TECH, BUSINESS AND CAREER INSIGHTS

What is OEM and ODM?

TSP • @myTSPnet

what-is-oem-odm

OEM (original equipment manufacturer) and ODM (original design manufacturer) are two different models of products and services that when utilized can have significant implications on businesses, their marketing strategies, and development. Understanding the difference between these two models is essential for companies looking to outsource or expand their production or service lines, but what is OEM and ODM? What is the difference between them?

WHAT OEM AND ODM ARE
Here’s some essential information about OEMs and ODMs. We will also go over their key characteristics and what the difference is between OEMs and ODMs.

Original Equipment Manufacturer (OEM)
An OEM is a company that produces parts, equipment, or services that may be marketed by another company. The OEM is usually not involved in the research and design process but instead creates products or services based on specifications provided by the client.

Key characteristics of OEMs include:

  • Customization: OEMs create based on detailed specifications and designs allowing each client a high degree of customization.
  • Production Quality Control: OEMs have the necessary infrastructure to produce at large scales. The client then closely monitors the production process and maintains quality control checks at their discretion.
  • Branding: Most products and services are branded for the client company. This ensures that the client retains control of branding and marketing.
  • Examples: The automotive industry utilizes OEMs for most car manufacturing. Companies like Apple use OEMs for computer parts. In the tech world, companies like TSP provide clients with both custom IT services as well as products.

Original Design Manufacturer (ODM)
ODMs are the yin to OEMs yang. ODMs create and produce original products that they sell to clients who may then rebrand and market them under their brand name. The ODM handles everything from research and development to design and engineering. They then license their product or service to their clients.

Key characteristics of an ODM include:

  • Turnkey Solutions: ODMs provide complete product and service solutions. Clients can select from existing products and services to streamline bringing them to market.
  • Flexibility: While the client does not have a say in the original design of the product, ODMs can customize products and services in some ways to meet each client's specific needs.
  • Cost-Effective: By utilizing an ODM, companies can save on time, research, and development costs which is fundamental for companies like start-ups or those looking to expand their product or service line.
  • Examples: Makeup brands have been increasingly utilizing cosmetics ODMs in recent years helping the market flourish to predictions of over $30 billion USD by 2031. While phone companies utilize OEMs for the internal aspects of their phones, they also utilize ODMs for things like phone cases and chargers.

WHAT IS AN OEM AND ODM — WHICH IS RIGHT FOR YOU?
Both OEMs and ODMs are great solutions for any company looking to expand what they offer. They allow the client to save time in creating their goods and services and have options to customize in some way. When it comes to deciding which is best for your company you will not go wrong with either option, it all comes down to your budget, timeline, and customization needs. At their core, what OEMs and ODMs are comes down to this: they are fundamental manufacturers that keep everything from Corvettes to Lipsticks in consumers’ hands.

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