When you are sourcing products you are likely to come across the terms, OEM and ODM. These terms refer to different approaches to manufacturing. This guide covers what these terms mean and helps you decide which is the best option for you.
OEM (Original Equipment Manufacturer)
OEM manufacturing is normally best suited for people and businesses with new and innovative products.
OEM is essentially when a company designs a product from the ground up and then contracts another company to manufacture it for them. This happens, for instance, when you design a brand new widget, launch it on a crowdfunding site and need to get it produced. Apple uses OEM for producing the iPhone. They come up with the design, then contract a number of third-party manufacturers to handle the mass production.
The minimum order quantity will be higher than with ODM, because of the higher level of capital expenditure and technical understanding of the product required.
This type of manufacturing is often also referred to as private labeling. With ODM you contact a manufacturer of an existing product, often through a site like Alibaba, and have the product branded with your brand and company information. Sometimes, you can request modifications. Many suppliers are only prepared to make minor changes like product size, color, and packaging.
Many of the sellers and entrepreneurs you hear about importing from China and selling on Amazon are essentially following this method. The most popular place to find ODM manufacturers, especially in Asia, is Alibaba.com. Other sources include Aliexpress.com, GlobalSources.com, and Made-In-China.com. These sources are covered in more depth in the Supplier Marketplaces guide.
The minimum order quantity will be less than with OEM, because there are fewer set-up costs to recoup.
If you have a new product and are worried aboutIP infringement, don’t worry so much about copycat artists. Most cases of infringement are by the original supplier or manufacturer. This isn’t really surprising since they went through the hard work of product development and getting the product into manufacture, and probably have a sense of their buyer’s business model. If you do not want your supplier to turn into your competitor, you should take a few precautions.
1. Seek legal advice.
2. Register your trademark in China before production starts. 3. Have your supplier sign a non-disclosure/non-use/non-circumvention agreement.
The following table lists some of the common advantages and disadvantages of both OEM and ODM manufacturing.
OEM Manufacturing
ODM Manufacturing
Pros
Exclusivity to sell that product.Near complete customization available.
Little or no product development costs.Lower minimum order quantity requirements.
Cons
Expensive development costs.High minimum order quantity requirements.
No product exclusivity.Fewer opportunities for customization.
This guide was contributed by Dave Bryant, EcomCrew
Summary 1. If you have a great idea for a new and innovative product, then OEM manufacturing is likely for you. 2. If, on the other hand, you want to import a pre-existing product and brand it under your own name with few or no product changes then you want ODM manufacturing.
OEM and ODM are acronyms seen quite frequently in the manufacturing world. OEM stands for Original Equipment Manufacturer and ODM stands for Original Design Manufacturer. Though many people often confuse the two terms and use them interchangeably, they certainly do not mean the same thing.
Apple's iPhone has the Apple logo clearly visible to users. Apple is the OEM. Apple designs its products, but Apple outsources the majority of iPhone manufacturing production to contract electronics solutions providers. Both EMS and ODM.
OEM stands for original equipment manufacturer. In the business world, this means a company that makes a product to be sold by another company under its own name. For example, an OEM computer manufacturer might make computers for a brand like Dell or Lenovo, who then sell the products under their own brand names.
ODM is a manufacturing model in which a company orders the existing product of a manufacturer, brands it as its own, and markets and sells the product. In this model, the manufacturer is called the original design manufacturer.
OEMs have the capability to manufacture designed products, but they often lack design capabilities. ODMs have the capability to design products for their clients and will typically have the manufacturing expertise too, but there are some ODMs that only perform the design side of the equation.
OEM stands for “original equipment manufacturer”. In the smartphone industry, this term refers to companies who manufacture their own phones in their own factories. Some examples of Android OEMs are Samsung, LG, and NUU Mobile.
One example of an ODM/OEM product that is commonly used in daily life is a smartphone. Many smartphone manufacturers, such as Apple and Samsung, design and develop their own phones, but they also work with original design manufacturers (ODMs) to produce parts or complete devices for them.
An ODM (Original Design Manufacturer) is a factory that has ready-made designs of electronic products, such as laptops, tablets, or smartphones, that can be customized and labeled by a private label, such as Dell or HP.
A drawback of OEMs is the amount of resources needed to produce a unique product. This can include research and development costs, as well as the time it takes to create the design before it's ready for manufacturing. These investments can be quite high and introduce a certain level of risk to a business.
With an OEM arrangement, one company purchases products or services from another. Those products or services may then be resold directly or incorporated into the first company's products or services.
An OEM factory does not have designs for sell.ODM factories have catalogs of designs for you to choose from. A brand like Mango does not need designs. They have their own designers in-house.
Also, OEM parts are generally more cost-friendly compared to genuine parts. You do not have to worry about fitting and compatibility because they are made under the manufacturer's design and model specifications. OEM parts are a good choice because they meet the Federal Motor Vehicle Safety Standards.
ODMs can tailor existing designs to meet specific client needs, and OEMs can manufacture a part or product from scratch to meet a client's exact specifications. The ability and flexibility to provide this level of customization can help clients cater to their consumer's needs.
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