OEM VS ODM: The Definitive FAQ Guide

OEM and ODM are popular terms not only used in manufacturing but also the import and export sectors.

In this guide, we explain what OEM and ODM entail, together with how the two compare to each other.

What is OEM?

OEM otherwise known as Original Equipment Manufacturer is a company that designs and manufactures products depending on the buyer’s preference and specifications.

OEM

The parts produced are later used in another company’s products to come up with an end product.

Not forgetting that these manufacturers offering OEM services can as well print the buyer’s logo on the products.

Afterward, buyers are free to resell the products using their brand names.

What are the Benefits of OEM?

Working with OEM attracts a couple of benefits not excluding;

• Quality products –OEMs are geared to producing quality products as most are customized by the buyer. To add to that the manufacturer produces quality products in order to maintain the clients.
• Cost-effective –As compared to other companies, OEM provides their services at a cheaper rate as they produce bulk products.

Big brands and multinational cooperation are able to save on their bulk orders.

• OEM facilitates the fast growth of your business.
• OEM also provides you with an option to ship products directly to your customer.
• Also, OEMs offer their clients with complete customization options.
• The buyer owns the intellectual property of the products.
• OEM creates a competitive ground for your business as it is difficult for another business to copy your products.

What are the Disadvantages of OEM?

Some of the cons related to the OEM industry are not limited to;

• OEM only deals with bulk orders and therefore you will have to be selling a huge amount of products in order to procure OEM services.
• The higher MOQ (Minimum Order Quantity) set by most OEMs limits small businesses in acquiring the products.
• The cost of development is expensive.

How does OEM Work?

OEM works by producing parts or products that are otherwise used by another company to produce a finished product.

With OEM the buyer is free to customize his or her own products.

What is ODM?

ODM otherwise referred to as Original Design Manufacturing refers to products that are designed, manufactured, and produced based on the manufacturer’s specifications and preferences.

The products are later rebranded and resold by another different company.

Besides, the manufacturing company chooses for you the designs available leaving very little to no customization for your products.

What are the Advantages of ODM?

Some of the benefits of ODM are not limited to;

• ODM saves time– As compared to OEM, ODM does not need any form of researching or designing of the product. Therefore, less time is consumed.
• Cost-effective – Most ODM charge lower prices for their products and to add on that they require less startup capital.
• Lower MOQ – Expect the minimum order quantities to be lower as compared to OEM since fewer costs are incurred.
• ODM leaves you with time to focus on other matters such as the marketing and development of your brand as they take care of your order.
• ODM products are faster to market as compared to OEM products.

Are there Disadvantages of ODM?

In as much as ODM might seem advantageous to some, here are some drawback that you might find important to consider;

• ODM offers limited customization for your products.
• Production of similar products with your competitors makes it difficult to differentiate your items.
• ODM have smaller profit margins as compared to OEM.
• The buyer doesn’t own the intellectual property of the products.

How does ODM Work?

Original design manufacturing also referred to as “private labeling” leaves little to no product customization for the buyer.

The manufacturer designs and manufactures the products that are afterward rebranded and resold by another different company.

How does OEM compare to ODM?

OEM vs ODM

OEM compares to ODM in a manner that OEM allows for product customization depending on the buyer’s choice and preferences.

On the other hand, ODM products are finished and ready for resell by the buyers.

Most OEM products consist of parts that are meant to be used in the manufacture of a finished product.

What is the difference between OEM and ODM?

OEM allows for customization of products by the buyers and mostly produces unfinished products.

On the other hand, ODM produces finished products that are ready to be sold and doesn’t allow for customization.

In addition to that, OEM products are unique and difficult to copy.

Alternatively, ODM products normally have a uniform resemblance making it even harder to compete effectively in the market.

ODM has a lower MOQ as compared to OEM.

This is due to the extra expenses that OEM products require.

As with OEM, the injection molds and tooling are paid by the buyer as compared to ODM where the ODM pays the injection molds and tooling.

The project development time for OEM products normally ranges from 1 to 8 months while ODM products range from 1 to 4 weeks.

Also, once you purchase OEM products, you as the buyer will own the intellectual property of the products.

This is quite different when it comes to ODM as you will not own the intellectual property of your products.

What are the Similarities between OEM and ODM?

OEM and ODM have very few similarities. To begin with, both OEM and ODM facilitate the growth of your business.

In addition to that, both OEM and ODM products can be rebranded and sold as the buyer’s company own products.

Also, the mass production time is similar for both OEM and ODM

How does Chinese Manufacturers Support OEM and ODM Business Models?

Chinese manufacturers support OEM and ODM business models by creating a platform where buyers can order ODM and OEM products.

Taiwan, Shenzhen, Yiwu are some of the cities in China where you can find OEM and ODM business models.

How does OEM Parts compare to Aftermarket Parts?

OEM parts are mainly used by another company to complete the production of their unfinished products to finished products.

On the other hand, aftermarket parts are mainly used for replacement and are designed to be compatible with several gadgets or models.

In simple terms, aftermarket parts are used to replace OEM parts.

Take for instance a Mercedes car that needs servicing or repair.

Once you take it to a Mercedes authorized dealer, it’s with no doubt that your car will be replaced by genuine Mercedes parts (OEM parts).

However, if you decide to take your car to your local mechanic shop, there shall be an option of either using aftermarket or OEM parts.

How do you Select ODM Manufacturer?

Selecting an ODM manufacturer is not a hassle. First, you need to identify your preferred manufacturer.

By this, I mean the one who deals with the kind of products that you intend to purchase.

After finding one, you can choose to make some little adjustments to the products.

Such adjustments are limited and might include the type of material and color of the material used for the products.

Remember, you have to take some factors into consideration before selecting your manufacturer.

Such factors include;

• The manufacturing capacity of your products.
• The manufacturing company should be reliable.
• Delivery timelines. Whether big or small your order is, the manufacturers should be able to deliver your products at the specified timelines. Note that if you have a small order, some manufacturers might de-prioritize your delivery. This might happen during certain times such as Christmas, Chinese New Year.
• Make sure that your manufacturer possesses effective communication skills. The manufacturer should able to provide timely replies, should be easily contacted, and should respond to any of your concerns.
• Research on the manufacturer’s track record as this gives you analytics of the manufacturer’s quality and efficiency.

What is the difference between ODM and OEM Products?

The main difference between OEM and ODM products is that OEM products are manufactured in order for them to be used by another company.

That is in the production of an end product.

On the other hand, ODM products are finished products that are ready to be introduced to the market.

Additionally, the project development time for OEM products takes longer as compared to ODM products.

Where can you find Suppliers Offering OEM and ODM Products in China?

There are several suppliers in China offering OEM and ODM products.

Some of these suppliers are found in areas such as;

• Ningbo
• Shenzhen
• Guangzhou
• Tianjin
• HongKong
• Taiwan
• Wenzhou

You could as well find suppliers offering OEM and ODM products on online platforms such as Alibaba, Made in China, Global Sources, and Aliexpress just to mention a few.

To add to that, you can also locate the suppliers in trade fairs.

China has a number of Trade fairs that happen every year and attending some of them would expose you to suppliers that deal with your intended products.

Is ODM the same as Private Labeling?

Yes, it is.

Original design manufacturing is also termed as private labeling.

Private labeling refers to the manufacturing of a product by one company which later gets rebranded by another company.

Why is OEM Associated with IPR Infringement?

In many instances, OEM face counterfeits.

Who, without approval, use their marks on relatively same products.

Additionally, some businesses or individuals become trademark pirates or trademark squatters by registering marks of famous Chinese brands.

Some trademark pirates do this to capitalize on brand equity of the brand owner.

However, others may do it to negotiate payment from a brand owner in exchange for the mark.

Even so, the mark’s holder in a foreign market can contract Original Equipment Manufacturer (OEM) in China.

This would imply authorization of manufacturing of goods bearing the said mark specifically for export.

Where rights to said mark in PRC are held together by a different entity, such actions aren’t considered an infringement upon trademark holder’s rights.

Are all OEM Products Custom-made?

Not necessarily.

Most of the OEM products are often standard designs.

The essence is it makes it easy to sell since the design of most designs is compatible with the standard designs.

Custom-made OEM products are produced specifically on order.

You have to make your order for the specific designs before manufacturing custom made OEM products.

What is the Product Development Time in OEM?

The overall lead time for producing OEM products often varies depending on a wide range of elements.

First, it depends on the specific manufacturer’s capacity to produce particular parts.

In essence, this is based on labor, infrastructure, machinery, and equipment for production.

Another determinant factor is the order quantity.

Generally, large volume orders will take a bit more time compared to manufacturing a relatively low quantity.

Furthermore, the design requirements of the OEM parts also determine the specific development time.

A custom-made design will take more time compared to a standard design.

In principle, if you consider your new products using the manufacturer’s design formulations, the process can take a shorter time.

Even so, the average lead time for developing OEM can vary between 1-12 months.

Most manufacturers consider developing the products from the very beginning to labeling and packaging where necessary.

Nevertheless, you may want to consult the particular manufacturer to arrive at a realistic timeline.

This is vital, especially where there is an urgency to put the products in the market relatively early.

What is the MOQ for OEM Products?

Different manufacturers often quote varied MOQs based on a wide range of factors.

Some usually consider the overall cost of manufacturing the product to determine the ideal MOQ.

On the other hand, others often look into the profit margin to base their minimum order quantity.

Nonetheless, you ought to understand that you can always negotiate about the ideal MOQ with most OEMs.

You need to ensure you consult the relevant representative of the manufacturer to figure out the suitable OEM products.

Are OEM Products Safe?

Yes.

Most OEM products are safe, good quality, and also durable.

In essence, the manufacturers often follow the specific guidelines as provided by the relevant authorities.

The production process also conforms to all the laid-down procedures as stipulated by the authorizing bodies.

Furthermore, there are specific bodies in charge of inspecting the manufacturing process’s quality and final product.

For instance, buying an OEM product is typically better and safer than getting the aftermarket one.

The reason for the former, you can be sure of the materials used in manufacturing it, unlike the former.

However, in case you run into an issue with an OEM product, you might as well find yourself without necessary support.

In essence, most developers only offer a retail version of their specific products.

What is the Difference Between OEM and Genuine Parts?

In many instances, OEM and genuine parts are used as a replacement for failed, malfunctioning, or worn-out components.

However, the two sets of parts vary based on a variety of factors.

OEM parts are developed by the company, which initially made the particular parts.

Ideally, most of the OEM parts are same as the part, which came with the equipment or machine.

However, this type of part does not have the manufacturer’s logo.

These parts are relatively reliable and provide better value.

On the other hand, genuine parts refer to a component installed in the equipment, machine, or automotive when manufactured.

Genuine parts are comparatively expensive than OEM parts since they carry the company’s logo.

In some instances, a sister company may as well supply the part.

Technically, genuine parts were designed to be fixed in the respective components when they leave the factory.

They carry a little advantage over OEM parts.

However, it does not necessarily imply that the genuine parts are better than OEM parts.

Which E-commerce Platforms are Best for Ordering OEM products?

All the major e-commerce platforms are suitable for ordering OEM products.

These include Amazon, Alibaba, AliExpress, E-bay, Etsy, Global Sources, Made in China, Taobao, and Shopify among others.

What’s important when sourcing OEM products from such platforms is ensuring that you use a genuine and reliable sourcing agent.

Also, you need to determine the cost of different e-commerce platforms to ensure you obtain best rates.

What are the Elements of OEM Products?

OEM products are regarded as better options to consider since they present quite several aspects.

Some of these elements include the following;

Warranty – Most manufacturers of OEM products often provide a warranty on the items. This is essential since it assures you of the quality and reliability of the component.

Quality – The OEM products exhibit high quality hence guaranteeing high performance.

Price –Most OEM parts are relatively costly compared to similar aftermarket products.

Availability – Ideally, most certified parts centers usually order most of their parts from the manufacturer. In case it is out of stock, it can take a few days or weeks to restock.

Which are the Popular OEM Industries?

OEM products are used in different types of industries for a wide range of applications.

Of course, they help in enhancing efficiency and convenience as well as cost-effectiveness.

Some of the common OEM industries include the following;

· Automotive Industry

Most of the parts and components used in different automobiles such as cars, motorcycles, and other heavy commercial vehicles are OEM.

Several manufacturers in the automotive industry worldwide use OEM parts to assemble their cars.

Some of these parts include exhaust systems, electronics systems, tires, and plastic injection molded parts among others.

· Consumer Electronics and Computer Hardware

Most companies in this industry also use OEM to make different types of their products and components.

For instance, Apple Inc has, for a long time, been using components by different manufacturers in its iPhones.

Companies such as Lenovo has also been manufacturing IBM personal computers before it acquired IBM’s PC business.

· Start-ups

OEM’s are specifically ideal for start-ups or entrepreneurs.

If you are an entrepreneur with a great product idea, you can get an OEM to manufacture your product.

However, you must ensure you’ve done thorough research and development and that there is a clear demand for the product.

Ideally, getting OEM to manufacture the product is the most suitable, efficient, and fastest approach to get it into the market.

All you need is to find an experienced and competent manufacturer, possibly with the help of Tj chinafreight as your sourcing agent.

You’ll then share the prototype, ask for a quotation, sign an agreement, and await the shipment at your port of destination.

It is cost-effective, convenient, and much easier than setting up a factory from scratch.

· Cosmetic

It is also another common industry, which utilizes OEM products.

Once you figure out the specific product you want to develop, you’ll need to contact a reputable manufacturer to produce it.

All you need in this case is to prepare a brand name and base formulations where necessary.

The manufacturer, in many instances, will make applications to all relevant authorities where required for cosmetics sales.

Also, the OEM will inform you of required items to state on the packages and regulations of indication.

How Long Does it Take to Produce ODM Products?

Developing ODM product is somehow faster compared to OEM products.

Generally, the specific lead time depends on the manufacturer.

Moreover, the exact design of the product also determines specific lead-time.

Nevertheless, the average lead-time is usually between 1-4 weeks.

ODM allows the manufacturer to use already existing designs with minimal customizations if need be.

Also, the exact time for manufacturing this component may vary based on the degree of customization.

In case you are getting a mold designed for your product the average waiting time should be around four weeks.

Additionally, you should also expect about 2-4 weeks to create the product spec sheet and the design files.

Can You Obtain OEM/ODM Products as an Individual Seller?

Yes.

Most manufacturers often deal with both individuals and entities.

As long as you are interested in the specific industry, you can always get ODM products you need.

You only need to have creative and ideas and thoughts regarding the specific products you are seeking.

This is irrespective of whether you are an individual seller, trader, or corporation.

Furthermore, the manufacturers is always willing to provide production service and responsible for research and development.

What is the Cost of OEM/ODM?

The cost of OEM/ODM is dependent on a host of variables.

One of these variables is the particular type of product you are manufacturing.

In most instances, relatively technical products will be more expensive compared to less technical ones.

Also, the quantity of products you are producing determines the cost of OEM/ODM.

Many manufacturers usually offer discounted rates when producing a large quantity volume compared to a small quantity.

Another determinant factor is the specific manufacturer you are seeking the ODM/OEM products development from.

Expectedly, some are a bit expensive based on numerous factors, whereas others are somehow affordable.

Your choice of manufacturer, nonetheless, will be guided by several factors and not necessarily cost alone.

The degree of customization is another significant determinant of OEM/ODM cost.

A highly customized part takes quite a lot of resources and time hence tend to be priced higher than a standard component.

In a nutshell, there is no specific cost for ODM/OEM since it depends on various factors, as mentioned above.

In which Industries are ODM Products More Common?

Most ODM products are quite common in relatively developed industries such as machinery, electronics, and other hardware.

In particular, the popular ODM products developed by various manufacturers include kitchen appliances and LED lighting.

Ideally, ODM products are somehow less common in low-cost industries, which are more design than function-oriented.

For instance, you’ll rarely find ODM products in fashion, jewelry, and footwear industries.

How can you Find ODM Product Suppliers?

In essence, there is no restricted category of ODM suppliers in the market.

Most manufacturers in different industries started as OEMs.

This involved developing products based on their clientele satisfaction.

Nevertheless, some suppliers are investing significantly in developing their ODM products.

On the other hand, others specialize in uploading ODM products for reference only to their respective accounts on various e-commerce sites.

It is also important to understand that there is nothing wrong with latter.

But to avoid making critical mistakes, you need to know this aspect.

Some of the best places you may consider when looking for ideal ODM product suppliers include Alibaba and Global Sources.

You may as well think of visiting the numerous trade fairs taking place in different Chinese cities.

If you are a start-up company trying to find footing in the industry, the best place would be to talk with specific manufacturers in the sector.

Such manufacturers are helpful, especially for businesses with smaller product volumes.

Even so, you must carry out due diligence when selecting the best supplier for ODM products.

What Does it mean when a Supplier Claims to offer ODM Products?

Supplier listings are quite broad; hence can easily confuse by assuming they have all the products.

In essence, factories make to order as far as ODM products are concerned.

It thus means that they rarely have stock waiting for buyers.

Secondly, product listings can fail within any of the following categories;

· Customer Products

Existing customers may be the owners of these designs.

In such instances, the product is only shown as demonstrating what they have created in the past.

However, the supplier may not have a fixed spec sheet or a design drawing for the specific product.

· Supplier Developed Products

A number of suppliers invest hugely in product R&D and tooling.

However, this remains an insignificant part of all the listed products on the major supplier directories.

If you choose to go, this direction always have it in mind that the supplier will have a lot of influence, as is their IP.

· Demonstration Products

In the digital marketplace, you’ll find some suppliers uploading product images they never necessarily manufactured.

Therefore, you are likely to pay for the tooling, which can be questionable if it is listed as ODM product.

If it’s a digital design, it can be acceptable provided that it is created by a supplier to demonstrate what they can make.

Otherwise, it can never be acceptable if that is not the case.

Can You Reverse Engineer and ODM Specification?

Most ODM products are usually customized.

Therefore, suppliers expect you to provide them with the products specifications, even when they are purchasing ODM products.

Principally, many products are for reference only.

And in most instances, the PDF files and spreadsheets containing original product specifications are by then long gone.

Hence, it is your responsibility as the buyer to do the following;

a) List all the relevant product specifications

b) Verify all available customization alternatives with the supplier.

How Do You Ensure the ODM Product is not IP of Another Company?

Ideally, this is a litigation issue often common among many parties involved in development of ODM products.

Most of the list products are not actual ODM products but images of products manufactured for other customers in the past.

In many instances, these such product designs are the IP of the customer.

One way of preventing this is by making sure you never use the brand name and trademarks, which you never own.

Secondly, you may consider going to Amazon and figure out whether you can find similar products on the market already.

You should have in mind that not each product or function can necessarily be patented.

Nevertheless, it is always the brand name that is often the IP, even if a different customer designed the product.

Thirdly, you can get into further detail and carry out a patent search.

Alternatively, you can ask the suppliers to provide the documents demonstrating they own patent for ODM products.

Also, you ought to understand that a Chinese patent is only valid in China.

Now that you know what OEM and ODM is all about, you can proceed to import from China.

However, in case you have any question on finding OEM partner in China, feel free to contact us.