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What's the Difference Between OEM, ODM, and OBM?
A breakdown of everyday manufacturing terminology

Thu, May 26, 2022

Anyone who’s dipped a toe in the field of e-commerce or sourcing has inevitably come across the acronyms OEM, ODM, and OBM, but what do they mean and why is it so difficult to differentiate between these three? Here’s a useful guide that can save you some time and help to demystify the manufacturing jargon.

OEM (Original Equipment Manufacturer)

Original Equipment Manufacturers work under strict licenses to create parts or finished products for other companies. This is often seen in the computer, phone, and automotive industries, where companies like Apple own the IP and have access to significant R&D resources, but lack the manufacturing component. By outsourcing manufacturing overseas to OEMs like Foxconn, Apple is able to produce the same high-quality phones, while maintaining its brand and logo. In this scenario, both Foxconn and Apple are OEMs, but Apple is the OEM buyer, whereas Foxconn is the actual manufacturer.

 

Working with OEMs can be highly advantageous for companies wanting to go this route, but there are a few barriers to entry. First, OEMs require a significant monetary investment to conduct the necessary R&D for creating an entirely unique product. Second, OEMs are responsible for building production lines specifically tailored for these products along with securing the relevant certifications. These requirements alone are enough to deter several small and medium-sized companies.

Advantages of OEM:

 

  • Greater ROI
  • Competitive Pricing
  • Fewer fluctuations in market costs

Disadvantages of OEM

 

  • Lack of flexibility
  • Costly development
  • Longer time to market


Examples: Apple, Dell, Canon

ODM (Original Design Manufacturer)

Original Design Manufacturers receive a set of specifications, illustrations, or instructions from the customer and are tasked with creating products using existing production lines. This is an ideal solution for companies that require a faster turnaround time, but lack the money and resources to do everything in-house. 

 

Some ODMs like Gizmospring can even provide businesses with additional resources beyond just standard production. As a total solution provider, Gizmospring helps clients with market research, design, and even branding. This allows Inventors, entrepreneurs and corporations to gain a distinct advantage when bringing products to market.

Advantages of ODM

  • Faster time to market 
  • Lower minimum order amounts
  • Cheaper than manufacturing from scratch

Disadvantages of ODM

  • Less control of IP
  • Resistant to change
  • Lower product differentiation

 

Examples: Foxconn, Sony, Philips

OBM (Original Brand Manufacturer)

Original Brand Manufacturers are companies that own both the brand and the manufacturing process. This is often the case with older industry giants that did everything in-house before outsourcing became so accessible. OBM can be advantageous if the company has a large target market and is able to cater to that market effectively. 

 

Naturally, the benefits of OBM are having complete control over the manufacturing process and being able to safeguard reputation by eliminating the middleman. Additionally OBMs can set their own prices and cut costs by not having to work with a supplier.

Advantages of OBM

 

  • No middle man
  • Better control of the process
  • Can set both price and MOQ

Disadvantages of OBM

 

  • Difficult for smaller companies to scale
  • Requires significant capital investment
  • Significant time required to grow the brand



Examples: Ford, Coca-cola


Looking for a reliable partner?

If you are an entrepreneur, business, or inventor looking to take your ideas to the next level, then Gizmospring can help get you there. Our team of expert designers and engineers have decades of combined experience bringing recognizable products to market and creating strong brands that customers know and love.

For more information, message us at [email protected]