Both offer a wide range of manufacturing options, but choosing the best depends on what you’re selling and how much control you want over the design and production proces
For those new to the world of China manufacturing, the difference between OEM and ODM can be quite confusing. Both are manufacturers that help eCommerce brands and other businesses produce products based on certain requirements. However, the similarity stops there. Let’s demystify these terms to help you decide which manufacturing service is best for you.
What is OEM manufacturing?
OEM stands for Original Equipment Manufacturer. It refers to a company that manufactures products on behalf of a brand based on specific requirements and designs.
Let’s say you are an eCommerce seller and want to launch a unique product. You can do extensive R&D and prepare the final design for that product. An OEM company is the one that has the manpower to manufacture your product based on the design provided by you.
Example of how OEM works
The best way to demonstrate how OEM works is by taking Apple’s iPhones as an example. To manufacture the iPhone, Apple does extensive R&D to design the device and set the desired standards. To manufacture the iPhone in China, Apple reaches out to Foxconn, an OEM company. Foxconn receives the designs and specifications from Apple to produce and assemble the iPhone.
Benefits of OEM
- More control over the production process because the client is the one who provides the designs.
- More competitive products as the OEM company designs the product exclusively for the client.
- Cost-effective (only when producing on a massive scale).
Disadvantages of OEM
- Requires more spending on R&D to make the designs and do market research.
- Resource and time intensive.
- Slower time to market (the time required for the product to be produced and ready for sale).
- More complex procedure with the likelihood of encountering various supply chain challenges.
- Requires large-scale production so the minimum order quantity will be high.
- The risk of introducing new products or concepts to the market.
What is ODM manufacturing?
ODM, which stands for Original Design Manufacturer, is a company that designs various types of products and tweaks them slightly based on the client’s requirements. ODMs, especially the ones in China, offer a wide array of manufacturing services to suit the needs of eCommerce businesses and other clients who want to launch new products to the market in a short time.
Example of how ODM works
Let’s say an online apparel seller wants to launch a new product. The seller has done their research and identified a gap in the market for a new type of shirt but they lack the time and resources to design it and give it to an OEM for production.
Instead, the seller can pitch the idea to an ODM company that specializes in manufacturing apparel and has already similar designs. The seller can ask the ODM to produce the new shirt and have a few customization options, such as color, size, and fabric.
Since the ODM already has experience in producing apparel, it can quickly ramp up production and bring the product to market without the need for more complications or input from the seller.
Types of ODM services: Private labeling vs white labeling
ODM offers a plethora of manufacturing services, but the most common ones are private labeling and white labeling. To explain the difference, let’s go back to the shirt example.
If the seller opts for the private label service, they can customize the product a little by adding branding and asking for certain materials to be used. In this case, the ODM will produce the shirt exclusively for the seller.
If the seller goes for white labeling, the shirt will be already designed by the manufacturer. It will be a generic one that costs less but the ODM will have the right to sell it to more than one client. In this case, the seller will handle the branding process.
Benefits of ODM
- Simple and more efficient process as the ODM will be familiar with the products requested.
- Customization options (with private labeling).
- Faster production time.
- Lower costs (especially when choosing white labeling).
- Requires less resources and time to get the production started.
- Perfectly suited for mid-sized companies and startups.
- Lower minimum order quantity.
Disadvantages of ODM
- Limited control over the production process.
- More competition as other sellers can source the same product from the ODM (more common with white labeling).
OEM vs ODM in China: Which one is right for your business?
Choosing between OEM and ODM manufacturing depends on various factors. If you have time and extensive resources for R&D to design your product, then OEM might be the right fit for you.
However, most businesses, especially in the eCommerce space, often choose ODM. The services offered by ODM companies balance between cost and quality for most online retailers. Between private labeling and white labeling, sellers can choose from different manufacturers and have enough freedom to customize the product and bring it faster to the market.
Get quality products from China at competitive prices with Lansil Global
Understanding the differences between manufacturers is one thing; knowing how to deal with them is another. With language and cultural barriers, eCommerce sellers cannot communicate effectively with factories on their own and get a good deal.
At Lansil Global, our Shenzhen-based team understands the nuances of Chinese manufacturing and has already established relations with over 2,000+ factories. No matter the type of your product, we can get it to market in a short time. Our in-house quality control team can check your products to ensure a lower defect rate.
How to get started? Get a free consultation today by reaching out to our sales team.
