OEM vs ODM: Drastic Differences With Drastic Benefits

OEM vs ODM: Drastic Differences With Drastic Benefits

Have you recently come up with an idea for a new product? Are you searching for a reliable manufacturer to partner with to begin the process of bringing your product to market?

If so, you have likely come across the term’s OEM and ODM manufacturing.

Before contacting anyone, it is good to learn the differences in OEM vs ODM, which will help you know what option is right for your product.  

Understanding Original Equipment Manufacturing – OEM

OEM is the term used to describe products designed by one company then licensed to a manufacturer for production. An example of this is the Apple iPhone. It was invented by Apple but licensed to Foxconn for production.

This provides the iPhone with more product differentiation because the design is only accessed by Apple and the licensed manufacturer.

OEM Benefits

When it comes to the benefits of OEM, the biggest is that the designer maintains creative control of the design. However, with OMD products, they are restricted to a predetermined design.

OEM products can be produced based on any specifications. The main limitation is the imagination and budget of the designer.

OEM Disadvantages

The biggest disadvantage of OEM is more resource-intensive. As an OEM designer, you must invest millions of dollars into research and development over several years to create new or unique products.

Therefore, OEM designers must protect their designs as a type of intellectual property. Failure to do this can lead to the technology being copied and sold to another company.

Understanding Original Design Manufacturer – ODM

ODM is a company that can design, develop, manufacture, and sells products on its own. OEM is often called a service, but ODM is a product.

Products of an ODM are usually rebranded by buyers and a private label product. They will then be sold under this label to make a profit.

Unlike OEM products, which rely on client briefs and product design for manufacturing items, OEM will design and develop each product independently. If you have a great idea but have not designed, developed, tested, or branded it, ODM is a smart option.

ODM Benefits

ODM spares the need for importers to invest millions of dollars into the research and development process to create a new product from scratch. There’s no need to reinvent the wheel when we already have one.

ODM Disadvantages

With ODM, it is often more difficult to differentiate your product from the products made by your competition. While ODM doesn’t require as much capital upfront, the price competition is usually steeper, which results in lower profit margins.

Choosing Between OEM vs ODM

When it comes to choosing between OEM vs ODM manufacturing methods, you will have to choose the one that best meets your needs. Taking some time to review the information here will help you figure out what option works best for your product or idea.

For more helpful resources and information, be sure to check out some of our other blogs. We publish new information regularly to ensure you know what is going on.

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About the Author: Veronica Baxter

Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area.