OEM VS. ODM: How to Choose the Right Manufacturer for Your Business?

China remains the world’s manufacturing superpower and many overseas businesses with great concepts would love to put their dreams into action in this country. If you ever find yourself wanting to produce items in China, there are two common phrases that may come up while reaching out to a supplier: OEM and ODM.

These two terms are crucial when dealing with manufacturing projects. But do you know what they mean? How to differentiate them? Which is the best fit for you? In this blog, we will explore the meaning of these acronyms, the difference between them, how they differ from one another, and their respective benefits. Let’s get started!

What Does OEM Mean?

OEM is an abbreviation that stands for Original Equipment Manufacturer. In China, OEM also denotes contract manufacturing or outsourced manufacturing.

Typically, OEM refers to a product made by a production factory based on the original company’s specifications and guidelines. In this case, the OEM firm plays only a manufacturing role in the supply chain.

An OEM operates on a business-to-business (B2B) basis and the most common products created by OEMs are for businesses in industries such as automotive and electronics.

Why Do You Need An OEM?

In many cases, a firm with great ideas or product designs, but doesn’t have enough resources to produce high-volume or highly specialized goods. Then outsourcing production to an OEM company can help to cut down on costs while making goods of high quality.

And the most important thing is that the company that owns its exclusive intellectual property rights over the products has full control over the product they are requesting, meaning that it can make changes to the product whenever possible.

The company does not need to spend time and money on construction; instead, it can spend time on improving its ideas and designs and it can spend money purchasing goods from the OEM. Likewise, the OEM has in-house staff and production lines, and it just needs to make products on demand in bulk. This arrangement benefits both parties because they are free to specialize in their skills while still making profits.

The business usually asks the OEM supplier to manufacture parts and components according to their specifications. The business affixes the finished product with the company trademark and sells it on the market under its name, and at competitive prices.

What Does ODM Mean?

The acronym ODM means Original Design Manufacturer. An ODM company design and manufacture products before distributing them to other companies who then market and sell to end customers under their brands. Products that an ODM company produces are also known as white-label products or private-label products.

Product categories that benefit heavily from ODM manufacturing include plastics, cosmetics, clothes, and consumer electronics.

Why Do You Need An ODM?

Unlike an OEM company that manufactures individualized products accordingly one at a time, an ODM produces the goods in bulk based on their capabilities and techniques. This way, an ODM supplier usually has a few set production lines producing the same products for years.

This provides small or medium-sized businesses with the chance to use these generic finished products to start their businesses or expand their product lines without having to invest too much money, time, and new staff into it. Thus, ODM is a cost-effective yet efficient option for many importers.

Actually, ODM is getting increasingly popular among Amazon sellers who are creative but have little capital, they still have chances to be successful and make a great fortune when they don’t have much knowledge in this field. They just need to be a bit fortunate and smart to choose the best OEM supplier, buy high-quality products and properly market the products themselves. A lot of times, many supermarkets with various types of necessities at a reasonable price are purchasing items from the same ODM supplier.

Final Thought

There are many similarities between OEM and ODM that can be compared, but one of the major aspects that people mention all the time is how they can help businesses save up on costs and time. This is a prime reason why you should consider working with an industry-savvy China-based company to diversify your company’s offerings.

However, different suppliers offer similar services but they each have their own working processes and specifications, which means there is no such thing as the perfect supplier for everyone. For example, if you are in need of an OEM company, their prices may vary due to differing availability of material sources or specific machinery needed. So, it’s important to make sure you understand these differences before working with one supplier over another.

If you want to start your production project in China but are not sure how to get started, let Shield Works make it easy for you! We are a British-owned and managed company that specializes in the high-quality and competitive rate of contract manufacturing and product assembly services. By following a rigorous process, we are able to ensure quality and consistency from order to delivery. Whether it’s for one-time or large batch orders, we work to deliver only the best product strategies and results for each client. Start your journey by reaching out today to see how we can help you reach your production goals.