Three models of manufacturing - OEM, ODM and OBM
OEM and ODM are frequent acronyms in manufacturing, with OEM standing for original equipment manufacturer and ODM standing for original design manufacturer.
While many people are often confused as to how to properly use these two terms, they are certainly not the same thing; OEMs manufacture products based on designs provided by customers, while ODM manufacturers design some or all of their own products before manufacturing them for customers. In this article I will explain the differences and advantages between the two types of manufacturers.
1. Original Equipment Manufacturer
An OEM (original equipment manufacturer) builds a customer's product that is completely designed by that customer and then outsources production. For example, the Apple iPhone was invented and designed by Apple and then contracted to Foxconn for manufacturing. This results in a much more differentiated product for the iPhone because the design is only available to Apple and its contract manufacturers.
The main advantage of OEM is that d has complete creative control over the design retained by the customer. With OEM, there are also few or no intellectual property restrictions that might prevent switching to a different manufacturer in the future if needed.
Another benefit of using OEM over ODM is the flexibility of product design. OEMs can manufacture products to any specification, while ODM products are limited to predetermined designs.
The disadvantage of OEM manufacturing is the production of unique products. As a result, significant resources are required. These resources include R&D costs and the time required to create a design before it is ready for manufacturing. These investments are often quite high and pose some risk to the company.
Recall that Apple invested millions of dollars in R&D over several years to create their unique products. apple's market share ensures that they will see a return on this investment, but many companies that do not y have this development access do not have this assurance.
2. Original Design Manufacturing
ODM (original design manufacturer) is also b known as private label or white label products. In this case, the manufacturer has an existing product design that the customer can alter slightly and sell under their own brand name. Some examples of changes include branding, color, or packaging.
A more typical example of an ODM product is a car charger. If you browse car chargers on Amazon, you will see multiple companies with essentially the same design. While the products are made to the same general design, each product is custom branded, colored, and packaged to each buyer's specifications.
The advantage of ODM manufacturing is the small amount of resources required by the customer to create the product. With ODM, customers do not have to invest millions of dollars or time in R&D to develop new products. By reducing product development costs, customers can spend more time and money on marketing strategies.
The downside of ODM is that it is difficult to differentiate from competitors who essentially offer the same design at a similar price. This price competition usually means lower profit margins.
For example, an end user looking to buy an ODM car charger is more likely to choose the lowest price than to care about color or branding. It takes a lot of creativity on the part of the customer to truly differentiate their ODM product from competitors in the marketplace.
ODM doesn't just mean electronics, either. Have you ever noticed that some furniture, clothing or sports equipment often carry similar looking products? This is another example of ODM manufacturing.
Another benefit of using an ODM manufacturer is the economies of scale that can be gained. This means that the unit cost of the product is lower because the manufacturer is building the same design in large quantities.
3.OBM ----Original Brand Manufacture (OBM)
OBM requires companies to register their own trademarks to develop markets and create their own brands while taking advantage of design and manufacturing. The trademark marks a big step from "branding" to "branding" and is a qualitative leap in the development of the enterprise.
Key Takeaways:
When deciding whether to use OEM or ODM, the actual maximum depends largely on available resources. If a company has an R&D budget and a reasonable time-to-market plan, then using OEM is a good choice. If time and resources are tight, then ODM is the way to go for a product launch.
OEM, ODM, OBM are different business methods and profit models, from OEM to ODM to OBM, is an inevitable division of labor between large and small enterprises, between enterprises at different stages of development, and is also the inevitable choice of capital after weighing between profit and risk. Mature enterprises are dumbbell-type enterprises, technology and market is very strong, manufacturing part or all outsourcing, which is the result of chasing profits, but also the division of labor cooperation between enterprises. From OEM to ODM to OBM, it is a development mode of the enterprise, which is accompanied by different business methods and different profit models in different development stages of the enterprise, and is also an inevitable choice for the enterprise to pursue sustainable development. It is actively meeting the challenges, creating value and gaining profit.
