OEM and ODM generally exist in the procurement industry, but we found that many buyers and even some foreign sourcing agents do not understand the meaning of “OEM” in the mouths of Chinese suppliers.
For example, the following is the wrong understanding of OEM and OEM (in China Sourcing).
OEM and ODM are a concept you must understand when purchasing from China. Many suppliers on the Alibaba.com and other supplier catalogs claim to provide original equipment manufacturing (OEM) and original design manufacturing (ODM) products.
Based on SourcingArts’ more than ten years of local sourcing and sales experience in China, below we will take you to understand the OEM and OEM in China purchasing.
Table of Contents
An OEM company is responsible for designing and building a product according to their own specifications, and then selling the product to another company or firm, which is responsible for its distribution.
An ODM company or firm is responsible for designing and building a product as other company’s specifications.
For example, if I want to sell mobile phones, I have the following ways to obtain mobile phones:
1. Choose one of the products that have appeared on the market and sell it under my own brand.
2. The products on the market do not meet my requirements, and I do not have enough resources to design.
At this time, I will put forward my needs, such as functions, parameters, appearance, and then commission the company to design and produce for me. Of course, the brand still uses mine.
The first is OEM.
The advantage is that buyers can use their own brands and channels to open markets that are difficult or impossible for original production designers to enter.
The disadvantage is that besides the appearance and some localization settings, the functions, key parameters and even shortcomings of the original product cannot be changed.
The most important thing is that this product may be sold by many sellers, and the market competition will be very fierce.
The second is ODM.
Since the product is developed from 0, ODM needs to invest a lot of money.
And if the product cannot be sold well after development, the loss will be even greater. All efforts will be in vain.
But the product is designed and developed you, everything is control by yourself and you hold the copy right of the product.
ODM stands for Original Design Manufacturing, and OEM refers to Original Equipment Manufacturing.
Both OEM and ODM are cooperation models between buyers and manufacturers in product design and manufacturing.
The main difference between the two is:
The OEM cooperation method is that manufacturers use their key core technologies to design and develop new products and control sales channels.
Buyers can make some modifications on the product, such as custom LOGO, color, material, etc.
The ODM cooperation method is as follows:
Buyers provide product ideas and entrust manufacturers to provide all services from research and development, design to production, and post-maintenance.
The external trademarks and names of OEM products belong to the brand. The design property rights belong to the commissioned manufacturer.
ODM products are actually produced by the manufacturer in accordance with the buyer’s requirements and released under the brand’s trademark and name. Technical property rights such as design belong to the brand.
“OEM service” means that buyers can customize LOGO, color, size, material, packaging, etc. according to the supplier’s existing product design. The specific scope that can be customized depends on your product and the strength of the factory.
For example, for mobile phone cases, the factory can usually customize the LOGO, color, size, material, packaging, and even the appearance.
For complex products such as electric fans, it may be difficult to customize the size and shape. Because it means expensive mold fees and complicated product development processes.
Therefore, you do not need to specifically look for suppliers who actually claim to provide OEM products, as this may be taken for granted.
OEM products are not necessarily products that can be ordered directly from their existing warehouses, but the products must be products that have been produced by the manufacturer.
Usually OEM products will be put into production after the buyer places an order.
In most cases, ODM products only exist on paper-for example, product photos, renderings or drawings.
Suppliers must first develop samples before proceeding to the production phase-this usually takes at least a few months or even a year.
Yes, OEM and private label are essentially the same thing.
The concept behind OEM and private labels is that suppliers provide template products, and buyers can use their own logo for brand promotion.
Therefore, buyers can save money and time because they do not have to go through lengthy product development processes or invest in expensive injection molds and other tools.
Few suppliers are able or willing to provide actual product specifications, including design documents and bills of materials.
Because this may lead to the risk of buyers looking for other suppliers to produce this product.
One of the main risks when purchasing OEM products is “accidental” infringement of another company’s intellectual property rights. Imagine buying an OEM product and discovering that it is a copy of a patented product in your target market.
SourcingArts suggestion is to ask the supplier if they have product patents before continuing to buy OEM products.
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