Do you have a new product that you want to sell for your company, but you are unsure what type of manufacturer to use? Have you decided to use a manufacturer in China, but you aren’t sure what type of manufacturers are available? Most people don’t know that there are OEM manufacturers in China in addition to ODM manufacturers.
So what is the difference between the two? We will give you a hint; one provides more protection and more specification help than the other. They are both excellent options to bring your products to the market, but you should be aware of a few other key differences. This brief manufacturing guide will cover the difference between the two and who you can contact for more information.
What is OEM Manufacturing?
Before we get into what OEM Manufacturing is, we must first define what OEM is. OEM stands for Original Equipment Manufacturing, and it is a form of outsourced manufacturing. OEM factories have the capabilities to manufacture products according to your unique specifications and designs.
Before an OEM manufacturer can produce your product, you must complete your research and development. This includes engineering, market research, and design.
Once you have all the components of your product down in writing, you can then reach out to an OEM manufacturer to create your products in bulk. The original equipment manufacturer will set up the production of your product to make sure that they can produce the product on time, on quality, at your designated budget.
Advantages of OEM Manufacturing
One of the most significant advantages of OEM is the fact that you have complete control over your intellectual property. This is a huge deal, especially if you have a breakthrough project and you choose to ship your production services overseas.
When you control the research and development of your product, you have complete control over your intellectual property. This gives you better bargaining position and makes it easier to switch to another supplier if you need to. Even though you have full control of your intellectual property, it is best to protect it at all costs.
If you don’t have the right expertise or equipment to create certain parts of your product, you can depend on your OEM to have it for you. It is best to take advantage of the technology offered by your OEM manufacturer to complete your project. Access to this type of technology and expertise ensures that the manufacturer will create your product with top-tier quality.
When you partner with OEM manufacturers in China, they can streamline the process of creating your product in large volumes. China is also well known for its efficient supply chains, making it cheaper to produce your product. This provides your business with higher profit margins, more revenue, and increased sales.
Disadvantages of OEM Manufacturing
One main disadvantage of using OEM manufacturing is a limited selection of suppliers for certain specialized items. Most OEM manufacturing companies prefer to work with businesses that create a lot of demand, so if you don’t sell your goods fast, they most likely won’t work with you.
Risk of Infringement
Because you are sending your items to a company to create your product, there is a risk of infringement. It is important to note that every country has its own rules and regulations for intellectual property. If you aren’t diligent in protecting your product, you risk someone selling your components to your top competitors.
Once you have your specifications down and send it over to the manufacturer, they will create your product based on what you send. This means that they won’t troubleshoot or correct any faulty designs as they produce your items. They will only manufacture based on what they have from you.
What is ODM?
Original Design Manufacturing, also known as ODM, is another form of manufacturing. Unlike OEMs, ODMs provide product development services, and depending on the company; they can help you with the entire product lifecycle. The exact scope of what an original design manufacturing company can do differs from company to company.
Let’s say that your company has an excellent idea for a gaming console. You did your market research and found an opportunity to create a low-priced gaming console of decent quality in China.
You and your team will need to develop some features you want the console to have, but you don’t necessarily have any specifications or technical drawings. If you want a gaming system that meets your requirements, you can reach out to an ODM to fulfill what you need.
Your ODM company can help you create specifications and new designs based on your idea. The ODM may already have its own product lines that you can customize if you would like.
Advantages of ODM
One significant advantage of using original design manufacturing companies is that you don’t have to make substantial upfront investments. You won’t have to pay for any tooling; the ODM will take care of that.
With an ODM, you don’t need technical resources that provide detailed specifications and designs. Instead, the ODM will handle all of that for you. Many Amazon FBA sellers prefer to use ODMs to create and sell their products quickly.
ODM companies don’t worry about testing, developing, or researching a product. They usually have already created products that they can rebrand for your business. To ensure you don’t run into issues with another company claiming that you copied their idea, the ODM will handle making sure the product uniquely links to your company.
Least Expensive Manufacturing Route
Testing and designing a product takes a lot of time and requires a decent amount of capital. When you partner with an ODM manufacturer, you have the opportunity to save money while you focus on the core aspect of your business.
Depending on your product, certification is typically required before your product can hit the market. To ensure that your product meets quality requirements, ODM manufacturers will handle all quality testing and inspections. They will also get the proper product certificates you need before selling your product.
Disadvantages of ODM
Although these manufacturers provide you with a quick and easy way to create a product for your business, working with them can make it harder to stand out from the competition. Your manufacturer will sell the exact product you create to other companies with minor alterations.
Even if you manage to make significant sales volumes, your ODM most likely won’t honor your changes if your customers request customizations or upgrades. Most manufacturers don’t develop new products, especially if a specific product requires a full or a partial redesign.
No Intellectual Property Rights
Because your manufacturer designed, tested, and developed these products, they own the item’s intellectual properties. This means that you have no control over the ODM’s legal decisions about the product.
You also have no control over who the supplier sells the item to. There is a chance they could sell your product to another competitor.
There is also a chance that the item you buy from your ODM could be another company’s intellectual property. If you are unaware of this and you sell your product on the market, you’re at a risk of facing a lawsuit.
How to Find an OEM or ODM Manufacturer in China
Choosing an OEM manufacturer in China can be an overwhelming experience. There are hundreds, if not thousands, of manufacturers in China who can help bring your product to life.
The best way to find the proper manufacturer for you is to look up some and make a list of those you like best. There are certain companies that have high-quality components, quick turnarounds, and high customer service ratings.
Shortlist Your Companies
Once you have a list of companies you may want to work with, it would be best to shortlist them. Look over each company’s length of time in business and see if they specialize in the component you need.
Other essential details to look over:
- Certifications the company has for their production capability
- Business licenses
- If the company has already exported products to the United States
- Their minimum order quantity (MOQ)
If you like a company but have questions about its qualifications, check out its reviews. Most previous clients will rate the company and put what they did or did not like about them. The best way to find out if they have what you need is to contact them.
Review Their Credentials
Even if a company tells you that they have the right qualifications, it is better to verify those credentials to ensure that they are actually a legitimate company and not a middleman. There are many ways to verify this information.
For one, you can ask the company for their audited accounts, ask for product samples, or you can check their Value Added Tax Invoice. You can also ask for the Chinese name of the factory, the location of the factory, and the local government office assigned to the factory. The government office should have a copy of the factory’s registration and license records which you can use to verify their details.
Unlike the United States, there are many countries that do not have protocols in place to protect their workers. This means that some workers may not receive adequate breaks or time to get food. Some of these people work for more than eight to twelve hours a day without reasonable pay.
When sourcing the proper manufacturer for your company, make sure that you work with an ethical company. The last thing you want to do is partner with a company that does not care about its employees. Don’t spare efforts on researching their track records.
Hiring a Sourcing Agent
The most significant advantage of hiring a sourcing agent is that they can verify and identify different manufacturers on your behalf. These people have extensive networks of partners and in-depth knowledge of the sourcing market.
There are many companies that have sourcing agents on staff who can serve as the liaison between you and their manufacturer. They are able to speak to you in your native language while being able to translate for their company.
Visit the Manufacturers
If you aren’t able to visit the manufacturers yourself, you can use a sourcing agent to do that on your behalf. If you can take a trip out to China, you should go to check out the different available manufacturers.
When you go in person, you can see the facility first-hand and meet with key personnel at the manufacturing facility. While you are there, you can better explain the specifications of your product and if they can handle that for you. Visiting in person also lets the manufacturer know that you are serious about working with them to create your product.
Build Your Product With Confidence
There are many different ODM and OEM manufacturers in China that can bring your ideas to life, but which of the two is the better option for you? Choosing the proper manufacturer for your business needs shouldn’t be a complicated process, and that is what we are here for.
If you need help deciding between the two or if you are set on working with an OEM manufacturer in China, contact us now. Our team is fully prepared to answer any questions or concerns you have about our process!