OEM AND ODM PRODUCTS
Manufacturing OEM & ODM products…
When we plan to produce products, we are often asked if we prefer OEM or ODM. It is imperative to know the distinction between the two options. Furthermore, it is crucial to know the benefits and risks with both options
Original Equipment Manufacturer
OEM or Original Equipment Manufacturer term is commonly used in automotive, information technology, and aero industry. It means a company devises or invents and manufactures a product to its own specification ventures into OEM. The business would normally sell the product to another company for market distribution.
The OEM term has been evolving. Today it invokes other things. In certain situations, the company may rebrand the manufacturer’s products to market and sell them to consumers. It also can mention a company that makes the actual part is used by another company to build a whole unit.
Certain people claim that OEM only manufactures components and peripherals for servers and computers. Others may say that OEM does not design anything and commonly manufacture the unit to their client’s design.
OEM Advantages
The principal advantage of OEM is that the designer or manufacturer retains the creative intellectual property. OEM products may be manufactured to any specifications. Whereas, ODM products will be restricted to a prearranged pattern.
OEM manufacturing may be challenging because of in-depth resources. Research and development may require many years to create a unique product. It often absorbs substantial capital to design the products. Thus, OEM designers need to protect their intellectual property. There is always a danger of the design being duplicated by a competitor and selling for a lower price.
Original Design Manufacturer
ODM or Original Design Manufacturer is a company that designs and manufactures for another company. The other company stipulates its own specification to the manufacturer, thus undertaking ODM. Most people concur that ODM manufactures and designs a complete system for others.
Private labelling is often referred to as ODM. The importer may select an existing product design from the manufacture’s list. Then they make a few minute variations and sell under their own brand. Changes may be to packaging, colours, product size or bundling, and of course the brand. There may also be the opportunity for some minor adjustments to peripheral or tasks.
ODM Advantages
The key advantage of ODM is that the importers do not need to invest substantially in research and development. They leverage the manufacturer’s exploration and evolution to develop a product from inception. It is basically applying the principle of ‘why reinvent the wheel’ when one can improve on an invention. Thus, phase out the need to expend on product development and focus on marketing strategies.
One of the challenges of ODM may be that it can be more difficult to separate the product from the competitors. This mostly applies to the clone or look-alike products manufactured. Despite ODM requiring lesser capital to start, price competition remains sharper. Thus, it results in lower profit margins. Typically, a consumer shopping to buy a laser printer may choose to base on price than on differences in colour, feature, or brand.
Therefore, to actually separate your ODM product from the competitors in the market, it can momentous creativity. The price will have to be the key consideration for keeping it competitive.
Choose Carefully
It is a complex choice to analyse to determine your preferred method of manufacture. Careful selection of your supplier is a good start. It is important to ensure the manufacturer has the experience, they are ethical and reputable. No matter what method you decide to use, be willing to provide a product blueprint and information. You must know the risks and benefits of the system you choose. If need be, attempt to mitigate and possibly take professional advice.
