Contract Manufacturer Selection: OEM v.s ODM

You might have come across OEM services and ODM products so many times when searching for suppliers on Alibaba, AliExpress or Google, but just can’t seem to tell them apart. Don’t you worry about it, we’ve got you covered. In this post, we’ll share with you what OEM and ODM products are, and what you should pay attention to when you engage with an OEM and/or ODM supplier.

Definition of OEM

OEM, short for original equipment manufacturing or original equipment manufacturer, is the best option when you or your company have an innovative product idea and want to find a supplier for its mass production.

For example, Apple would go to Foxconn, one of the OEMs, to get the latest iPhones mass produced. The iPhones are designed by Apple, and Foxconn just provide the right resources, such as professional engineers who understand the technical requirements of the new phones, factory equipment and enough work forces, to get the new phones produced at a large scale.

Definition of ODM

ODM is short for original design manufacturing or original design manufacturer. Different from OEM, you don’t need to design your own product. You can reach out to an original design manufacture, and have an existing product branded with your company name. In some cases, you can request for minor product modifications like the updates of the color, size, and packaging.

Given this nature, ODM also refers to private labeling or white labeling. Unlike OEM, ODM is almost as commonly seen in the software industry just as that in the hardware industry.

Risks and benefits of OEM

An OEM doesn’t design the products, and their power to change the product design is limited to when the design is not good for mass production. And the rest of the responsibilities lie in the manufacturing process.

If you’re considering reaching out for an OEM, here are the risks the benefits that you should be aware of:

Risks of OEM

  • You need to pay for injection molds and tooling;
  • The product development time is longer since it takes time to create new tooling and the design phase could take a long time as well;
  • Your order quantity needs to be large;
  • Poor contract manufacturer selection could means low quality product and delayed time-to-market.

Benefits of OEM

  • You own the IP of the product;
  • You can customize the product as you like;
  • You have more leverage power over the CM OEM, and you have more freedom to switch to a new manufacturer when things go south.

Risks and benefits of ODM

Working with an ODM means that you don’t need to worry much about product designs, since the contract manufacturer will take care of some or most of the product design issues.

But just like OEM, ODM has its own risks and benefits as well. Here they are:

Risks of ODM

  • You don’t usually have the IP rights to the product, unless you talk your contract manufacturer into selling it to you in a good deal;
  • You have little freedom to just walk away from the current CM since it could means starting all over again for your company;
  • You might not get the best pricing because of your weaker bargaining power to your CM;
  • You have little resources to drive the quality of the product;
  • Your competitors might roll out similar products to the market before you do;
  • Modifying the product to your unique needs might take much longer time than designing it from the very beginning;
  • You could end up in IP disputes if your CM’s design is accused of IP infringement.

Benefits of ODM

  • You can save money from hiring experienced experts and engineers for your product design and research and development. The saved money could be a huge asset to some industries;
  • You don’t need to pay for the models or tooling;
  • Short product development cycle;
  • Your order quantity doesn’t have to be large.

No matter which method you choose for mass production, it’s crucial that you know the risks and benefits of them like the back of your palm, so you can mitigate possible risks before they appear.

When a supplier claims to offer OEM products

When a supplier says that they offer OEM products, they are saying that their organizations have the ability and willingness to produce products as per your design.

OEM suppliers are not hard to find, but it just takes some time and effort to find the ideal one for your product.

Should you need any assistance when searching for an OEM, feel free to reach out, and we’d be glad to help.

When a supplier claims to offer ODM products

Finding the ideal supplier for ODM products is the real challenge here.

When a supplier claims that they offer ODM products, you need to alert, since you either hit the jackpot or about to walk into a nightmare.

Some suppliers would lie about offering ODM products, and the make to order (the manufacturing starts only when you place the order) approach is used here, just as it’s used in OEM.

In other cases, some suppliers might show you images of products that they don’t actually make or own. And it could take you quite some time to tell if they are just showcasing what they’ve done before, or if they are just lying to get your order. It could be tricky, especially when the suppliers are overseas, and you can’t visit them onsite for verification.

 

If you don’t have the time or resource to find yourself an integrated or trustworthy contract manufacturer, feel free to reach out, and we’d be more than glad to help you out.

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