Does your company need precision CNC machining or laser cutting services? If yes, one of the first decisions you need to make is whether to work with an OEM or ODM company. 

OEMs take ownership of the entire manufacturing process from start to finish, producing custom goods with your company’s name and branding. ODMs specialize more in product design and engineering expertise, acting as a behind-the-scenes manufacturer.

In this article, we’ll break down the OEM vs ODM differences. By understanding what these manufacturers do and the pros and cons of each, you can make a more informed choice for your machining manufacturing partnership. 

What is OEM?

Have you ever wondered how the products of some of your favorite brands get made? Well, many companies use a process called OEM or Original Equipment Manufacturer. OEM is when one company fully designs a product and then works with another company to make it.

The designing company is called the OEM customer. They come up with the idea for the product, design how it will work and look, and test early versions. Then, they find a manufacturing company to mass produce it for them. The manufacturing company is called the OEM supplier or vendor.

For example, if your company sells uniquely designed laser cut products or precision machining parts, but you don’t have the facility to manufacture them, you can contact an OEM to make the products for you. 

It’s a good system because the designing company gets to focus just on the creative part of coming up with cool new things. And the making company focuses just on the productive part of building lots of items fast and affordably. That way both companies can do what they do best without trying to do everything.

Some well-known examples of OEMs are Apple designing their iPhones and then having Foxconn make them. Automakers also contract these companies for producing precision components. 

Things an OEM’s client does are: 

• Market research
• Product design
• Product testing
• Marketing

Things an OEM does are:

• Product manufacturing

Features

Some of the essential features of OEM are: 

• OEM products are fully designed by one company but manufactured by another company.
• The designing company licenses the product design to the manufacturing company to produce.
• The designed products have a higher level of differentiation since the design is exclusive to the licensing agreement.
• The designing company invests in research and development to create the specifications and functions of the new product.
• Some large companies both design and manufacture in-house, like Apple designing computer chips. But they rely on outside partners for high-volume manufacturing.

Pros

Many startups and established corporations choose the OEM route because of the many benefits it provides. Some of them are:

Total Control over Design: Using an OEM lets you design the product however you want. You get complete control over what it looks like and how it works. This means you can make something truly special. An OEM won’t limit your creativity at all.

Established Manufacturing Process: Another good thing is that OEMs already have experience making lots of products. They know how to find all the parts needed and put them together the right way. This speeds things up compared to starting from scratch. You don’t have to track down suppliers or figure out manufacturing as the OEM has already done that work.

Lower Production Costs: OEMs can also save you money. Since they have been making things for a long time, they can get parts for lower prices. Plus, the charge for their services is much lower compared to starting your own factory. As a result, creating a product becomes more affordable.

Unlimited Creative Freedom: You get the freedom of designing your products without thinking of all the manufacturing hassles. 

Cons

Going the OEM route also has some disadvantages, such as:

Long Waiting Times: It takes a long time to get your product made when working with an OEM. You may have to wait several months before seeing the first versions. Comparing OEM vs ODM, the latter is faster as it takes 1 to 4 weeks only. 

More Upfront Work Required: While using an OEM lets you design freely, it does mean more work for you upfront. You have to provide super detailed instructions for how to construct everything down to the smallest piece. Making those instructions takes extensive time and testing on your end.

No Help With Problems: Another downside is that OEMs won’t help fix problems in your design. They only make what you tell them to. So if there’s a mistake or glitch, it’s up to you to spot it and come up with a solution. 

What is ODM?

An ODM or Original Design Manufacturer is a company that makes products for other brands. They design the products and sometimes manufacture them too. 

For example, an ODM CNC machining company may use the same general design when making CNC machined parts for two different customers. However, the products will be customized for brand designs, colors and packaging according to each buyer’s requirements.

An ODM company may keep a CNC design template on file that buyers can customize to fit their specific needs.

Cell phone carriers are another good example. You may see phones with names, like Verizon or AT&T, but ODMs likely designed and made those phones. The carriers tell the ODM what features they want, and the ODM takes care of the rest. They’re experts at designing phones, tablets, and other electronics.

ODMs do more than just design. Many of them can also manufacture the products they create. But sometimes the ODM doesn’t have the right setup, like workers and factories. Then, the product company finds an OEM, which are factories that make the products according to the ODM’s designs.

Things an ODM’s client does are:

• Proposing the product ideas
• Finding a market opportunity

Things an ODM does are:

• Research and development
• Testing and manufacturing the products
• White or private label offerings

Features

Some of the core features of an ODM company are:

• An ODM designs products for other companies. They help companies that don’t have the skills or budget for research and development.
• Most ODMs can both design a product and make it. But if they can’t make it themselves, they’ll help the company find another manufacturer called an OEM to produce the product.
• ODMs often have sample designs already made that companies can pick from. This saves time versus starting from scratch.
• The companies may reuse general designs but make each product specific to the customer wanting their own brand on it. 

Pros

Some of the advantages of using an ODM are: 

No R&D Costs or Setting up Production: In OEM vs ODM comparison, the latter will take care of researching, designing, testing, and setting up production so you can focus on selling your item.

Manufacturing Expertise: Working with an ODM is perfect if you don’t know much about manufacturing. They have a lot of experience developing products so you can rely on their knowledge and skills. 

Save Money on Low Volumes: Even if you only need a small number of products, an ODM can offer that at a low price. That’s because they make lots of items at once for many customers. Then, they break those big batches into smaller shipments. This bulk production keeps costs low, which benefits smaller businesses too.

Fast Speed to Market: ODMs can also get your product to stores or customers much quicker. While you market your item, they can have it ready to ship right away once you’re set to go. This fast “speed to market” means you don’t have to wait as long to start selling.

Reduced Risks: Choosing a reputable ODM reduces your risks. They already have licenses and do thorough testing, so your item is less likely to have faults. You can feel more secure launching with an experienced manufacturer on your side.

Cons

Some of the disadvantages of choosing an ODM company are:

Standing out is Tough: It can be tricky to make your product stand out from others because the products are made from stock designs. You have to think of clever ways to add your own flair.

Creativity Faces Limits: The ODM supplier owns the rights to the designs they produce for others. So how much you can customize may be limited by their rules. 

No Protection for Intellectual Property: Since the ODM owns the product blueprint, you aren’t protected if disagreements happen. There’s a risk that you pour money into a product only to lose ownership or have duplicated without permission later on. 

Conclusion

While OEMs and ODMs both play important roles in product development, they each have different strengths. OEMs focus on manufacturing designs from others, while ODMs specialize in design and can also produce goods. Understanding the distinctions between OEM vs ODM approaches will help companies leverage the right partner for their needs in bringing concepts to reality. 

Need an innovative OEM or ODM company to help bring your next big idea to life? Reach out to Zintilon. Our experienced specialists can help you with custom design and precision manufacture your product from start to finish.

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