January 20, 2021
ODM vs OEM, with one you’re buying generic products, with the other one, the product design is exclusive to you.
When you work with an ODM you don’t need to worry about design and manufacturing, all you have to do is find an ODM that designs and manufactures, let’s say low-tier cellphones.
You get in touch with them and ask them to put your logo on it and your color brands, easy.
Working with an OEM is different because you are the one doing all the product research and development until you have a functional working prototype ready for mass manufacturing.
The OEM will follow your instructions to manufacture the product and of course, you retain IP.
Five Differences between ODM and OEM
1. Buyer Involvement ODM vs OEM
With an ODM, the buyer company steps in after the product is already made and simply adds elements such as branding or colors, or packaging that makes the product more relatable to the company.
With OEM, the buying company steps in before any manufacturing is done, it is actually the buying company that has to do all the product research and development.
The OEM will manufacture the products according to the specific instructions you give them.
2. Costs – ODM is Cheaper
When you work with an ODM you save money as you have to do neither designing nor manufacturing, because the ODM manufacturer takes care of that.
Someone working with an OEM manufacturer has to first invest millions of dollars to design a product specific to their company look and what they are attempting to market.
Here’s an everyday product as an example, juice, someone trying to sell a well-known juice such as apple juice vs someone trying to sell an original juice they made themselves.
They’d first have to do many tests, such as mix a bunch of flavors together, see what works and what doesn’t.
Then they’d need to test the juice because they might like the juice but maybe they have more of a sweet tooth than the larger population.
So by the time they get to selling the original juice, they would have spent a much larger amount of time and money than someone selling something everyone already knows works.
3 Competitors – OEM is The Best Option
It doesn’t matter if you work with an ODM or an OEM, in both scenarios you have to worry about competitors, but in entirely different ways.
Someone working with an ODM company will have many competitors to worry about, as their product is not original, it can be bought by others and rebranded.
So they have to compete with many other products that not only look exactly like theirs but many in fact are.
They have to be very ingenious to compete as they have to do something to put their product aside from others.
Someone working with an OEM company has to worry more about someone stealing their design; IP theft.
This would mean that the investment of thousands of millions of dollars spent towards making their product uniquely theirs and expected ROI are at risk.
No one copies a new to the market product right away, it happens only after the product proves to be a hit in the market.
So, if you find much success with your product, make sure you safeguard your intellectual property.
An example could be a boutique clothing store vs a mainstream one.
The mainstream one could have many clothes that are unoriginal and sold in a lot of places, however, they might be fine unless another store opens up close by and is indiscernible from it.
But the boutique might really suffer if the mainstream shop gets a hold of one of its original styles because it means that it would be sold cheaper and they would lose a lot of business.
4. Time – ODM is Faster
Getting products from an ODM company takes a lot less time than going the OEM approach.
With an ODM you can simply place an order and have your products in your warehouse in a couple of weeks.
With an OEM, before you can start manufacturing, you need to go through a product development process, which depending on the complexity of your product might take several months.
This would be in part similar to house buying vs house building.
It would take far less time to buy a house, which means the buyer of the mentioned house can dedicate a larger amount of time decorating it and making it livable.
However, the person who builds their house naturally takes a lot longer to be able to live in it.
5. Full Responsibility – OEM is More Work
When you’re the designer of the product you’re the one in charge of making sure the product passes all necessary certifications and provides quality warranties.
If quality problems arise and returns are made, you’re the one who has to deal with that, as well as repairmen services.
The factory will of course give you support, but if they can prove that a product issue is because of the design and not the manufacturing, then you’ll cover the expenses to revert the issue.
On the bright side, the fact that it is a product designed to be unique means that it is extremely recognizable, which is great for branding.
For example, when you see an iPhone you know it is an iPhone, and sometimes that is enough for the product to do well in the market.
In conclusion, I hope that now especially as a result of the examples OEM and ODM are forever no longer interchangeable in your mind.
I also hope that if you’re considering heading down one of these avenues for your business you’re in a better place based on your context to decide what option is the best fit.
Good luck in your future endeavors and if you have any more questions related to any of these terms check out our website for more information.