As a manufacturer or wholesaler, you may always see two acronyms that often appear when mentioning the potential business models: OEM And ODM. There are a lot of articles about them: What are OEM And ODM? Which one is better?
What are ODM And OEM?
In most cases, manufacturers fall into the following three categories: OEM, ODM, or CM.
ODM manufacturer, or “Original Design Manufacturer” is a company that can design, develop, manufactures, and sells products on its own. ODM usually designs and develops products independently or in cooperation with customers. All you need to do is tell them the design concept you want, and they can also show you their existing product line, from which you can choose.
OEM manufacturer, or “Original Equipment Manufacturer”, refers to a company that develops, builds, or sells products to another company or distributes its products according to its standards.
What Do ODM And OEM Manufacturers Do?
ODM manufacturers need to do a lot of work, mainly including product design, market research, marketing, and product testing. However, OEM manufacturers only need to produce the products.
Advantages and Disadvantages of ODM And OEM
Advantages of ODM Services
- You don’t need to make a lot of upfront investment in R & D and setting up custom production lines.
- There is no need to control mold costs.
- Customers can focus more on marketing products.
- You don’t have to worry about expertise or resources that meet your design specifications.
- Even if you buy a small number of products, you can save money. This is because ODM manufacturers usually produce a lot of products, but sells them in small quantities.
- ODM manufacturers usually go to market faster than OEM manufacturers.
Disadvantages of ODM Services
- It is difficult to change suppliers because they have designed.
- If your sales are high, the supplier maybe compete with you.
- Your product is likely to be similar to other competitors.
- Other companies may start selling the same products as you.
- No intellectual property protection.
- You are responsible for any problems that may appear during sampling and product control.
Classic ODM manufacturing industries: electronics; machinery; medical equipment; kitchen utensils. Many industries work with ODM manufacturing companies, and ODM products are more common in R & D and capital-intensive industries.
Advantages of OEM Services
- You will own all intellectual property rights. You can quickly get quotes from manufacturers because you will have detailed specifications and designs.
- You have a better bargaining position and can easily switch to other suppliers.
- It may be more difficult to copy your product.
- The manufacturing risk is lower because of the working prototype.
Disadvantages of OEM Services
- Changing suppliers is difficult because you need to change the entire supply chain and negotiate to get a great price.
- Any material or process changes may impact product quality seriously.
- Product development can significantly increase the time getting into a market.
Classic OEM manufacturing industries: clothing; home textiles; accessories. If you are a manufacturer and cannot design, produce, test, and brand products, you should provide OEM manufacturing and basic manufacturing services to help enterprises mass producing products.
ODM And OEM: Which One Should I Choose?
On the one hand, the OEM business model enables you to build a professional facility that can produce high-quality goods for potential brands. Through the OEM business model, you can become an expert in your field and find that your business is associated with some of the most popular products in your industry.
On the other hand, the ODM model is more suitable for big ideas that go beyond product manufacturing expertise and have unique ways to attract market attention. It is usually suitable for companies that already have good product ideas but do not necessarily want to invest their marketing budget in building their brands. They can package their unique IP and sell it to consumers through brands they are familiar with and love.
It depends on your needs. Are you ready for the finished product design for manufacturing? If so, OEM is the right partner for you.
If you are considering developing a product or are already in the process, we recommend the ODM model. We believe that engaging your manufacturing partners at the beginning of the process is a best practice that you should follow.
Please leave your comments, or browse other blogs to get latest information about wholesale business.