OEM vs ODM – What’s the difference?

by Tim Howard

I’m a product designer and have been working with a kitchen appliance company making new models and upgrades to their products. This year I’ve decided to venture out on my own and I’ve successfully got my first order through one of Alibaba’s OEM suppliers. I’ve put together some points to show you how simple and easy it is for you to get your products manufactured through OEM or ODM.

When checking the sites of different suppliers around the world like Alibaba.com and other such platforms. You as a buyer would have noticed they claim to provide services of both OEM and ODM products. I’m sure you must be wondering, what do they mean and how is this helpful to me as a buyer from these platforms. 

So I’ve prepared this article to help you understand the difference between Original Equipment Manufacturing (OEM) and Original Design Manufacturing (ODM) and what do they mean to your business. 

Let’s start by understanding the definition of both these terms. 

OEM & ODM Differences

OEMODM
No Change in Unit Price No Change in Unit Price 
Tooling Paid by the buyerTooling Paid by the supplier
Development Time – 1-6 months Development time 1-4 weeks
Specifications provided by – BuyerSpecifications provided by – Reverse engineered by the buyer
Compliance – No Change Compliance – No Change
IP owned by the buyerIP owned by the supplier
Pros – 
1. No less hassle to buy OEM products.2. You are free to customize the product 3. You own the IP and branding
Pros – 
1. Shorter development time2. ODM products can be customized within the limits of the supplier.3. No payment for the tooling required

What is Original Equipment Manufacturing (OEM)

OEM

Products made according to your specifications where the material is chosen by you, the design is customized to your liking, the dimensions are as per your request and even the product functions are limited or enhanced according to you. These products with your unique specification are classified under OEM. 

Once you’ve understood this, An OEM product is a product for which the specification of the buyer has to be given in order for production to begin. 

So when you see supplier profiles offering OEM services means they can take the specification you require of the product and implement it and provide you with your original product. 

In Short: OEM products are newly designed products that have not been made before and the buyer has provided all the manufacturing specifics to the supplier who will manufacture the OEM product. 

What is Original Design Manufacturer (ODM) 

ODM

When it comes to ODM products also known as private label products, the product is constructed from an existing design that is developed and manufactured by the supplier. It can also be a replica of another product with minor changes by your supplier where you can have your brand’s logo. This replicated product is considered an ODM product. 

This method of manufacturing has become a regular practice over the years by eCommerce companies. When using ODM services from a supplier be sure to ask the supplier for the patent over the design to avoid any issues. 

Suppliers who offer OEM Services: What does it mean 

When the supplier offers OEM services its means he is willing to provide his ability to manufacture your product as per your specifications and design. This is a great option for startups with an amazing product design but does not have the investment to do the manufacturing themself. 

With the help of OEM servicing suppliers within Alibaba and other platforms, your dream product can come to life. You will be surprised that how many OEM products are out there and how many suppliers are used to fulfilling these orders. 

Whereas, getting a supplier that provides genuine ODM products can be a task to find the reasons why are mentioned below. 

Suppliers who offer ODM Services: What does it mean

The first thing you have to understand when a supplier claims he provides ODM products on his listing, he technically does not have stock of these products even of the manufacturing factory status make to order. And these products fall under three main product listing categories as mentioned below. 

#1 Fake or Demo Products:  Most suppliers provide images of the inventory that they claim to have that have not been manufactured yet and can be just a design. This is where you would have to pay for tooling (the process of acquiring the manufacturing components and machines needed for the product’s production). Which makes the product questionable under the category of ODM products. 

Once you’ve understood this, you can accept a virtual design made by the supplier to show what they can provide which can be considered an ODM product.

#2 Customer Designed Products: The designs and manufacturing machines are owned by present customers. The same product displayed by the supplier shows what they have made but the supplier does not have the exact specifications and dimensions as it is with the original customer making it a replica of a sort. 

#3 Developed products by the supplier: With these products, you will have very little control and leverage over the product as the supplier invests in the R&D of the product and machine manufacturing. 

Where do you commonly find ODM products?

ODM products are most commonly found in industries revolving around hardware, electronics, and machinery who find it expensive to manufacture by themselves. That’s why you will find most of these products are developed in China by Chinese manufacturers when it comes to household appliances and hardware.

ODM Suppliers

There are no particular categories for ODM suppliers for any industry, most manufacturers began their journey in the industry as OEMs catering to the design of different customers’ specifications. So if you see a company stating they provide OEM or ODM services on Alibaba or other platforms it’s best to check if they are verified and can meet your product design expectations. 

Is Private Labeling and ODM the same

Yes, if you understand it through theory as both provide a basic template of the product that you the buyer can brand it with your own logo. Through both these methods, you can save on all the hassles of manufacturing and get the finished product with your branding ready for sale. 

Reverse Engineering ODM

Most ODM products are customized as per the buyer’s specifications. It is expected from you as a buyer to provide the product specification with your logo to the suppliers.

Below are some points to follow as a buyer when placing the order with your ODM supplier. 

#1 Provide the dimensions, buttons, color, and all the relevant product specifications.

#2 Double-check all the customization the supplier has to do to the product, there is no going back on this.  

How do you know if your ODM product is not conflicting with another country’s IP?

This is one of the most asked questions because it will cost you big if you don’t get this checked.

As mentioned before many products that are listed by the ODM supplier aren’t exactly ODM products. They are pictures of products that have been manufactured for other buyers in the past. 

#1 If the product you’ve chosen from that supplier is the IP of the earlier buyer, you should not use trademarks or brand names that are not owned by you. 

#2 Search for similar products on amazon.com and see if you can find products that look similar that are in the market already. If the product is not patented you will definitely find some which mean the product will not conflict with IP. 

For example, I cannot patent a pant but I can patent a new LED tube light. 

#3 You can do a patent search to see if the product you’re looking to manufacture is patent or not.

An easy way of avoiding this problem is by asking your supplier to show the documents stating they own the patent over the ODM product.

Note: Chinese Patents Are Only Valid In China Not Anywhere Else. 

Conclusion

OEM – If you have a completely new idea for a kitchen appliance and have the design to bring it to reality but the cost of manufacturing is really high in your country. To make this idea profitable checking with OEM suppliers on Alibaba.com and globalsourcing.com can really help you. You need to provide the specification of the product to the supplier who will process the info to get the tooling done and provide you with an ETA of when your product will be ready for shipping which takes nothing less than 6-8 months. This product can be patented and branded by you.

ODM – if you are looking to customize a product that is already existing in the market and provide it your branding can be done by ODM suppliers on Alibaba.com, globalsourcing.com, and other such platforms that provide these services. With ODM the product will be ready in 3-4 weeks with the patent provided by the supplier. Be sure to double-check this. 

I hope this article has helped you understand OEM and ODM better to help you make your outsourced manufacturing experience better. 

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