Online wholesale markets such as AliBaba and Fibre2Fashion provide ODM and OEM services. However, do you know what these services entail? They might be frequently used terms in the manufacturing industry, but there can be slight confusion surrounding the two terms.
If you’re wondering what ODM and OEM mean, you’re in luck. This article answers all fundamental questions about the two processes. What are the key differences between ODM and OEM? What qualifications do OEM and ODM service providers need?
Overall, there are many things all prospective manufacturers should know before delving into their businesses:
What Is the Difference between OEM and ODM?
First and foremost, it’s essential to define the differences between OEM and ODM. The terms stand for ‘Original Equipment Manufacturers’ and ‘Original Design Manufacturers’ respectively. If you’re scouring your online wholesale portals, you may see these terms on many private labels.
Here are the basic definitions:
Imagine that you need a customized product such as an item with your company logo. You’ll need to contact an OEM company. These companies consider your specifications and deliver personalized goods.
You could also call it ‘contract manufacturing’ whereby you contract an OEM company for different product manufacturing needs. You could also hire OEM companies to make the equipment you need to make other products.
As such, your relationship with an OEM company essentially involves buying a custom product from them. Then, you either sell the product as it is or use it to make another product. .
Most companies want overseas original equipment manufacturers. This is because overseas companies will not place their own logos on the final product. Moreover, production costs and labor costs are much more affordable.
Unlike OEM companies, ODM companies don’t work on a contractual basis. They produce their own goods. However, they sell these goods under a private or white label. What is a white label? It’s exactly what it sounds like: an empty label.
White labels allow buyers to rebrand the product as their own. ODM companies will let you place your own company logo on their product under a leasing agreement.
This agreement grants you trademarking rights. However, the design and manufacturing rights belong to the original company.
As such, if you’re a potential buyer, you can cut out research and development costs to build your own products. You can simply buy products from an overseas ODM company and sell them in your country.
Generic food products are likely to be ODM products. From storebrand cereals to meal kits, many ODM factories mass produce food items to sell in different grocery chains. These food items usually come with a lot of preservatives to last international shipping.
Also, these food items may also include semi-raw ingredients such as dried basil, coconut oil, and cocoa paste. Mostly, such items are exported from Asian or African countries to Western countries like the US.
ODM technology essentially refers to ODM products in the electronics industry. For example, chargers, either for phones, tablets, computers, or cars, are quite generic.
They can easily be sold as an ODM product. Most phone or car chargers on Amazon are likely to be differently-labeled products with the same design.
With the above description, you should have an idea on what ODM products entail. They are generic and can be applicable to a range of industries. However, most ODM companies target the electronics, fashion and apparel, cosmetics, and food industry.
For instance, in the cosmetic industry, ODM companies provide off-the-shelf formulations for skincare and makeup products. As such, buyers don’t have to invest in original chemical formulations.
As mentioned above, the OEM industry involves ordering customized products from a manufacturer. Considering the cosmetics example again, if you opt for an OEM cosmetic, the process will be different than with ODM cosmetics.
In the ODM industry, you simply purchase products with a pre-developed formula. However, before you can place an OEM order, you’ll need to create your own formula.
If you don’t have the right resources or expertise, you can hire OEM researchers to do so. Most OEM companies have a team of developers. You’ll simply need to tell them the type of product you want, and they’ll create an original formula as per your specifications.
You can solicit OEM products in essentially any industry. However, the most prominent examples include the automotive, general manufacturing, and computer software industries. In general manufacturing, many companies hire OEMs for original manufacturing equipment.
For example, a construction company may hire OEM services to get new engines for their forklifts or bulldozers. They may also require other parts such as wheels, cylinders, rollers, and buckets.
The computer software industry is also in high demand for OEM services. Many start-ups and entrepreneurs need web developers and programmers to create websites. If you have an idea for a new app but not the expertise, you can also hire an OEM software engineer.
OEM products are always original. However, you may receive a fake product if you buy it in the aftermarket. As such, your place-of-purchase decides whether or not you receive an authentic OEM design.
Overall, the OEM industry is quite successful with many reputable companies spread across the world. In China particularly, the OEM industry is flourishing.
However, you must carefully research each OEM company before entering into an agreement with them. Evaluate their company profile, check their samples, and look for previous client testimonials.
Not doing so can make you vulnerable to scams. OEM scammers do, indeed, sell fake products.
If you introduce a new product in the market through OEM, chances are replicas will pop up quite fast. OEM products are originally designed products. Replica products are copies of OEM products, which may be cheaper or lower quality.
You can find excellent examples of OEM and replicas in the fashion industry. High-fashion brands create OEM jewellery, shoes, bags, and clothes. Low-fashion brands mimic the product designs with cheaper materials.
To sum it up, ODM and OEM aren’t difficult concepts. If you know what they mean, you shouldn’t have trouble navigating between the two. Through this guide, you’ve learned the answers to the most common FAQs surrounding ODM and OEM.
Now, as a buyer or trade specialist, you can scour wholesale markets more easily. You don’t have to be intimidated by unfamiliar jargon.