You may be used to seeing the abbreviations OEM and ODM, especially if you are active in the electronics industry, whether as a hobby or professionally. Yet, for many companies, when they start importing products, the concepts of OEM and ODM maybe be confusing, hence this blog post aimed at explaining the use of both topics in an industrial context.
From a very general perspective, the abbreviations give us a simple, yet useful indication as to what exactly they mean. While OEM stands for Original Equipment Manufacturer, ODM refers to Original Design Manufacturer. In other words, in the first case (OEM) the focus is on products designed by companies, but for which the production is being outsourced to third parties. In the case of ODM, the company both handles design and production of the product (often implying that the product itself may be sold to thousands of other businesses around the globe, particularly with their respective private labelling).
Apart from looking into who designs and manufactures the product, the choice whether to import OEM or ODM items implies a variety of advantages, as well as disadvantages, both of which will be elaborated on in this post, so companies may correctly decide which type of products to source in Asia.
OEM Manufacturing
The concept of OEM Manufacturing usually implies large volume purchases or is usually restricted to those companies that have been accumulating plenty of import experience or with very exclusive products. This business model is often linked to a hefty initial investment – before importing might start – namely the product design phase.
A commonly cited example of OEM processes is Apple, the US company that invests heavily in research and development, but leaves the production of its range largely in the hands of Foxconn.
ODM Manufacturing
In this case, the manufacturer that owns the original design of the products and also produces it, may do so with a large degree of personalization, according to the specification of its customer.
It is worthwhile to note that, given the fact that countries like China have made major developments in product design, ODM manufacturing is now widely available.
Many of the goods sold on marketplaces like Amazon actually correspond to this type of manufacturing model: wireless headphones, smartwatches or air purifiers, among many other examples. They are often visually very similar products with a common aesthetic appearance (expect for some customization), where even the characteristics and accessories generally might be identical.
Which one is better: OEM or ODM?
This is a quite difficult question to answer, since many factors come into play. If your company is small or still new in terms of import experience, having very limited control over the entire purchasing process, most likely the best option is to import ODM products.
Nevertheless, it would be a mistake to consider that choosing ODM products implies not having the possibility to personalize our brand. In fact, as has been commented in several other of our earlier blog posts, it is very important to differentiate our products from the competition and this type of initiatives often starts with adding simple corporate details: our logo, corporate colors, an adapted packaging, etc., modifications that in most cases can easily be obtained with ODM products.
One of the main disadvantages of importing ODM products is that usually any type of quality control is the responsibility of the customer, which is one of the many reasons why it is advisable to count on a sourcing partner, who can offer a complete follow-up of all quality-related import processes.
Count on a sourcing consultant to make the best choice!
Although the main focus in this article has been on the most significant differences between OEM and ODM, when choices have to be made regarding imports, the safest option is always to make an adequate analysis in terms of the needs and expectations of our company and the products it wishes to buy, a task in which sourcing consultants tend to have a lot of experience.
A sourcing consultant will assist you in the entire import process, from supplier selection till the entire production process and, needless to say, the management of transport and delivery. Its experience is key, since this tends to be an activity in which practice significantly increases the success rate.
In this sense, at S3 Group we have been offering import services for over 15 years, acting as sourcing partners, specialized in products manufactured in China, India and South East Asia, both in OEM as in ODM processes. We analyze each project jointly with the customer to make sure that any company from whichever industry is able to implement a successful import operation.