The Fundamental Differences Between An OEM And ODM Manufacturer

If you have been in the manufacturing industry for a while now, you have already heard acronyms like OEM and ODM. While these are two of the most commonly used terms for your business models, few know what it means. Simply put, ODM stands for Original Design Manufacturer, while OEM means Original Equipment Manufacturer. To succeed in any industry field, it is imperative that you know what the two entail and which one you should choose. 

The most straightforward explanation for the two is that OEM only sells highly customized products, aptly suiting the specific needs of their client. On the other hand, ODM focuses more on producing their own products to later lease them out to their clients. The leasing process is done on a private or white label basis, meaning they do not have to establish or invest in their consumer brand.

What Do You Understand By OEM?

OEM manufacturers are services that create products tailored to your specific requirements. Whether you have particular design elements you want to add or omit, an OEM will always take that into consideration. OEMs are quite important in any product development process. This is especially true for companies that have the resources and skills to ideate a product but lack manufacturing capacity.

So basically, OEMs help businesses produce any product and help launch it in the market without the need of a factory or staff. How much an OEM customizes a product solely depends on the requirements of the client. They can range from being a totally new custom product to a design that has been customized heavily. OEMs will also help you with product designing, ensuring that the product can get manufactured. 

Either way, the client will retain their intellectual property and design rights. However, only if they have to take help from the OEM for more than just manufacturing might they give up part of the IP. 

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 What Does ODM Mean?

When compared to OEMs, ODMs work a bit differently. They essentially do most of the product designing in-house and lease out the products for other businesses to sell. Most clients use such services as a way of getting their idea to the market quickly, with lesser R&D costs. In other cases, they see potential in the original design manufactures products and lease them out. 

In the latter case, the products actually belong to the ODMs, which are then altered in some way. Most commonly, the alteration is just rebranding, but sometimes these products get slightly customized to fit the seller’s reputation. This is known as white label manufacturing. 

However, it is essential to understand that not all ODM manufacturers are white label manufacturers. Many offer custom product services for their clients, especially if they like an idea, but the client does not have the means to design it. This is known as a private label product, and most of all, IP rights remain with the original design manufacturer. 

You will find both ODM and OEM companies on websites like Alibaba, helping you make the product. Depending on the kind of resources you have and your specific needs, you can choose either one to make your creation come to life.