ODM and OEM are acronyms that are the buzzwords in the manufacturing sector. ODM stands for Original Design Manufacturer and OEM stands for Original Equipment Manufacturer. While many people confuse between the two terms and use them interchangeably, they are not quite the same. OEMs manufacture product based on design specification provided to them, while ODMs also design the product themselves before manufacturing them. Let’s understand the difference between the two in more detail by understanding them one by one.
What is OEM?
OEMs are companies which manufacture products based on the product design and specifications provided by their client. The client does all the market research, R&D and develops its own product. But it does not have the manufacturing capability to fulfill the market demand in time, especially if its market is spread across the globe. So it turns to an OEM to do the manufacturing on its behalf. For example Apple spends millions of dollars on R&D and design and creates its own line of products, but gets the products manufactured by Foxconn. In this case Foxconn is an OEM (actually, world’s biggest OEM vendor). Foxconn doesn’t control the product design or it’s specs. They just manufacture them based on the details provided by Apple.
What is ODM?
ODMs or Original Design Manufacturers are companies which create new product designs and specifications based on the product idea brief provided by the client. In most cases, ODMs also manufacture the product they design and their clients get the products branded in their own name and sell it them in the market. Let’s say a company has a great idea for a “smart watch” that not only shows time but also acts as a health app measuring heart beat, blood circulation, etc. The company has done its research and knows it can market such a product. But they don’t really know how to design it or have the manufacturing capability to fabricate it. So they turn to an ODM which designs the actual product and manufactures it, to be eventually marketed by the client. ODMs generally provide , product manufacturing services, complete product life cycle services, etc based on their own capabilities.
Both OEMs and ODMs aren’t limited to technology, consumer electronics or engineering sector, though they are more common in these sectors because products in these sectors are more design intensive. They are also present in other industries like fashion, footwear, personal grooming, etc
One should always exercise caution when dealing with both OEMs and ODMs. In the case of OEM, providing them with secret product design and specs over which a company has invested huge amount of time and money can result in breach of intellectual property rights and the product design being stolen by copycats. So you need to work with an OEM that is trustworthy.
In the case of an ODM, you may have little to no control over product specifications and so you need to set adequate parameters and frameworks within which the ODM needs to work.