to conduct market and legal research.
As an alternative, if you do not have an adequate budget and passion for product design and have limited resources. If this is the case, you should consider ODM.
If you are working with an ODM manufacturer, ensure that you negotiate the terms of your contract to protect your supply chain. Consider negotiating favorable terms such as liability, payment terms, production costs, etc., to enhance your protection.
To put it simply,
ODM means original design manufacturer. This type of supplier is skilled in both design and production.
ODM: You provide your logo, the ODM provides the products, and the ODM personalizes them for you.
OEM means original equipment manufacturer. This type of supplier possessed experienced skills to produce a new product.
OEM: You provide the design, and the OEM provides production skills to turn your design into mass production.
That's all for OEM vs. ODM. Both of these business models are suitable for different scenarios. The final call between OEM and ODM depends on your business needs and preferences. You can choose both of them, but it is important to know their basics and understand your needs before making the final decision.
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