When looking for a manufacturer for your products there are three basic types of manufacturing arrangements, Original Equipment Manufacturing (OEM), Original Design Manufacturing (ODM), and Contract Manufacturing (CM). So what are the Benefits of ODM vs OEM vs CM? After working with 100’s of brands in almost every conceivable arrangement, we have come to learn that our clients have very different expectations or how they expect to work with a manufacturer. These 3 categories cover almost every arrangement with factories that our clients prefer to work with.
The simple definitions are:
OEM – Original Equipment Manufacturing – When a factory makes a product but customizes it based on a clients design.
ODM – Original Design Manufacturing – When a manufacturer designs and produces it in-house and sells to a client with little to no modifications.
CM – Contract Manufacturing – When a Client fully developed the product in detail and hires a manufacturer to make the product.
There are a few factors that you need to factor in when comparing to these solutions such as development time, ownership of intellectual property, tooling cost and more. Each of the three has completely different IP rights, with ODM giving most of the IP rights, except branding, to the manufacturers, while Contract Manufacturing all IP rights belong to the Buyer. OEM falls in between with the Buyer owning the branding and some aspects of the design while the manufacturer can own rights to other aspects of the designs that they made themselves.
It is also very difficult to patent something that is ODM as they tend to be items that already exist on the market. For instance, you can’t patent a baseball cap, but you can add a sweatproof band on the inside that you developed yourself and patent that and its use in baseball caps.
For each of the three methods of working with factories the expectation of who is to create the Product spec sheet varies:
OEM – Created by the Buyer but may have help or guidance from the manufacturer
ODM – created by the supplier/factory
Contract Manufacturing – created by the Buyers
Since each method has a different degree of work the amount of time that it takes to make a product once you have the designs ready to go varies greatly, Below is a relative example: