Definition: OEM Partners

Pros and cons of OEMs

This type of business relationship can be a great way to get a product to market and start generating revenue. By forming an OEM partnership, you will be able to create a product that is difficult to replicate by consumers or competitors due to the cost or time to produce it. You may also unlock access to new markets, industry sectors, and geographic locations by hiring the services of an OEM.

However, there are some disadvantages to working with OEMs. Providing design briefs to a manufacturer can sometimes confuse and require members of your team to travel to the factory and provide support and assistance. This can cost your company time and money. The OEM may also require changes to the product during the manufacturing process that are backed by their manufacturing teams rather than your design brief. Also, by not involving the manufacturing team during the development of the product, they won’t have the opportunity to provide their feedback and advice which could make it easier to manufacture and save you money when it comes to the production costs.

Pros and cons of ODMs

ODMs often have a lower minimum order quantity (often referred to as MOQ) requirement, which is why they can be more appealing to work with – especially for clients who want to test out an idea. As the ODM has all the key components to design, manufacture, and brand a product, the cost to develop a new product is usually far less than the cost of working with an OEM. Yet there are some downsides to ODM relationships, which can make clients wary of using an ODM. Because the client is providing an idea rather than a final product design, there are fewer opportunities to customize, make changes, and control product requirements. Some people also worry that their ideas might be stolen by an ODM product owner because the factory has everything they need to make the product themselves without any further input or help from the client. Although this can be the case, there are ways that clients can protect their ideas and manufacturers can offer contracts that give reassurance to new customers.

What is contract manufacturing?

A contract manufacturer can offer businesses additional services such as packaging products, printing labels, and providing specific parts. A client might use an OEM to mass-produce a child’s toy, for example, but also require a company to package the final product and print instruction manuals and labels. On the other hand, a contract manufacturer may be given the task to provide additional parts to an end product. If we consider a food product, a contract manufacturing company could provide recyclable food containers, sachets of sauce, or perhaps utensils for fast food items.