What is OEM?

OEM (Original Equipment Manufacturer).

It is produced under the socialized division of labor and specialized interests. Its primary meaning is product development and manufacturing according to the original unit (brand unit) entrusted with the contract, using the original unit trademark, the original unit sales, or operation of the cooperative management production method.

OEM Original Equipment Manufacturer

The originator of economics, Adams’ “Wealth of Nations” (the first monograph of economics), the first chapter of the first section begins with specialization, classical economics that discipline can lead to increasing marginal revenue and decreasing marginal cost, to reach the rationalization of social resources allocation. If the concept is a little dry, let’s take an example: Suppose A, B, and C work on embroidery needles at the same time, processing a hand from cutting to polishing to piercing, each producing up to 10 each per day, for a total of 30 needles. Suppose we let A cut the material; we can cut 50 hands per day. In that case, B can polish 50 needles per day, C can perforate 50 needles per day, so it is evident that if each person does only one thing, three people can produce 50 needles per day, which is an advantage of specialization.

OEM can be called “OEM production” or “OEM production.” This business model has been in operation for many years and has worked well internationally. To increase the allocation of resources for innovation and minimize the investment in fixed assets, enterprises do not produce directly but let other enterprises create to complete the production of products. In this way, the company only has to pay for material costs and processing fees instead of bearing the burden of depreciating equipment and building its factories and can flexibly place orders on demand according to market changes. This can promote the formation of new business advantages in the finished product business, cultivate and strengthen the inherent expansion power of the enterprise, improve the management ability and management level, and thus create conditions and accumulate experience for higher level capital operation.

What is ODM?

ODM (Original Design Manufacturer).

It can provide customers with all services from product development, design, and manufacturing to post-maintenance. Customers only need to propose product functions and performance to ODM service providers or even provide product ideas, and ODM service providers can turn products from ideas into reality.

After some manufacturers design their products, they will be seen by other companies and asked to produce and sell them with their brand name or make some minor design changes for production and sell them under their brand name. The most significant advantage of reducing its research and development time. Therefore, it is customary to call the former ODM for the latter.

The difference between OEM and ODM

The most significant difference between OEM and ODM is the name: OEM products are custom-made for the brand manufacturer and can only be produced under the brand name but never under the producer’s name. On the other hand, ODM depends on whether the brand company has bought out the product’s copyright. If not, the manufacturer has the right to organize its production, as long as there is no corporate company’s design identification.

In industrial society, OEM and ODM can be commonplace. For manufacturing costs, ease of transportation, and saving development time, well-known brands are generally willing to seek OEM or ODM from other manufacturers. When seeking OEM or ODM from other companies, famous brands have to bear a lot of responsibility. After all, the product is crowned by their brand; if the quality is not good, fewer customers will come to the door to complain, the heavy may have to go to court. Therefore, the brand companies will undoubtedly carry out strict quality control during the commission processing. But after the end of the OEM, the quality is not guaranteed. Therefore, when a business person tells you that the manufacturer of a product is the OEM or ODM product of a significant brand, never believe that its quality is equivalent to the brand.