OEM vs. ODM

Difference Between OEM and ODM

OEM and ODM are terms that we come across in the design and manufacturing industry and people remain unsure of the difference between both terms as they appear to be similar. These are in fact categorization for the manufacturing companies and the resellers. This article will help the readers in differentiating these terms by finding more about their functions and responsibilities.

OEM

Original Equipment Manufacturer (OEM) is a company which produces a product according to parameters given by another company. The product is sold to the company which gave order and then it is sold under a trade name given by the purchaser. OEM has the facilities to manufacture products, but it is not involved in Research and Development and manufactures products according to the specifications of the company which places the order.

ODM

ODM is Original Design Manufacturer which refers to a company which conceives and manufactures the product. It sells the product then to another company which sells it under the own trade name. An ODM company can begin only if it knows the concept and the function of the product and it has the facility for research and development.

Now it is clear that an ODM company is the one which designs and manufactures products according to the ideas conceived by them, while the OEM Company works like a businessman who accomplishes the specifications of design given by another company. As ODM companies make their own products, they have of course more negotiating power and are able to ask for more prices than OEM companies.

An advantage which OEM gives to the business owner is that they get the ownership of a brand without setting up infrastructure for production because they get finished products from manufacturers. ODM is innovative and is involved in R and D and this is why they need to wait to get profits until their products are approved by industry and bought by the interested parties.

 

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