OEM stands for original equipment manufacturing, it is the company who manufactures products or parts of the products that are purchased by another company and sold by that company's name. They made products according to their client's specifications. The client does market research and develops the final product. The client does not have a manufacturing facility so he can contact the manufacturing firm to make their products. When the market is spread all around the globe and you don't have time or sources to meet the demand when it comes for the OEM. Apple is the best example of OEM, they do all market research and marketing but they made their products from Foxconn. The most international brands are using OEM strategy.
ODM refers to the original design manufacturing; the company creates new product design and specification according to their client's demand. They can also manufacture the product that they designed and their clients just sell the product under their own brand name. The ODM provides product development, product designing, and product life cycle services according to their capabilities. Their clients are increasing daily, they have mostly foreign clients.
There are many different advantages that firms get when they started their own ODM and OEM.
Cost of selling:
By manufacturing or designing your own parts can reduce the cost of the manufacturer. The manufacturer may be from a different country and charge more prices of a product then actually occurs. If you manufacture or design your own products can save cost and increase your profit margins.
On time production:
You can manufacture your products according to the demand in the market or by forecast the sales. It can save the delivery time from your manufacturer; you can produce the products when you want. The companies have advantage form other companies to have their own production and designing facility.
By manufacturing your own products give you the 100 percent quality assurance. The company manufactures the products according to their standards of quality. The quality products give them more customers' satisfaction and generate goodwill in the market. The chance of low-quality products can be eliminated.
The company can build secret product design itself and there is no chance of breach of intellectual property rights. The OEM and ODM companies may be trustworthy but there is also the chance of a leak of your design in the market. The company spends a lot of money in designing and gathers research on that product. So by having their own OEM and ODM, they have the advantage of launching the new product first in the market.
The companies with OEM and ODM facility have a proper chain of command. They have a strong chain of command. The product is delivering in a very systematic way, the efficiency in production increases. The use of different software's to manage supply chain systems. No outsider is involved in their production to the delivery system.
The company who starts OEM and ODM by themselves has more chances of getting profits. They have the power to control the specifications of their products according to their customers demand. They can introduce varieties of the products to target all ranges of the customers.