Are you looking into factories? You may notice that two common terms like OEM and ODM. Both terms classify factories that supply final parts or supply parts. But, what do these two words suggest? What are their major differences?
Are you one of those thinking about how to select OEM and ODM in China? Don’t worry. This article will help you learn the significant difference between the two. It will also include their benefits and drawbacks, among other things. Read more to find out!
OEM stands for Original Equipment Manufacturing. The production factory can supply products based on your specifications and designs. It creates products that follow customer specifications.
Individuals assume that an OEM factory is ideal for customizing products. But that is not the case. Do you have product descriptions for a new product? You can say you’re dealing with OEM products.
Are you choosing an OEM manufacturer to deal with your product design? You must conduct enough research and learn about its development first.
You should also perform market research, design uniqueness, and engineering. For example, do you have a smart glass you like to begin with? You will need more details, particularly about the dimensions.
You should hire a designer to make an attractive glass design. Ensure you assess the demand for the products. Then, increase the capital to begin the production if it’s worth it.
The only thing remaining for the production is to begin the OEM process. What’s next after coming up with a design and product specifications? It’s time you let an OEM deal with the manufacturing processes.
You will find various OEM responsibilities throughout manufacturing. The assembly and production lines guarantee reasonable costs, high quality, and timely delivery. Those benefits are suitable for people with significant volumes of products. Suppliers prove the positive benefits of this manufacturing process.
What are the benefits of OEM?
- OEM companies deal with suppliers that can keep up with their demands. That allows timely production of superior quality products.
- Effective and practical services. OEM firms are sought for their practical services. That makes them famous in the manufacturing sector. Good examples of OEM companies are Hewlett-Packard and Dell, among others. Such companies copy products and make tiny modifications in color and size. The items manufactured are replicas.
- Excellent quality. OEM firms are strict when choosing their raw material suppliers. They do this to ensure no problems occurred during production.
- Cost-efficient. OEMs are available at reasonable prices. Many consumers use OEM versions on their laptops. That offers a good option of buying software than buying costly commercial software.
What about ODM? What is it?
An ODM enables you to use a supplier that can create the product you like. Original Design Manufacturers allow you to join in their expertise too.
This refers to companies designing products and manufactures them. Those are the sold on to other businesses that will rebrand the products.
OEM often produces a component based on your company’s specification and design. Meanwhile, ODM brings a pre-designed product that you go on to brand and sell as your own.
What are the benefits of ODM?
- Better supply chain value. ODM has equal core competence. Manufacturer runs value chain activities by development and designing. The modularized division in value chains lays a foundation for the manufacturer. Businesses can win the dominant right of developing and designing as well. Hence, they have complete production capacity.
- Low-risk customer relations. ODM companies have low-risk and stable customer relations. ODMs also have a high position in the value chain. That’s because of their holding core resources and capability. They can pick their clienteles in a wider range too.
- Equal profit distribution. ODM companies have equal status. It has balanced profit distribution too. ODM manufacturers have a relatively balanced cooperative connection with clients. They have an equal say to consult the benefit distribution of related products.
OEM versus ODM: Which is Better?
OEM firms manufacture products based on the designs given by another company. The manufacturer only creates what the buyer needs.
In this case, both companies gain from the strengths of each other. Companies seldom have the needed machinery to manufacture high volumes of products. Hence, such companies outsource the production to an OEM firm.
Meanwhile, an ODM company makes the designs and manufactures the products by themselves. They call it White Label or Black Products. The buyer company can rebrand and sell it as their products.
In OEM productions, buyers demand the production of specific components. They based those product parts of machines on particular designs. The buyer, under a trademark, assembles and sells the product parts.
Most of those products are accessible for reasonable prices. The costs incurred from OEM manufacturing are lower. Meanwhile, ODM companies create the type of products you need. But you can make only a minor change in such products.
ODM is famous among most Amazon FBA sellers because of these benefits. But, it has drawbacks too.
Make sure you consider intellectual property. With ODM, you do not own the product’s IP rights. That puts you in a hostile place during contractual negotiations.
For instance, the ODM could ask a small volume of sales. They can also ask for a higher price per product. It could mean that the ODM’s development is the IP of another business. Worst that could get you involved in a lawsuit.
That’s something you do not like to risk. Hence, be extra careful and careful. Diligence is an absolute must when working with an ODM.
How to Find OEM and ODM Suppliers?
You will find different ways to help you find OEM and ODM manufacturers.
- Sourcing agents
New importers prefer sourcing agents. Make sure you engage with a qualified sourcing agent. They have different resources on the ideal manufacturer to meet your needs.
- On-site trade fairs or wholesale markets
You may find it undependable to find suppliers online. One option is to visit wholesale markets in your locality. It will help you determine suitable suppliers.
We recommend this if you’re in big manufacturing nations like China. Meeting a supplier in person is ideal. You can guarantee the quality, as you can see the products for yourself.
It will also help you lower the risk of working with a middle man who scams online customers. Do you live far from China? You can also invest in a trip to a trade fair. That will cost you, but it will be a worthwhile investment.
It would be best if you take a proactive approach too. You may experience some challenges like accommodation expenses, language barriers, and travel.
Take note of where the wholesale market locations are. They are in Shenzhen, Guangzhou, and Shanghai. Hence, you should make a comprehensive plan before your travel.
Always look at the bright side as well. You will be spoilt for options among the many ODM and OEM suppliers in China. Prices will become more friendly and competitive.
- B2B website
Finding a dependable supplier online provides convenience. It is also cheaper for startups and small businesses. Companies you can choose from are Global Source, Made in China, or Alibaba.
Most of them discuss their services in detail to potential customers. The services they offer include Customizing. ODM, and OEM. You can find all these details on the product listing page.
Others even provide private label services. That’s where a business can manufacture products with their logo or brand. Does your manufacturer don’t present such details on their page? You can call them to give you the details.
Tips When Choosing the Best OEM and ODM Supplier
You will find some indicators of finding a good manufacturer. That’s true whether you are finding it offline or online.
- Are you using a new mold? Determine if it can get back or not.
- The price and quality of the product must match.
- Efficient communication is crucial for every relationship. Business is not an exception.
- Get ready to encounter problems and unexpected hitches. Have an optimistic attitude toward this. Meet them head-on.
- Finish ownership of factory qualification authentication.
Take note that large factories are not equal to the best quality. Please do not rush to do business with them. Sometimes, they are not the best option for your needs. That’s especially true if you’re a small business with little stock.
Always go for a supplier that depends on your product and financial needs. Engage with a factory that excellent customer service and superior communication.
To sum up, OEM concentrates on manufacturing products based on your design preferences. It’s your responsibility to do research and create your product. The project could take months to finish.
Meanwhile, ODM specializes to all those processes. That’s an excellent benefit for the time factor, as you can finish the project fast. You also save a massive amount of money. You engage with minimal people and at a shorter time.
Still, the customer does not own the IP. You need to contend with the products and modifying the options given by the model.
Thus, the ideal manufacturing model’s choice will vary on your goal, market, and product. We recommend OEMs as you can own the IP. But ODM is a more reasonable option, yet owning IP is more critical.