OEM 101: Everything You Need to Know About Original Equipment Manufacturing in China

For years, China has been the best go-to manufacturing location around the world. Countless overseas companies choose to outsource their production to China for different types of products with lower costs and higher quality. But do you know much about an original equipment manufacturer (OEM) or why they’re so important? If not, it’s time to learn more.

Whether your business is selling a product directly to consumers or through retailers that make their products, learning about OEMs will give you a better understanding of how business works and how you can improve your bottom line. So, sit back and read this article on OEMs and how they work, then you’ll have all the knowledge you need to become successful in your field.

What is an Original Equipment Manufacturer (OEM)?

An original equipment manufacturer (OEM) is a manufacturing company that creates component products for other retailers to build finished items like a computer, phone, or car.

The company that makes the initial component products is called an original equipment manufacturer (OEM) while the company that buys those component products from an OEM is called a value-added reseller (VAR) because they add value to the original item by combining multiple parts together to create final finished items with more features.

The term OEM is most used in the automobile and computer industries. In the case of automobiles, the company that creates car parts is OEM and then sells those original pieces to another company that assembles them into cars for retail sale.

What is the Difference Between OEM and ODM?

ODM, an abbreviation for Original Design Manufacturer, is also referred to as private labeling.

For both OEM and ODM companies, many similarities make them comparable. However, they also have some key differences when it comes to unique flexibility and customization options for overseas clients.

When an overseas business has an original idea for both product design and product functionality, it’s worth looking into the use of an OEM to produce these goods at a lower price point while maintaining high-quality standards. And best of all, they can change their products according to the latest trends and innovations to suit the needs of consumers because they have exclusive IP rights over the products. This way, they don’t have to build out their engineering team or manufacturing plant. Instead, they just need to find an experienced OEM with a team of experts to take care of their production while they focus on marketing and running other aspects of the company. OEM is an ideal option for foreign companies that own their intellectual property rights and are looking to lessen production costs by outsourcing overseas.

ODM is a cost-effective option for importers who want to take advantage of the pre-existing product designs in the manufacturer’s catalogs. Importers are only allowed to make minor changes with the help of an ODM designer when selecting the certain products they would like to import and resell under their brand name. These changes may include color, size, and certain tweaks of components or functionality – all within limits set by the ODM. In this case, an ODM makes it possible for any overseas company to get products to market without having a huge investment in in-house design and manufacturing. ODM is suitable for startups and small businesses that don’t want to maintain a significant amount of inventory for themselves. Also, established businesses use ODM to make some promotional products with their logos to attract new customers.

How To Choose an OEM in China?

Now, you may have a better understanding of OEM. If you want to learn how to choose a reliable OEM partner for your project, keep reading on.

1. Know Your Expectations and Needs

First and foremost, if you want to complete your production successfully, you should clearly know what you want from your OEM supplier.

For example,

• What’s your product type?
• What are your quality standards?
• Do you need your OEM to deal with design and prototype or just manufacturing?

All these questions should be taken into consideration before diving into the world of original equipment manufacturing.

2. The Tradeoffs of Costs and Quality

There are always tradeoffs when it comes to making a choice. Costs and quality are two of the important things that are traded off in OEM manufacturing. This means that there will always be an opportunity cost for each decision made.

You have to understand that the overall costs go up because you have to pay for better raw materials, techniques, and skilled labor. If you don’t have enough budget, the quality of your product might suffer too much.

Therefore, when working with an OEM to make your products, it’s important to consider the tradeoffs between the overall costs and product quality.

3. Ensure Your IP Rights Are Protected

Your IP rights are the most valuable aspect of your brand and business. Your IP rights are all of the work that you’ve created and they’re what set you apart from everyone else.

So, you can’t take any risks when picking out a Chinese OEM supplier. With so many manufacturers here in China nowadays, it’s always best to double-check whether or not your manufacturer of choice has had anything stolen from them in the past. It’s also wise to sign an NNN agreement before agreeing upon cooperation and make sure everything is legal if transferring your design or idea over to them.

Work With a British-Owned OEM Supplier in China

Any time you outsource manufacturing factory selection is very important. When you move your manufacturing to China, you may feel overwhelmed by the choices and worry about the legitimacy of the operation. 

As your OEM manufacturing service provider in China, Shield Work Precision Manufacturing can meet your production needs. We offer a forward-thinking approach with the ability to fully customize work procedures, equipment and develop new specialist in-house manufacturing processes.

At Shield Works, we have a proactive approach to manufacturing and are always keen to explore new specialist processes. We are one of the leading original equipment manufacturers and have been providing our services since 2005. Contact us today to discuss your requirements.