The abbreviations OEM and ODM are often used in the manufacturing industry. Original Design Manufacturer (ODM) and Original Equipment Manufacturer (OEM)
Despite the fact that a lot of people frequently mix up the two terms and use them interchangeably, they do not necessarily signify the same thing.
As Heating, Ventilation, and Air Conditioning Original Equipment Manufacturers (HVAC OEMs), we build products based on designs provided from customers, while ODM producers develop some or all of the products themselves before producing goods for clients.
This article will help explain the differences and benefits between the two types of manufacturers.
Original Equipment Manufacturer (OEM)
An OEM (Original Equipment Manufacturer) builds a customer’s product that is fully designed by that customer and then contracted out to produce.
The Heet heatpipe, for example, was invented and designed by Heet, and then contracted to PMT HVAC (M) Sdn. Bhd. (subsidiary of TCW Group) to build.
With this, the heatpipe has a much higher level of product differentiation because the design is only available to Heet and PMT HVAC to manufacture.
The primary benefit of an OEM is the customer's continued complete creative control over the design.
Additionally, there won't be many intellectual property limitations when employing an OEM, which can make it difficult to convert to a new manufacturer later on, if necessary.
The flexibility in product design is another advantage of working with an OEM as opposed to an ODM. While ODM products are limited to a predetermined design, OEMs are free to develop products to any specifications.
The disadvantage of OEM manufacturing is the substantial amount of resources needed to make a distinctive product is an issue with OEM production.
These resources cover the price of research and development as well as the time required to develop the design before it is ready for production. These investments carry some risk for a firm because they are frequently highly expensive.
But these disadvantages are advantages for TCW group as our setup with resources and machineries are specific to cater for the HVAC OEM industry.
Our products included PU panel, heating coil, cooling coil, shell & tube cooler and condenser, tube in tube condenser, damper, filter, Air Handling Unit AHU, split unit, chiller, water cool package, air cool package, etc.
Original Design Manufacturing (ODM)
ODM (Original Design Manufacturers), commonly known as white label or private label products, are ODMs.
In this instance, the client may make minor adjustments to an existing product design from the manufacturer in order to market it under their own brand name.
The use of new branding, colours, or packaging are a few examples of alterations.
Car chargers are an illustration of an ODM product.
On Amazon, you may search for car chargers and find products from a number of different manufacturers that are practically the same.
While the products are produced using the same basic design, each is individually branded, coloured, and packed to meet the needs of the consumer.
ODM is not limited to electronics only. Have you ever noticed how frequently sporting goods, apparel, and furnishings carry items that share a similar appearance? Another illustration of ODM manufacturing
The low number of resources required by the client to produce a product is an advantage of ODM manufacturing. With ODM, the customer can create a new product without spending millions of dollars or years on research and development.
The cost of product creation is decreased, allowing the consumer to devote more resources—both time and money—to marketing tactics.
The disadvantage of ODM is that it might be challenging to differentiate yourself from rivals who are effectively providing the same design at a similar price range. When there is this much price rivalry, profit margins are frequently reduced.
For instance, a customer trying to buy an ODM vehicle charger is more likely to choose the option with the lowest price than one who cares about the brand or colour.
To truly set their ODM product apart from those of other companies in the market, customers must be very creative.
Key Takeaway
When deciding to use an Original Equipment Manufacturer (OEM) vs an Original Design Manufacturer (ODM), it really comes down to available resources.
Using an OEM is a good fit if a company has a budget for research & development and a realistic time-to-market strategy. ODM is the way to go to launch a product if time and resources are limited.