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Difference Between OEM and ODM

OEM vs ODM

OEM and ODM are terms often encountered in design and manufacturing industry and people remain confused about the differences between the two terms as they are quite similar. These are actually nomenclatures for manufacturing companies and resellers .This article will enable the reader to differentiate between the two by bringing forth the functions and responsibilities of an OEM as well as an ODM company.

OEM

Original Equipment Manufacturer is a company that produces a product according to specifications given by another company. The product is sold to the company that gave the order and then it is sold under a brand name given by the buyer. OEM has the facilities to manufacture, but it does not engage in R&D and produces only as per specifications of the company that asks to make a product.

ODM

ODM refers to Original Design Manufacturer which is a company that designs and manufactures a product on its own. It then sells the product to another company which sells it under its own brand name. An ODM company can start only if it gets to know the concept and function of the product and has all the facilities of R&D.

As is clear from the definitions, ODM Company designs and manufactures on its own whim, whereas OEM Company is in reality a contractor that carries out design specifications of another company. As ODM companies make products on the its own, they naturally have more bargaining power and are able to get higher asking prices than OEM companies.

One advantage that OEM offers to entrepreneurs is that they can become owners of a brand without setting up a factory as they get finished product from such manufacturers. ODM, being more innovative, as it is involved in R&D has to wait but gets more profits once its products are approved by the industry and purchased by interested parties.

In brief:

• OEM and ODM are terms used to refer to manufacturing companies that make products for other companies that sell them as their own brands.

• OEM needs specifications and design instruction to come up with the product while ODM has its own R&D and makes a product and then sells it to another company.


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