In the wave of globalized production, OEM and ODM are important cooperation models in the manufacturing industry. They respectively represent different relationships between brand design and factory production. Simply put:
OEM means “constructing according to the design drawings”. The brand provides the design, and the factory is responsible for manufacturing;
ODM means “full-package service”. The factory is not only responsible for production but also participates in the design, and the brand only needs to sell the products.
When an enterprise chooses between OEM and ODM, factors such as the right to design, intellectual property rights, and cost efficiency are involved. There are complex considerations behind these decisions. Whether it is the smartphone you are using or the Bluetooth earphone, it may be the result of these two cooperation models.
Concepts and Roles
OEM
It refers to that the manufacturer produces products according to the requirements of the buyer (usually the brand owner or marketer), following its design, specifications, and technical indicators.
The overall design and intellectual property rights of the products belong to the buyer, and OEM enterprises focus on the manufacturing and processing links.
ODM
It is not only responsible for production and manufacturing but also undertakes the whole process of product design and development.
It independently completes the research and development and design of the products and owns the intellectual property rights of these products. The brand owner can purchase the products of the ODM and affix its own brand label for sale.
Intellectual Property Rights and Design
OEM
It does not own the design copyright and major intellectual property rights of the products, unless there are special agreements in the contract.
The cooperation mode focuses more on manufacturing execution, usually producing according to the drawings, technological processes, etc. provided by the brand owner.
ODM
It usually owns the complete design and intellectual property rights of the products, unless the customer exclusively buys out the relevant rights when purchasing.
The cooperation mode is more flexible, and it can provide customers with a complete set of solutions, including design, production, and possible suggestions on marketing strategies, etc.
Core Competitiveness and Characteristics
OEM
The core competitiveness lies in manufacturing capabilities and efficiency, emphasizing processing technology and production capacity.
In the early days of foreign trade, this model was very common in China, enabling many Chinese enterprises to quickly accumulate capital and improve their production capacity. However, at the same time, the profit margin is thin, and there is a lack of brand influence and innovation capabilities, making it vulnerable to the impact of the international market and orders.
ODM
The core competitiveness lies in the ability of research and development and innovation, being able to provide designs and products with independent intellectual property rights.
It is an advanced mode based on OEM, representing the leap of manufacturing enterprises to a higher level. ODM enterprises can provide services for customers in all aspects of the product’s entire life cycle, such as product development, production, and maintenance, according to the product concepts or functional requirements put forward by enterprise customers.
Development Time and Flexibility
OEM
The new product development cycle is relatively long, usually taking 1 to 6 months.
The flexibility is relatively low, mainly producing according to the requirements of the brand owner.
ODM
The new product development cycle is relatively short, usually taking 1 to 4 months.
The flexibility is high, and it can carry out customized design and production according to customer needs.
OEM and ODM are two different production cooperation models, each with its own characteristics and advantages. OEM is good at efficient production and cost control, and can provide brand owners with stable product supply and flexible cooperation; while ODM is characterized by strong research and development innovation and quick response to the market, and can bring more competitive products and customized solutions to brand owners. In the global manufacturing industry, OEM and ODM complement each other and jointly promote the development of the industry. With the continuous progress of technology and market changes, these two models will continue to evolve, bringing new opportunities to more enterprises. Therefore, for enterprises hoping to expand their markets, it is crucial to understand the differences between OEM and ODM and choose a suitable cooperation model, which can help them achieve their strategic goals and enhance their competitiveness.