I. The difference between an original equipment manufacturer and an original design manufacturer.

For a better understanding, let’s take an example to illustrate the difference between an original equipment manufacturer and an original design manufacturer.

OEM stands for Original Equipment Manufacturer, where the manufacturer itself does not own the intellectual property rights or design rights to the products it produces. All core technology comes from the sourcing side and the manufacturer is solely responsible for OEM processing. For example, there is a very powerful electrical appliance buyer, A, who has his own design and R&D team and has designed many highly advanced products.But if all these products need to be made by A’s own factory, the labor cost and time This will be very high.In order to have more time to devote to R&D and marketing, A came to China and looked for B’s manufacturer. B’s manufacturing quality met A’s requirements in all aspects, so A then licenses B’s core technology of the machine he designed, package design, etc. a series of product-related technologies including trademarks. Factory B only needs to keep its head down and follow Buyer A’s determination to properly complete production and ensure product quality and delivery.

ODM stands for Original Design Manufacturer, which is a category in which the manufacturer has its own design and research and development capabilities, and only provides the buyer with the brand license. This situation is mostly seen in large manufacturers who have their own R&D teams and technical teams. In the same example of the buyer, A, who visited Manufacturer B’s booth in Guangzhou Fair, found that B’s product design was very much in line with the aesthetics of his market and learned through conversation that Manufacturer B had its own R&D team Its and technical team with 25 years of experience in the electrical appliances sector. On the other hand, Buyer A needed to do more marketing and market research because of the competitive market, so Buyer A chose to design Manufacturer B’s product and finally affixed its own brand.

From the above example, we can easily understand that the OEM is actually an advanced version of the OEM, since the manufacturer is a simple OEM and has no research and development. The original design manufacturer invests in research and development and technology, but only uses the buyer’s brand in the end, which is often referred to as OEM production.

II. Advantages of original equipment manufacturer and original design manufacturer.

Both OEM and ODM manufacturers have their own advantages. In general, the two kinds of manufacturers help buyers solve the problem of high labor management costs in their countries, which allows buyers more time to focus on marketing.

OEM simply means process, where the manufacturer only pays for the labor, and that gives a good indication of the benefits.

• The core technology and design solutions are buyer-owned and can be better adapted to market needs.
• Savings in labor costs and time costs associated with operating a plant.
• Jupiter has more energy to devote to technology development and marketing.

ODM simply means allowance brand production, where the manufacturer pays for both labor and technology and the product is finally branded with the buyer’s brand.

The original design manufacturer is more technical than the original equipment manufacturer, whose advantages are mainly reflected in the following:

• Ability to provide product development support to the buyer.
• The buyer can save labor costs, time spent on factory management and product development costs.
• For buyers who want to open up the market in the manufacturer’s country, it increases brand awareness and reduces investment risk.

III. Problems to note under the OEM and ODM trade-in.

Nowadays OEM and ODM are widely used, but there are still many uncertainties, and it is easy to bring risks, which buyers need to pay special attention to.

1. Regardless of the trade method, the manufacturer’s qualifications and production capacity must be fully understood.

The most reliable way is to visit the manufacturer’s factory directly. However, with the currently unchecked globalization of the pandemic, direct commercial visits can be costly in terms of time and expense. The buyer can visit the manufacturer’s independent website or social media platforms such as LinkedIn, Facebook, etc. in the early stages to get acquainted with them in several ways. Once a certain level of trust is established, a video conference can be held between the two parties to discuss the details of the collaboration. Alternatively, a trusted representative can be found in the manufacturer’s country of origin to visit the factory on behalf of the buyer, so that he has an understanding of all aspects of the factory’s reality.

2. Product standards should be expressly included in the legal provisions in the contract or in the appendix to the contract to prevent unnecessary disputes and disagreements about final quality.

Because of the simple replacement of labor, profits are often the lowest in a market where manufacturers are very competitive. This leads some manufacturers to cut corners on some parts in order to expand their profits. Although the quality of the product is not affected in the short term, the complaint rate of the product will rise in the later stages, which is not conducive to enhancing the credibility of the brand.

3. Brand protection.

Many manufacturers will also have the idea of ​​developing brands, but for various reasons this has not been realized. Under the OEM and ODM approach, there is a risk that manufacturers will export their OEM or branded products to their home market to generate additional profits for the brand. Or leak OEM product technology and design. It can be harmful to the buyer’s brand image. The manufacturer in particular must be highlighted and stipulated in the law.

Through the above introduction, I believe all buyers and friends have a deep understanding of OEM and ODM trade methods. If you are looking for OEM or ODM manufacturers, welcome to consult us for advice and solutions