Common Misconceptions About OEM/ODM in Manufacturing

In the process of finding manufacturing partners, businesses often come into contact with two models: OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer). However, in addition to the outstanding advantages, many businesses, especially startups, still have common misunderstandings about these two models. This not only increases risks but also directly affects the success of business projects. Below are common misunderstandings about OEM/ODM that businesses need to avoid.

Misconception 1: OEM/ODM are the same thing

This is one of the most basic misconceptions that many people often have about OEM and ODM. In fact, these two models have similarities but are not completely the same:

• OEM (Original Equipment Manufacturer) or also known as original equipment manufacturer. With this form, the business will carry out production work according to the design, pre-set specifications and sell the product to the market. Simply put, the OEM company will be responsible for manufacturing and distributing the product. At the same time, the product brought to the market will carry the brand name of the party ordering the production.

• ODM (Original Design Manufacturer) is also known as original design manufacturer. This term is understood as a business that will undertake the design and construction of products according to requirements. ODM companies will research and develop products, manufacture and package them. Then, other companies can buy ODM products and put them on the market under their own name.

Confusing these two models can lead to choosing a partner that does not suit the actual needs of the business. From there, the business will lose a lot of costs but not get results, greatly affecting the product as well as the business. Understanding this information will help businesses learn and select the right partners for themselves.

Misconception 2: OEM/ODM manufacturing will lose control over product quality

Many businesses believe that when manufacturing under the OEM/ODM model, product quality depends entirely on the factory, and the business itself cannot control it. This is an incorrect point of view.

Whether OEM or ODM, businesses can and should participate in the quality control process, periodically check shipments, and monitor the production process to ensure that the products meet the desired standards. Cooperating with reputable, transparent factories with quality management certificates will help businesses minimize this risk.

Myth 3: One size fits all

Many businesses, when first learning about the OEM/ODM model, always think that this is the most perfect solution, which can be used for all products as well as different types of business models. But in reality, it is not like that.

Not all products are suitable for the OEM/ODM model, especially highly innovative and exclusive products. When using this model, it is easy for information to be leaked as well as the risk of competition is very high.

In addition, for large-scale enterprises with a systematic internal production system and abundant resources, choosing processing factories is not suitable. Relying on OEM/ODM units in these cases can create barriers in quality control, production time as well as flexibility when it is necessary to improve products or change business strategies.

Therefore, businesses need to carefully evaluate product characteristics and business scale to decide on the appropriate production model.

Misconception 4: The factory will take full responsibility in case of an incident.

Many businesses believe that when a product quality problem occurs, the entire responsibility lies with the processing factory. However, legally, the product still bears the business’s brand, so the business will be the primary party responsible to the consumer.

Therefore, businesses need to develop a risk control policy, choose a reputable processing factory and have a clear contract agreement on the responsibilities of both parties.

Myth 5: All OEM/ODM factories are the same

In reality, the capacity, experience, expertise and reputation of OEM/ODM factories vary greatly. An inexperienced OEM/ODM partner, with lax processes or failing to meet technical standards, can result in defective, unstable or non-conforming output products. This not only causes losses in costs and time to fix, but can also seriously affect the image and reputation of the business brand in the market.

Some factories are not transparent about raw materials, formulas, or do not have a clear commitment to information security – leading to the risk of revealing production secrets or having their products copied. Therefore, choosing an OEM/ODM factory cannot be based solely on price or scale, but needs to be carefully evaluated through many criteria.

Things businesses should do to avoid misunderstandings and make the right choice:

Research thoroughly: Learn deeply about OEM and ODM models, compare the advantages and disadvantages of each model to determine the right choice for your business strategy.

Define your needs clearly: Clearly analyze your product requirements, quantity, quality, budget and time to find the right partner.

Search and evaluate potential partners: Spend time searching, screening and evaluating OEM/ODM factories based on criteria such as experience, capacity, certifications, reviews from previous partners.

Establish a clear contract: Draft a detailed contract that clearly stipulates terms related to quality, quantity, progress, price, confidentiality and dispute resolution.

Maintain close communication and monitoring: Establish effective communication channels and regularly monitor the production process to ensure products meet requirements.

Building long-term partnerships: Treat OEM/ODM partners as an extension of your business, build a trusting relationship and grow together.

Understanding OEM and ODM is crucial for businesses to make informed decisions when looking for manufacturing partners. Avoiding common misconceptions will help businesses choose the right cooperation model, optimize costs, ensure product quality and build successful partnerships.

If you are looking for a reputable and quality OEM/ODM factory. Please contact THT Vietnam immediately for advice and support.