Here's what OBM vs. OEM vs. ODM means for you
Whether you're brainstorming and considering your following big electronic product as a startup or planning a challenging project at work, you'll likely come across three acronyms that refer to different service providers who can assist you. Even the best can be perplexed at times due to the fragmentation of the electronics products industry, so I'll use this article to differentiate between the two and provide a solid guide on which path you should take to achieve your following electronic product development goals.?
What is OBM?
An original brand manufacturer, OBM, is a company that markets a complete product manufactured by another company or a component obtained from another company as its own branded product. All three company types involve producing products from one company that another sells. The main difference between OBM, OEM, and ODM is in the level of involvement each kind of company has in the design and branding of the products they produce. Because OBM companies have a low level of participation because they manufacture products that have already been designed and branded by another company, we'll concentrate our discussion on two main options: OEM and ODM, which have distinct differences.
What is OEM?
If you're unfamiliar with the term, OEM stands for "original equipment manufacturer." An OEM is a manufacturer who can produce a product to a customer's exact specifications - or as close to them as the manufacturer can due to equipment or supply constraints. That is, you can give the OEM anything on the blueprint, and the OEM will help make the products you will sell under your brand name. As such, they must take great care to avoid violating the intellectual property rights of the original designer. An OEM must have the right attitude and be willing to handle all stages of the production process and deliver as promised.?
OEMs can provide products for many different industries. An excellent example of this is the computer industry. For example, a company that manufactures a PC will also supply the operating system to the end user. The operating system is not developed by the hardware company but by Microsoft. The PC will then be sold as a Dell or HP PC. When working with OEMs, remember that you will need to give them access to your product specifications, which can be very confidential and in which your research and development team has invested significant resources. It is critical to find a reliable and honest supplier or manufacturer.
OEM's customer roles:
OEM's role:
What is ODM?
ODM is an acronym for "original design manufacturing." ODM differ from their OEM counterparts in that they typically do much of their product development in-house and, in a sense, lease their products to other companies (customers) for sale.
Companies frequently use ODMs to quickly bring an idea to market with lower R&D costs or to take advantage of the ODM's product line and contact the ODM to lease a portion of it. The benefit of private labeling is that the manufacturer clearly understands the product's specifications and can make the product promptly. Usually, ODM products are modified to fit a brand that wants to sell them - usually just with a new brand name, but sometimes slightly customized. These services are also known as "white-label manufacturing."
However, not all ODMs operate solely as white-label manufacturers. Some companies provide customized product services for customers with great ideas but lack the resources to develop them. For example, suppose a customer has an idea for a new piece of wearable technology but is unable to design it themselves. In that case, they may turn to an ODM, almost as if they were proposing a new business idea. The ODM usually retains most IP rights, but every case can differ between what the customer agrees and accepts.
ODM's customer roles:
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ODM's roles:
OEM: Is this right for you?
The answers can come out differently depending on your resources and what you plan to do. Suppose you're a startup capable of up with your new electronics product's design, development, and testing, and you want to outsource the manufacturing part only, yes. In that case, OEM is appropriate for entrepreneurs and startups who have a new product but aren't yet ready to produce it themselves.
The answers may differ depending on your resources and what you intend to do. Yes, OEM is appropriate for entrepreneurs and startups who have a new product but aren't yet ready to produce it themselves. The company must be capable of handling the design, development, and testing of your new electronic product, and you only want to outsource the manufacturing part. OEM manufacturers usually offer high-quality products with excellent warranties that last longer than non-OEM manufacturers. As a result, businesses working with OEM manufacturers can save money and time. Additionally, their products are designed to last long and fulfill their intended function.
Advantages and Disadvantages of ODM Manufacturing
The main benefit of ODM manufacturing is that it saves companies money as they do not have to invest in production and development costs. They can therefore sell their products for lower prices, especially if they only order a small quantity. However, developing the products and arranging production lines requires time. Additionally, ODMs can make products that are identical to other popular brands.
Another advantage of ODM manufacturing is that you don't have to worry about designing the product. While many inventors enjoy tweaking their designs and changing specifications as the market evolves, letting someone else create and manufacture the product for you will allow you to concentrate on other aspects of your business.
However, this can pose several problems. For example, ODMs may not give you the flexibility to choose the component suppliers. As a result, quality and functionality may have to be compromised. Hence, differentiating your products may also prove problematic. Furthermore, you'll have to entrust your IP to someone else. While creating a unique effect in ODM is more accessible, you may also have difficulty negotiating favorable terms with your supplier.
There are many advantages of ODM manufacturing, such as lower costs and saving a lot of time. Because the ODM manufacturer handles the technical aspects, you can focus on marketing and testing your product in the market. If you're a big company, this is particularly useful.
Considerations for Your Next Project
Conclusion
The decision between OBM, OEM, or ODM is usually a business decision. The choice will depend on the resources available to work on your project and your goals for the product.?OBM might be the choice if your intention is to just add virtual extrinsic value to the product through your unique branding that someone else designed, developed, and manufactured. OEM might be a good option if you have substantial research and development budget and a reasonable time-to-market plan. In contrast, if your budget is limited or you need to make a product quickly, you may want to consider using an ODM instead.
No matter which direction and type of service you seek in getting your next project off the ground, it's essential to consider the pros and cons before deciding. A wrong decision can damage your company's reputation and waste time and money.?
BECS Inc. is an industry-unique ODM provider with private-labeling product lines and the capacity to deliver hard-to-fulfill custom electronics designs and development services for leading companies, research centers, and public institutions. We take project confidentiality and intellectual property very seriously and do our best to protect our customers' best interests in all projects. Visit www.becscorp.com for more information, or connect with us on #LinkedIn to learn more!