Original Design Manufacturing (ODM)
Original Equipment Manufacturing (OEM)
- OEM stands for Original Equipment Manufacturing, and refers to products that are fully designed by one company and then licensed out to a manufacturer to produce. The Apple iPhone, for example, was invented and designed by Apple, and then licensed out to Foxconn to produce. As a result, the iPhone enjoys a higher level of product differentiation because its design is only available to Apple and its licensed manufacturer.
- Many other brand name electronics and appliances are OEM. Custom designed clothing, as opposed to a generic garment with a custom logo, is another example of OEM.
- The main advantage of OEM is that the designer retains total creative control over the design. Whereas ODM products are restricted to a predetermined design, OEM products can be made according to any specifications. The only limitation is the designer’s imagination (as well as budget).
- The disadvantage of OEM manufacturing is that it is much more resource intensive. OEM designers often invest millions of dollars into research and development over several years in order to create unique products. Because of this, OEM designers have to guard their designs as intellectual property, lest it be copied and sold by another company for a lower price.