What Is An ODM Manufacturer?

If your business is in the process of conceptualizing and building a new product, it is important to choose a reliable and suitable manufacturer to help your company bring the product to market. Among those choices, an ODM manufacturer is one of the great options for businesses that want to cut down on production time and costs, while keeping excellent quality for the final product.

What is ODM?

What is an Original Design Manufacturer? Example of ODM manufacturers

ODM definition: An ODM (Original Design Manufacturer) is a manufacturer that will be responsible for the direct development of the goods, purchasing raw materials, manufacturing the products, and then selling the products to other brands. These brands will then take the goods, label them, and rebrand them as their products. Businesses that choose ODM manufacturing will order the ODM manufacturer to design samples of the product or use the available product designs for faster and cheaper set-up. With the help of ODM manufacturers, you can produce part or all of your products without spending too much effort researching or running the factory directly. You are able to take advantage of the economies of scale and in-depth production capabilities of the ODM line.

For example, as a clothing manufacturer, Thygesen Textile Vietnam will receive T-shirt inquiry from a well-known clothing brand. Then design and manufacture the products to meet the brand requirements. This brand will then take shipment, label, and rebrand these T-shirt to be their products.

Types of ODM manufacturing

ODM manufacturing is often classified into white labeling and private labeling

White labeling

As being said, ODM manufacturers can mass-produce products for a variety of different customers. If you require a white labeling service, manufacturers will provide the same finished and unbranded products to individual brands. Your brand will then deploy your marketing activities and distribute products under your brand name.

Private labeling

With private labeling, ODM manufacturers will design and complete exclusive products for brands according to pre-order. As a result, you can sell this product line with no duplication on the market, make a profit at a lower cost of production, and have more budget to invest in other parts of your business.

Pros and Cons of ODM

Advantages of ODM

Little to no development and manufacturing cost

One of the greatest benefits of ODM manufacturing is that you will have to spend very little to develop and invest in machinery for production, especially since these two costs are very high. Besides, by taking advantage of ODM, you can buy finished goods at much cheaper prices, even with small quantity orders. Your products may even have the same quality as those of other famous brands that share the same product line from an ODM supplier.

Time-efficiency

If your company is strong in marketing or product distribution but does not have much experience in manufacturing, ODM manufacturers will save you a lot of time with their specialized production lines. their business. You will not only reduce the amount of time spent researching, designing, testing products but also installing and familiarizing with the machines. Your business can focus more on researching, market testing, and bringing products to consumers.

Low minimum order quantity required

Before ODM manufacturing, most businesses had to place orders in enormous quantity and value. With the help of ODM manufacturers, you have the ability and opportunity to test many different products on the market, thereby it would be easier to build a reasonable marketing and sales strategy. This not only saves costs but also minimizes potential risks during the sales process.

Disadvantages of ODM

No product exclusivity

However, with Original Design Manufacturing, finding unique designed and produced goods would be hard for businesses, since ODM manufacturers often produce in large quantities to supply different firms. You might run the risk of competing with almost identical products from various brands in the market. To solve this, many consulting agencies were born to help businesses find ODM manufacturers with new and distinctive goods.

Only useful for certain products

Another downside of ODM manufacturing is that this method is only suitable for certain types of products that do not require special and unique designs for each customer. Therefore, you will only often encounter footwear, cosmetics, or clothing ODM manufacturers. These are the products that have similarities between firms in the market, but the marketing method and brand name can make a difference in the price of the goods.

Which industries can take advantage of ODM manufacturers?

Many industries can take advantage of ODM manufacturers so that firms working in these fields can sell products at a lower price with good quality at the same time. These industries include:

• Textile and garment industry (clothing, footwear, etc.)
• Food industry (fast food, canned food)
• Consumer electronics industries (power banks, phone cases)
• Medicine industry

ODM scope of work

Cost Estimation

Before choosing ODM, you should compare the prices of the final product between different suppliers. This will help you save costs for non-price aspects such as shipping fees, quality, and packaging. To determine the right price, you can base on the prevailing market rates, then anticipate your expenditure and make some adjustments if necessary.

Lead Time Evaluation

To compete in such a volatile market, fast product launch time is a great advantage of businesses. Therefore, firms need to evaluate and manage the time of ODM orders strictly, regardless of the quantity and quality of the order. With the assessment of lead time, the time required to complete the entire supply chain process, from ordering to receiving, is greatly reduced. Your business will be able to provide customers with qualified products in the shortest possible time with the most optimal cost.

Sample Procurement

To evaluate the quality of goods produced by ODM manufacturers, businesses need to carefully consider actual product samples. Sample procurement will help you verify the ODM manufacturer’s capabilities, ensuring that the quality of the product completely matches your order request.

Supplier Assessment

Supplier assessment allows you to select the ODM manufacturer with the experience and technology necessary so that they can manufacture your products with sufficient quantity and quality standards in the allowed time. This assessment process includes on-site audits, an inspection of their licenses, local registration, testing agency certification, certification of specific products, and ODM workforce.

Due Diligence

Before ordering from an ODM manufacturer, due diligence requires you to check whether these suppliers are strictly compliant with mandatory certifications, industry standards, and regulations. You should also pay attention to the track records of ODM manufacturers, their past transactions with customers, and the financial records to ensure future cooperation.

White Label Packages

White label packages provided by third-party manufacturers are sure to meet your back-end requirements (design, quality, and production settings) so you can focus on the front-end (branding, marketing, sales, customer service, etc.) and grow your business. You can discuss this with the ODM manufacturer, then these companies will seek and coordinate with the manufacturers that can design and manufacture packaging tailored to your needs.