What Is An OEM Manufacturer?

To bring consumers the best quality products, businesses must choose a reputable manufacturer with first-class production lines and services. There are different approaches to manufacturing, one of them is OEM manufacturing – which is a great way to minimize production cost, have the exclusive rights to designs, and experience high-quality services.

What does OEM mean?

The OEM business method is quite popular all over the world with many well-known businesses adopting it. So what does OEM mean? OEM is the term for “Original Equipment Manufacturer”, often used to refer to companies specializing in the production process, based on the design and specifications ordered by their partners. Simply put, the OEM company will produce and manufacture for another company. 

These products will be under the brand name of the ordering company when placed on the market.

OEM can be mistaken with ODM, which stands for “Original Design Manufacturer” – refers to companies undertaking the design and construction of required products. ODM companies will help you turn ideas into real designs if you have trouble with it. ODM businesses engage with the design and production, while OEM manufacturers will only participate in the actual manufacturing process and create finished products.

Advantages and Disadvantages of OEM

Advantages of OEM manufacturing

Customization

A company that implements OEM manufacturing can apply many business ideas, and at the same time can implement many products to increase diversity, allowing them to penetrate the market and reach the customers quickly and more optimally. In addition, OEM manufacturers allow ordering businesses to retain copyright and intellectual property for all of their designs. Therefore, customization is in your control.

Reduce the cost of production

Another advantage of OEM manufacturing is the reduction of costs in factories, cumbersome processes, and procedures. By utilizing OEM, you are outsourcing the expense of production which also leads to output at cheaper prices while maintaining high quality and focusing on core operations.

Capitalizing new improvement

You can get access to new technology and professional service that the original equipment manufacturers develop. Therefore, products will be improved in design and quality without you having to own them. However, businesses applying OEM should pay attention to choosing reliable and reputable businesses to avoid litigation for stealing technology and ideas.

Disadvantages of OEM manufacturing

Development cost

Although ordering businesses do not have to build factories or manufacture products directly, they still have to spend a lot of money on idea development, market exploration, and research. These new designs and ideas are then presented to the OEM company. Moreover, the expenses on details and customizing brand identity are also among the additional costs that you have to think about.

High minimum order quantity requirements

OEM manufacturers will have to manufacture products at your disposal, with the technology and developments created by your own company. Therefore, they need a large number of orders to be able to customize their production lines and labor force according to your requirements. To enhance capital expenditure and technical understanding, the minimum quantity of products and orders placed must be high.

OEM in Clothing

With OEM in garment production, OEM manufacturing businesses will actively participate in the production process and have autonomy in input materials, from purchasing raw fabrics to finishing the final products. They will source raw materials and use their technology to make the best garments and textiles. Design, quality, and technical requirements are listed by the orderer and provided to the OEM business.

The main advantage of choosing OEM in clothing production is that the designer retains total creative control. Therefore, the designs, prints, layouts will be customized by the OEM manufacturer to your likings. 

With OEM in garment production, OEM manufacturing businesses will actively participate in the production process and have autonomy in input materials, from purchasing raw fabrics to finishing the final products. They will source raw materials and use their technology to make the best garments and textiles. Design, quality, and technical requirements are listed by the orderer and provided to the OEM business.

The main advantage of choosing OEM in clothing production is that the designer retains total creative control. Therefore, the designs, prints, layouts will be customized by the OEM manufacturer to your likings. 

Why choose Vietnam for OEM Clothing Manufacturers?

Vietnam is a favorable environment for garment production and processing, replacing China. The garment industry in Vietnam accounts for 16% of the country’s GDP, with more than 2.3 million workers by the year 2020. Therefore, garment and textile production is always a top priority in economic development in Vietnam. There are many big fashion enterprises in the world such as GAP, Nike, Mango, etc. have chosen Vietnam for OEM production. Let’s take a look at some information about OEM manufacturing and the garment market in Vietnam!

Low cost 

Firstly, it is the cheap labor force that Vietnam brings. Compared to China, you can find seamstresses, stitchers, mechanics, etc. with much less pay and wages. This will help businesses that place orders for OEM manufacturers in Vietnam to reduce their total spending so they can shift it to other segments and investments. Many businesses are making great efforts to be able to localize materials, in order to reduce production costs.

Free Trade 

Vietnam has participated in negotiations for the Trans-Pacific Partnership (TPP), as well as the Vietnam-EU Free Trade Agreement. This can promote cooperation between Vietnam and fashion businesses around the world. OEM manufacturers in Vietnam are able to produce high-quality products with compromised international standards according to orders, designs, and technologies.

Lead time

For OEM manufacturing, the lead time starts from the deposit of the fabric to the end of the production process. With the nonstop development and assembly line, OEM manufacturers in Vietnam can reduce the lead time to around 30-60 days with a full inspection and guaranteed quality.

Scope of Work

Analysis and Study

It takes a lot of work to figure out the strengths and weaknesses of the manufacturing process before working with any OEM manufacturer. By doing this, the risks can be eliminated. Analysis and research about OEM, compare this approach to your business idea and product. This will help you understand factors such as the manufacturing process of your product, capital requirements, and minimum order requirements to see if OEM implementation is feasible or not. You also need to study the local policy to make sure you are doing it right.

Pricing

Since ordering companies do not participate in the direct production process, you need to understand their business strategies and negotiate them with OEM manufacturers to make the best price for their products. Break down the costs and discuss how to optimize them to gain profits and success.

Some companies place orders from the West, while OEM businesses are located in Asia, it is necessary to closely monitor the pricing process, carefully at each stage.

Lead Time Assessment

In OEM manufacturing, lead time affects the entire process largely because it is all about the schedules and the replenishment of the products. It is important to accurately estimate the lead time from the early stages to avoid delays. Monitor the on-time production of OEM manufacturers to reduce lead times so you can bring your products to market quickly.

Prototyping

To have a clear look and evaluation of a product, it is necessary to ask for prototypes from OEM manufacturers. By doing this, design flaws can be identified from the early stage which can eliminate risks when it comes to mass production. Reliable prototyping will make the production more efficient and successful.

OEM Packages

Many companies offer OEM packages with impeccable service from beginning to end. They even help you when you are having trouble with the design and finding the suitable materials, fabrics, and technology for your desired products. They even help you with shipping, collaborating with the FOB approach.