What is OEM and ODM and what is teh difference between the two?
ODM = Original Design Manufacturer
OEM = Original Equipment manufacturer
Original Equipment Manufacturing (OEM) is a design business approach in which ‘overseas buyers provide the design and draw up the product specifications for a new product. They then look around the world for suppliers to manufacture and deliver the goods in the most satisfactory way’ (HK Trade Development Council, 2000 p.2). Unfortunately, the clients’ specifications are renowned to be similar/imitative to existing, successful products, and merely asks HK designers/engineers to backwards engineer the “designs.” ‘OEM relationships, if successful, can represent steady and lower-risk business’ (Design Task Force, 2003 p.20) for all stakeholders. Explained further, in Chapter 1.2, in the past HK has engaged mainly in OEM. The OEM model becomes competitive amongst other countries as it is ‘too easily dominated by cost considerations’ (Design Task Force, 2003 p.20). Therefore, if trapped in the ‘OEM pool,’ countries will continuously undercut each other, which consequently leads to a decrease in product quality.
Original Design Manufacturing (ODM) is another design business approach that is seen as a process of ‘upgrading the value-added in manufacturing’ (Design Task Force, 2003 p.20). In the ODM model one can see evident investment in ‘front-end activities’ like ‘product research, product design and prototype creation, [that] usually entail higher value-added’ (Design Task Force, 2003 p.20). ODM is practiced when the client or company are intentionally willing to differentiate themselves from others in the market, and utilise the service a designer can offer.
OEM is to engage 3rd party’s design, factory and facilities to produce
product with own brand.
ODM is to produce own products with own designs.
My impression of OEM is when the manufacturer gets the spec from the client company, including design, and just manufactures it.
ODM is when a client contract a project to a manufacturer that will take care of everything. The client will take the product and put its own sticker on.
Most sucessful businesses use a combination of the two business methodologies.
I worked on a bunch of watches a few years back. There, the internal guts where OEM. We selected modules(digital) and Movements(Analog)from OEM catalouges that fit the functions, size, and number’position of buttons we wanted and designed around them. This design was then given to the client who outsourced the production to factories that could produce the case, crystal, and bands, and then assemble in the movements. The client we worked for was a ODM using OEM parts: Timex.
Clear as mud yet.
Nike is similar. We don’t own any factories at all. The entire footwear industry pretty much uses the same list of factories, we are more selective than most (you don’t want to hear about the places that make your Payless, Kmart and Wallmart shoes, they are cheap for a reason you know). We design the product, specify the materials, the function, the construction, and then work with a factory’s development and engineering teams to get it into production. The only factory we do own is in the United States, it’s where we make all of the airbags used in Nike and Cole Hann product in a very controled environment. We then ship those parts overseas to be molded into foam midsoles. We also have patented formulas for our foam and rubber that we have the factories use. 12 billion without owning a factory. Crazy… so is that ODM? I think it is. But often we will use little OEM parts, molded eyelety, speed hooks on boots, laces, lace ends, fastners, velcros etc. We also send a design to an OEM that is basicly a modification (sometimes a major mod) to a part in their catalouge, let’s say for an anodized aluminum logo, a speed hook that holds the lace better, etc.
OXO has a more extreme version of this same model. They don’t have any in house manufacturing, design, or even distrabution I think. Jobing out each step to the best firm they can get at the time. Low overhead keeps the profit rolling. Lots of profit means more money to spend on development of future products. How many years was the freaking measuring cup in existance before these guys had the idea to put the numbers inside the cup on on angled surface so you can read as you pour? That might be the best product ever.
Sorry, tangent. Previous posts did a great job defining the terms, I hope this added a little context.
I can offer some clarification on ODM design. I am involved in a joint venture arrangement with a Chinese company that manufactures several different product lines. The have 70+ injection molding presses they are trying to keep busy. We design products and “partner” with companies like Target and Office Depot. They co-develop lines with us and then import the products from our factory in China.
Sometimes we actually manufacture the products in the US because the product value is low and cube is too large to import. I can sleep better at night knowing we didn’t “off-shore” too many plastics jobs!!
The key to this arrangement is the value we add to the manufacturing process by providing the product development services. The expense for this is buried in the product cost. We can’t be too extravagant about the time we spend on design, but the stuff is turning out nice! The designs are ours, but instead of selling design services, we are selling PRODUCTS that become an annuity (long shelf life). In most cases the brands on the products belong to the retailer, not us. It’s a win-win situation. They have already built a brand and we keep the presses busy.
I don’t agree that NIKE is an ODM manufacturer because they don’t manufacture. If their factories started designing shoes for NIKE then they would be an ODM.