Choosing an OEM Parts Manufacturer: A Complete Guide
Apple is one of the largest companies in the world, with its iPhone being one of the most popular smartphones on the market. If you’ve ever held an iPhone in your hand, you know it’s a premium, well-made device. So it may come as a big shock that Apple does not manufacture almost any of its individual parts.
Instead, Apple sources OEM parts from other companies. They get accelerometers from Germany, gyroscopes from Switzerland, and batteries from China. Apple even sources some of its parts from direct competitors, such as Samsung.
This is common practice in the world of manufacturing. And it’s one that can make your business more efficient and cost-effective.
What are OEM products, and how does one choose an OEM vendor? We hope to answer that and many other questions here. Keep reading for a definitive guide on OEM parts and finding good manufacturers.
What Are OEM Parts?
OEM stands for Original Equipment Manufacturer. The screen on an Apple device has an Apple label, but the OEM is actually Samsung. Samsung makes the screen, sells it to Apple, and Apple claims the screen as its own.
It’s a continuous cycle. The iPhone gets high-quality screens for a good price, and Samsung sells more screens. As counterintuitive as it may seem, this is a mutually beneficial relationship that is unlikely to end.
Samsung is unafraid to admit this because it only proves that its screens are of the highest caliber. Apple does not want to burn a valuable business partner, either.
This practice extends far beyond consumer electronics. Car parts, printers, and countless small electronics require OEM parts.
Why Not Manufacture In-House?
You may be wondering why Apple does not produce the screen itself. At first glance, it would seem to be a better deal overall. Apple could potentially save money and create screens that meet their expectations exactly.
But upon closer examination, it’s not as easy as just manufacturing some screens. Screens require specific manufacturing hardware, long processes, insider knowledge, and a workforce equipped to make them.
If Apple were to manufacture its own screens, it would likely cost them billions of dollars to create the production lines. Sure, they will get custom Apple screens. But the cost would put a huge dent in their operational expenditures.
Samsung already has the infrastructure to make screens. They have know-how and years of industry experience. They can produce the screens cheaply and sell them to companies like Apple.
In short, OEM products give companies access to affordable parts that would otherwise cost a fortune to make.
Benefits of OEM Parts for Small Businesses
OEM products are not just for gigantic companies like Apple. They are a means for smaller companies to save money on manufacturing, without sacrificing quality.
Apple not only purchases OEM parts but also outsources its manufacturing to other companies. Foxconn, for example, makes custom Apple silicon chips. This allows Apple to scale up and down in response to demand, and easily pivot toward new products.
The same is true for your company. OEM parts will allow you to manufacture on a smaller budget, compared to manufacturing yourself. It’s an excellent way for small businesses to get their foot in the door, as it were.
As your business grows, you can scale up to meet demand. Most OEM vendors have the ability to adapt to your ever-changing business requirements.
With all that said, let’s discuss how you can find an OEM parts manufacturer.
Things to Look for in a Reliable OEM Vendor
As you shop around the OEM vendor market, you will discover a huge number of manufacturers. There are hundreds of companies, from Shenzhen to Beijing, looking to make your product a reality. But as you might expect, there are some bad eggs among the bunch.
There are some important do’s and don’ts when working with foreign companies. Some of them amount to cultural differences, but others may be unsavory business practices.
Here are a few key points to get you in the right direction.
GMP, also known as Good Manufacturing Practice, ensures that the company you work with adheres to the highest manufacturing standards. Regulations vary depending on your country or region. But the name is self-explanatory, to make sure companies behave well during the manufacturing process.
Part of GMP compliance is the implementation of a quality management system or QMS. This is a body of processes, policies, and procedures to ensure OEM parts meet the highest standards. A QMS ranges from procurement of raw materials to the finished products at the end.
GMP compliance includes specialized employee training and regular audits of the process. This means having accurate records and making adjustments over time to improve.
Find a company that is GMP compliant before you settle on a contract.
Understanding OEM vs. ODM
OEM refers solely to the manufacturing of individual parts that go into a product. However, the company that makes these OEM products uses its own design and engineering team to create them. When you buy an OEM product, you are essentially picking a ready-made product off the shelf.
However, some companies have very specific needs for their products. The OEM parts that a vendor makes may not be sufficient for your standards. In that case, you might feel better suited to an ODM manufacturer.
ODM, which stands for Original Design Manufacturer, designs a product according to your specifications. Then they manufacture this product for you. The only part left for your company is assembly.
A perfect example of ODM is car chargers for electric vehicles. In this case, the design of the plug across car chargers is very similar. But each design has a custom brand, unique coloring, and entirely different packaging.
A common issue with Chinese companies is that they can easily shut down one company and open another. A company with a bad reputation can become a new company with a fresh slate overnight. Many who consider outsourcing to China understand this as one of the risks involved.
Just like any business relationship, you must establish bona fides. It pays to do your research about a company’s past dealings. If the information runs dry after digging only a few years deep, you may have a problem.
Word-of-mouth is an excellent tool in the manufacturing industry. Other companies you know or have worked with may have had bad run-ins with specific manufacturers.
Of course, there are always online reviews that you can check out. Aggregate reviews can provide an intimate window into a company’s dealings with past customers.
Technology advances at a breakneck pace. As it concerns chip manufacturers, this means that new processes get outdated within years of their fabrication.
For example, 10 nm chips release one year, then shrink down to 7 nm the next. Each shrinkage requires completely retooling the factory to make the updated chip.
Granted, not many industries upgrade at the same pace that silicon manufacturers do. But generally speaking, industry innovation in all fields grows at a steady pace.
Ideally, you want a manufacturer that uses the most modern processes. The more modern it is, the more efficient and cost-effective a company can be.
Older processes deprive you of all the new advancements. Plus, a company that can support current advancements is likely better off financially. Having modern processes also means they have highly skilled people onboard.
Things to Avoid in an OEM Vendor
Naturally, there are big red flags that you should spot before signing any contracts. Some of these are small things that can be remedied easily. Others are a very clear no-go and you should avoid them if at all possible.
Inconsistent Communication and Language Barriers
It’s understandable that there will be communication delays between East Asia and your headquarters. It’s difficult to convey things over email or even a video call. But you want to avoid OEM vendors that don’t give you consistent, comprehensive communication.
A good vendor will update you through every step of the process. They will alert you promptly to any delays and communicate any manufacturing challenges. They will help you achieve a seamless assembly process and take into account any input you may have.
Language barriers can provide misunderstandings. And even if there is no language barrier, there may be cultural barriers. Having a company that tries to bridge this gap with you will be invaluable.
To be clear, you shouldn’t discount a manufacturer only on account of a language barrier. It’s how both parties overcome that barrier that matters.
Constant Delays and Manufacturing Issues
Some manufacturers may prove to be a pain in the neck throughout the process. There may be constant delays in finishing a run of products. These delays may cost you money, create logistics issues, and prevent you from distributing your product on time.
Delays will happen from time to time. But if they are very, very frequent–without good explanation–then this may point to bigger internal issues.
For example, your manufacturer may be biting off more than it can chew. They may have attempted to fulfill more orders than they have the capacity for. This leads to them prioritizing some customers over others.
Ensure that they have the capacity to meet your needs. If they are bogged down with too many orders, you may want to look elsewhere.
Lackluster Prototype Models
Before doing a run, it’s common practice to produce a few prototype models. This gives you a physical example you can hold in your hand. You can see with your eyes and feel for yourself the quality of the manufacturing.
This is an excellent chance to see from the start what you’re going to get. You can ask for quality checks throughout production. If there is any degradation in the product, it allows you to identify what has happened.
If they cannot get your OEM parts up to snuff from the beginning, then perhaps you should shy away from that company.
Everyone wants a good deal, but you don’t want an agreement that seems too good to be true. You get what you pay for, after all. An unnaturally low price is a good sign that you might be getting a low-quality product.
Take a look at comparable rates from other companies. This gives you a good idea of what you should expect to pay for bulk OEM parts. This way you can find a good balance between an affordable price and parts that meet your quality standards.
Protection of Your Intellectual Property Rights
Intellectual property theft is a risk you have to take into account when working with Chinese companies. As such, you should prioritize companies that keep your intellectual property safe.
This usually isn’t a huge issue with OEM manufacturers, since they design the products. However, if you share blueprints and schematics of your products, you are likely sharing valuable IP information.
Only trust companies who have a reputation for protecting this valuable information. Otherwise, you may see your patented product designs appearing in cheap Chinese products, with no recourse for legal action.
Get Custom Manufacturing with Shield Works
OEM parts allow companies of all sizes to get high-quality components for affordable prices. If you decide to source your OEM products from a vendor, take the time to vet them well. Keep the above tips in mind before you settle on a contract manufacturing run.
Shield Works serves professionals in all industries. We do assembly, manufacturing, and much more. Contact us today to find out how we can help you get the best OEM parts for your business.