When it comes to starting a new business, the word OEM & ODM can be seen frequently when you are looking up a manufacturer of your products, and that can be super confusing as you have no idea how they work.
Both OEM and ODM are related to the manufacturing industry, and they mean different things. What is the difference between them?
What is OEM?
OEM is the short form for Original Equipment Manufacturing, the manufacturer produces products based on the customer’s requirements. Every detail of the products, from the design, texture, smell, functions, colors, and materials used can be customized based on the requirements made.
In a new product-making process, OEM manufacturers never design any of the products on their own, they are responsible for making and producing the product based on the customer’s requirements. Once the product is done, the customer can then sell the product with their own private label.
In most cases, the customer looking for OEM services are private-label companies, they print logos or designs on the product. It’s common to find a manufacturer that does OEM in the industry, such as cosmetics, skincare, perfume, personal care, stationary and etc. Therefore, the customer must research their best to cooperate with the right OEM manufacturer before giving the secrets of your products.
Just make sure they give you the best services and the best product quality for your business confidential.
What is ODM?
ODM is the short form for Original Design Manufacturer, the manufacturer design, and produces products for their customers. The customer will select an existing product design and makes a few changes to the products, for example pasting a sticker on the existing labeling, making it their own.
ODM service makes it possible for companies to make their own product without changing anything when they can use the existing design. However, the manufacturer has the right to obtain ownership of the design, which means modification might happen even current specification of the product meets the customer’s requirements.
In fact, ODM will only provide low pricing for the products when there is no need to design them.
OEM vs ODM
To understand the differences between the meanings of OEM & ODM, here is an example:
Imagine you are the owner of your brand with an idea of how you want your product to be, but you need somebody to help you develop it. You have all the specifications and information needed to create the product you want.
After you pick the right OEM partner, you share your idea with them to build your product. When the final product is out, all you have to do is brand, find distributors and sell it to the market.
Now, let’s just say you have an idea of the product, but you do not have the specifications you want. You will have to pick an ODM manufacturer that helps you to do Research & Development, design, testing, and manufacturing of the product.
The good thing about ODM is that you can have product developers to help you design your idea, something an OEM doesn’t do.
However, the bad thing about having an ODM manufacturer is that you may not have much authority over the product design and specifications
Besides, you may not maintain the intellectual property of the product, and in most cases, you will have to work out a deal that works for both parties.
Comparing OEM and ODM, ODM manufacturers only produce certain types of products. Thus, it is much recommended to choose an OEM Partner. As of today, most ODM manufacturers require bulk orders from companies that want customization on their products.
Article sources from: ZELCOSLAB