The supply mode of the OEM (Original Equipment Manufacturer) model mainly involves the cooperation between brand manufacturers (the consigning party) and manufacturers (the consigned party). Under this mode, the manufacturer produces according to the requirements and specifications of the brand manufacturer, while the brand manufacturer provides product design specifications, technical requirements, brand logos, etc.
Basic Supply Process
Demand Determination
The brand manufacturer clarifies the specifications, technical requirements, quantity, and delivery time of the products needed.
Contract Signing
After both parties reach an agreement on the cooperation details, a formal cooperation contract is signed to clarify the rights and obligations of both parties.
Design and Production
Although the brand manufacturer mainly provides the design under the OEM mode, the manufacturer needs to ensure the technical implementation and quality control during the production process. The manufacturer produces according to the design specifications and technical requirements provided by the brand manufacturer.
Product Delivery
After the manufacturer completes the production, the products are delivered to the brand manufacturer, usually affixed with the brand manufacturer’s label.
After-sales Service
According to the contract agreement, the manufacturer may need to provide certain after-sales service support.
Characteristics of the Supply Mode
Dependence on the Brand Advantage of the Consigning Party
OEM manufacturers mainly rely on the brand influence of the consigning party to sell products in the market, and their investment in product sales and brand building is relatively small.
High Production Flexibility
OEM manufacturers can quickly adjust the production line according to the needs of different consigning parties and produce various types of products.
Strict Cost Control
Due to fierce competition, OEM manufacturers usually need to strictly control production costs to improve the price competitiveness of their products.
Supply Mode of Design Schemes
In the OEM mode, the supply mode of design schemes usually falls into two types: buyout and non-buyout.
Buyout Mode
The brand manufacturer buys out the design of a certain model of product that is already available from the manufacturer, or separately requests the manufacturer to design a product scheme for it. In this case, the manufacturer is not allowed to provide products using this design to third parties.
Non-buyout Mode
The brand manufacturer does not buy out the design of a certain model of product from the manufacturer. In this case, the manufacturer can sell the design of the same model of product to other brands at the same time. When multiple brands share one design, the differences between the brand products mainly lie in the appearance or minor functional adjustments.
The OEM model is a cooperation mode that benefits both the brand manufacturer and the manufacturer. The brand manufacturer can reduce costs and enhance brand value; the manufacturer can increase production scale and improve production efficiency. In the cooperation, both parties need to clarify their respective rights and obligations to ensure product quality and after-sales service.