- OEM vs ODM: What are the Differences between OEM and ODM?
- OEM and ODM are two important terms widely used in the manufacturing sector. Often you will see people trying to compare these two types like using OEM vs ODM. Both these terms are correlated and it can be confusing at times. Some of the startup companies seldom have the resources to design and manufacture products. In such a scenario, these companies outsource the production of certain components to contract manufacturers, also known as the OEM and ODM manufacturing firms.
- Original Design Manufacturing
- ODM, or original design manufacturing, is also also referred to as “private labeling.” This is where an importer selects an already-existing product design from a factory catalog, makes a few small changes and sells it under their own brand name. Changes can include things like packaging or product bundles, colors and branding, and some limited adjustments to components or functionality. Two ODM laser pointer cat toys. While both products are manufactured according to the same general design, each is custom branded, colored and packaged according to each buyer’s specifications.ODM doesn’t just refer to electronics though. Ever notice how most American Chinese take-out menus look the same? This is another example of ODM manufacturing. A manufacturer (in this case, a printer) keeps a template on file that buyers can customize to fit their specific needs.
- Product specification examples:
- 1. CAD files
- 2. Design drawings
- 3. Bill of materials
- 4. Color chart
- 5. Size chart
The advantage of ODM is that it spares importers the need to invest millions of dollars into research and development in order to create a new product from scratch. Why reinvent the wheel when you can just improve one that already exists? And by eliminating or vastly reducing the expense of product development, importers can focus more on marketing strategies.
The disadvantage of ODM is that it can be more difficult to differentiate your product from competitors’ products that are manufactured according to the same design. Although ODM requires less start-up capital, price competition tends to be steeper, resulting in slimmer profit margins. For example, a customer looking to purchase an ODM laser pointer is more likely to choose based on price than based on differences in color or brand. To really differentiate your ODM product from the others on the market, while still remaining competitive price wise, can require a significant amount of creativity. Original Equipment Manufacturing OEM stands for Original Equipment Manufacturing, and refers to products that are fully designed by one company and then licensed out to a manufacturer to produce. The Apple iPhone, for example, was invented and designed by Apple, and then licensed out to Foxconn to produce. As a result, the iPhone enjoys a higher level of product differentiation because its design is only available to Apple and its licensed manufacturer.
- 1. Colors
- 2. Materials
- 3. Coatings
- 4. Platings
- Many other brand name electronics and appliances are OEM. Custom designed clothing, as opposed to a generic garment with a custom logo, is another example of OEM.
- The main advantage of OEM is that the designer retains total creative control over the design. Whereas ODM products are restricted to a predetermined design, OEM products can be made according to any specifications. The only limitation is the designer’s imagination (as well as budget).
- The disadvantage of OEM manufacturing is that it is much more resource intensive. OEM designers often invest millions of dollars into research and development over several years in order to create unique products. Because of this, OEM designers have to guard their designs as intellectual property, lest it be copied and sold by another company for a lower price.
- WHAT IS THE PRODUCTION DIFFERENCE OF THE OEM AND ODM MODEL?
- In most OEM productions, client companies require the production of specific components. These parts are assembled and sold by the buyer with your trademark. Most of the products are available at competitive prices because the costs of the OEM manufacturing process are lower.
The client companies that opt for the ODM model, produce the product with all the specifications and details requested. This type of production is beneficial to smaller companies because they do not have to waste their time on research and development. The products produced with the ODM model can be divided into two types of categories: Private label and White label. Private label are finished products sold to an end customer company. On the other hand, white label products are generic products that can be sold by companies under their own brands.
OEM vs ODM : OEM- Pros
Another advantage of OEM manufacturing business is that you can procure high quality products in bulk amounts at cheaper rates. All these products are quality checked according to the testing standards of the manufacturer.