An ODM, or “original design manufacturer,” is a company that has the capabilities to design, develop, manufacture and sell products themselves. While OEM is often referred to as a service, ODM is referred to as a product. The products an ODM creates are often rebranded by a buyer as private label products and are sold for a profit. Unlike an OEM, who relies on a client brief and product design to manufacturer items, an ODM often designs and develops products independently, or in collaboration with a client. This is the ideal manufacturing service if you have a great idea, but are yet to design, develop, test, or brand it.
If you are a manufacturer and have employees or teams who have the skills, experience, and capabilities to design products, develop them, and carry out testing, you will be able to market yourself as an ODM.
Here is an example of how ODM manufacturing works:
A client works in the education industry and has found a gap in the market. With their knowledge of the market, they contact an ODM about their idea to create a schoolbag that includes compartments that chill drinks, food, and snacks, while keeping other parts completely waterproof and stain-proof.
The ODM receives information about the new schoolbag idea and sets up a meeting with the client to discuss the demand for this product in more detail.
During the meeting, the client explains why there is a need for the product and what would be attractive to young students in terms of color scheme and style.
The ODM takes this market insight and develops a school bag that features cooling, water-proof, and stain-proof pockets. Their design team works on the style, fabrics, and specifications of the final design.
Now the ODM can sell the product to the client, which they can rebrand if they wish, or they can sell directly to the consumer.
Pros and cons of ODMs
ODMs often have a lower minimum order quantity (often referred to as MOQ) requirement, which is why they can be more appealing to work with – especially for clients who want to test out an idea.
As the ODM has all the key components to design, manufacture, and brand a product, the cost to develop a new product is usually far less than the cost of working with an OEM. Yet there are some downsides to ODM relationships, which can make clients wary of using an ODM.
Because the client is providing an idea rather than a final product design, there are fewer opportunities to customize, make changes, and control product requirements. Some people also worry that their ideas might be stolen by an ODM product owner because the factory has everything they need to make the product themselves without any further input or help from the client.
Although this can be the case, there are ways that clients can protect their ideas and manufacturers can offer contracts that give reassurance to new customers.
Source: Alibaba
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