You’ve probably seen the terms “ODM” and “OEM” before. And chances are, wherever you’re sitting right now, you’re within arm’s reach of several ODM and OEM products. Understanding these terms and the difference between them is an important step in setting yourself up to be an importing entrepreneur.
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ODM, or original design manufacturing, is also also referred to as “private labeling.” This is where an importer selects an already-existing product design from a factory catalog, makes a few small changes and sells it under their own brand name. Changes can include things like packaging or product bundles, colors and branding, and some limited adjustments to components or functionality
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OEM stands for Original Equipment Manufacturing, and refers to products that are fully designed by one company and then licensed out to a manufacturer to produce. The Apple iPhone, for example, was invented and designed by Apple, and then licensed out to Foxconn to produce. As a result, the iPhone enjoys a higher level of product differentiation because its design is only available to Apple and its licensed manufacturer.
Many other brand name electronics and appliances are OEM. Custom designed clothing, as opposed to a generic garment with a custom logo, is another example of OEM.
The main advantage of OEM is that the designer retains total creative control over the design. Whereas ODM products are restricted to a predetermined design, OEM products can be made according to any specifications. The only limitation is the designer’s imagination (as well as budget).
The disadvantage of OEM manufacturing is that it is much more resource intensive. OEM designers often invest millions of dollars into research and development over several years in order to create unique products. Because of this, OEM designers have to guard their designs as intellectual property, lest it be copied and sold by another company for a lower price.
For readers who have or are looking to start their own FBA (Fulfillment By Amazon) business, ODM is by far the more common path. Most of us don’t have R&D departments working around the clock for us. And, if you do have a winning OEM idea, private label selling is a great way to generate the start-up capital and experience you’ll need to get it off the ground. If you’re interested in getting started, or in improving the business you’re already doing, give Guided Imports a try. Nobody makes private label sourcing and manufacturing easier!
Guided Imports works with hundreds of Amazon Sellers per year to help them safely source, manufacture, QC and ship their products to be safely accepted by Amazon Warehouses throughout the world. Here’s a few services and resources for Amazon sellers that may be of interest to you.
Detailed Guide: How to Ship from China to Amazon FBA
Simxperience port devices driver download for windows. QC Service: Amazon FBA Pre-Shipment Inspection
Shipping Service: Shipping from China to Amazon FBA
We’ve also linked to more related Amazon content below.
We are the leading sourcing service for high-growth companies from the U.S, Europe, and beyond.
What is OEM ODM and OBM?
Ever heard of OEM ,OBM and ODM? These two acronyms are buzzwords in the manufacturing industry. While some people incorrectly assume they can be used interchangeably, an OEM (Original Equipment Manufacturer) is quite different from an ODM (Original Design Manufacturer). Buyers (that’s you!) provide the designs to OEMs, while ODMs take charge of the designs and overall specifications.
Sounds simple, right? It is! However, understanding these two types of manufacturing company in depth, and not just by their definitions, will help you to choose the right manufacturers for your business and the products that you’d like to build or design. You must also keep in mind that both imply some caveats which, if overlooked, could actually risk your business.
What is OEM?
Do you have a unique product design? Have you spent millions of dollars on research and development for that exceptional product, but you need a third-party company to assemble and make things happen for you? Then, you’d have to work with OEM companies on the manufacturing process. This means licensing them everything you’ve got on that blueprint and selling the finished products under your brand name. We don’t have to go further to think of good examples: Apple spends on R&D and innovations with their own product lines and lets Foxconn fabricate everything from scratch.
What is ODM?
Alternatively, if you want the manufacturer to create the overall design and specifications of your product, you must search for ODM companies within your industry sphere. If you have limited resources in building and creating designs, ODM companies can turn your concepts into concrete and tangible items.
Tell them what you need and the expectations of your company’s customers and stakeholders. In this approach, the ODMs take care of the R&D, product concepts, testing and manufacturing.
More insights on OEM and ODM
OEMs and ODMs aren’t limited to technology and consumer electronics; they also work in the fashion and other industries, depending on the business models and product designing process of the overseas buyers. China is now one of the top global destinations for OEM and ODM sourcing.
In a nutshell, with an OEM, you’re the provider of ideas and specs, while the ODM’s concept is the reverse of this.
his model is especially used in international trade, where a local ODM is used to produce goods for a foreign company which sees some advantage in the transaction, such as low labor inputs, transport links or proximity to markets. This is also used where local ownership laws possibly prohibit direct ownership of assets by foreigners, allowing a local firm to produce for a brand company for either the domestic market or export.
But how far can you go working with these manufacturers? For OEMs, the greatest caveat is that allowing these manufacturers to see your top-secret product formulas could cause a breach of your intellectual property rights and the production of copycats of a product on whose R&D you’ve spent thousands of dollars. So, you have to find a supplier or manufacturer that’s reliable and honest, and send someone to the on-site production to monitor progress and quality.
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Meanwhile, with the ODM, the greatest caveat is that the buyer has little or no control on the product specifications and designs. As a buyer, you have to set boundaries on these matters.
Choosing between the two depends on the type of products you want to sell, the resources you have and are willing to invest, and the budget on hand.
What is OBM?
OBM (Original Brand Manufacturer) is a company that retails their own branded products that are either the entire products or component parts produced by a second company. They sell the goods under their own brand name in order to add value. The OBM will be responsible for everything including the production and development, supply chain, delivery and the marketing.
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