Companies considering manufacturing new products in China must decide whether to source original equipment manufacturer products or customize an original design manufacturer design. For large order quantities, custom manufacturing is another option. Find out what sets OEM products apart from original design manufacturer and contract manufacturer products and why the first option is often the best choice for bringing new products to market.
Original Equipment Manufacturer Products
OEM products are manufactured by a factory to the specifications of a buyer’s design. These products differ from ODM products based on a supplier’s design and branded and customized to meet buyer specifications and products made by a CM. OEM products often have similar unit prices and production times to ODM products, but production with a design and equipment manufacturer differs in several important ways.
Ownership of Tools
The first significant difference between original equipment manufacturer products and products made through other manufacturing methods is that the buyer pays for the tools to make OEM products. An ODM supplier is likely to own the tools to make products. In the case of CM, buyers are also likely to own designs and tools. Ownership of tools affects manufacturing costs and affects the ease with which a buyer can change suppliers or factories.
Production Development Time
Product development time is another important consideration with OEM products. In general, it takes more time to develop new products based on buyer designs and specifications. Buyers who order ODM products that require extensive reverse engineering or significant customization options could be looking at similar development times. On average, the product development time for OEM products is two to six months, while most ODM products only take one to four weeks of development.
Intellectual Property Rights
The last major difference between original equipment manufacturer and ODM products pertains to intellectual property rights. Buyers are more likely to retain IP rights for OEM or CM products, while suppliers or importers typically hold IP rights for ODM products. While some ODM products are off-shelf, many exist in the form of drawings and renderings.
Custom OEM Product Designs
OEM products allow for more original design options than ODM products. This is because these products can be designed from the concept up to meet the unique needs of a buyer. Based on the workflows of a company, design may take place in a buyer’s home country or in China.
Research and development costs for OEM products are typically higher than for ODM products that have already been brought to market and are subsequently reverse engineered and customized. Budget-conscious buyers may want to consider doing design, research and development overseas, where the costs of bringing new products to market tend to be lower.
Fewer IP Violations
When buyers design products for an original equipment manufacturer to produce, these products are less likely to infringe on existing IP rights than ODM products. A buyer does not own the IP of private label or white label ODM products, which can increase the risk of violations resulting in legal action or the removal of products from marketplaces.
While ODM products can be customized to a certain extent, substantial changes to a product design can verge on OEM products. For example, many ODM products allow for material or color changes or the addition of branding. Changes to product designs or dimensions can turn ODM products into original equipment manufacturer products in terms of product development time, specifications and tooling requirements.
Work With Manageable MOQs
Product design and sourcing experts recommend OEM products for MOQs over 2,000 pieces and under 5,000 pieces. ODM products can be more cost-effective for lower MOQs, as the costs associated with design, research, development and tooling are minimal.
The MOQ of original equipment manufacturer products can be cost-effective when a buyer wants to see returns from orders in this mid-range. The costs associated with ordering OEM products can balance out as a supplier places repeat orders for products based on the same specifications or with minor modifications. A sourcing partner can minimize some of the potential downsides of OEM products, such as limited supply chain visibility.
Benefits of Contract Manufacturing
Contract manufacturing can be the best approach for larger orders with MOQs over 10,000 pieces. In this case, the buyer still owns the design and must pay for tooling. Increased supply chain visibility and flexibility to change manufacturers may make this approach worthwhile for buyers who place larger orders.
An original equipment manufacturer can be the best choice for buyers who want to produce original products. Investing in design, research, development and tooling goes a long way, particularly if a company takes measures to protect intellectual property rights in the countries where products are produced and sold.
IP for Original Equipment Manufacturer Products
One of the main reasons why buyers pursue OEM is to retain the IP rights for product designs. Retaining these rights is an active process that requires protection. For example, if sales are high, a manufacturer may be tempted to compete with a buyer by offering ODM products based on a design. For this reason, it is important to actively protect IP, particularly when sourcing products overseas.
China 2 West offers buyers several options for preserving the IP for products. One of the best options may be to produce products in our Shield Works Precision Manufacturing facility. This facility offers customized OEM manufacturing, assembly and warehousing with IPR protective production zones.
Buyers may retain IP for OEM or CM products, but it is necessary to protect this IP. A sourcing service helps buyers preserve the unique market advantage maintained through IP rights and avoid direct competition on identical products from manufacturers and competing brands. This service can also maintain factory inspection, social compliance and quality control standards.
Try OEM Products
From the flexibility to design and manufacture new original equipment manufacturer products to the option to own and protect IP, OEM products stand apart from ODM products. China 2 West helps companies source products overseas and operates the Shield Works Precision Manufacturing facility. Find out more about options for sourcing new OEM products from China and other low-cost regions.
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