OEM stands for “original equipment manufacturer,” and refers to a manufacturer that provides goods or manpower to bring a product to market. OEMs often produce something that is used as a component to a product and is typically associated with a type of service called OEM services.
If you are a company hoping to launch a new product, you might require the services of OEM manufacturing through a B2B portal site like Alibaba.com. Well-established companies that already have products on the market will often have a product development team in place with designers, testers and marketing professionals who have all spent months, if not years, creating a new line of products. Because the company has the original idea, the designs, plans, manufacturing process, and branding ready to go, they only require a manufacturing facility and the manpower to help produce the items and meet product demand, or material to finalize the product and have it ready to sell. In this case, OEM manufacturing is the right service to choose.
If you are a manufacturer and don’t have the capabilities to design, create, test and brand products, you should offer OEM manufacturing and provide basic manufacturing services to help businesses mass-produce products.
Here is an example of how OEM manufacturing works:
A luxury sportswear company has designed a new line of sneakers. They have the designs, branding, market research, and product testing finalized, and they need each pair of sneakers to have a memory-foam sole.
The sportswear company finds a supplier on Alibaba.com that offers OEM service and contacts them about their services.
The OEM has previous experience working with fashion clients and can mass-produce the luxury range of footwear with the memory-foam sole element.
The sportswear company provides the designs, manufacturing requirements, branding, and logo designs, and if required, packaging requirements too.
Pros and cons of OEMs
This type of business relationship can be a great way to get a product to market and start generating revenue. By forming an OEM partnership, you will be able to create a product that is difficult to replicate by consumers or competitors due to the cost or time to produce it. You may also unlock access to new markets, industry sectors, and geographic locations by hiring the services of an OEM.
However, there are some disadvantages to working with OEMs. Providing design briefs to a manufacturer can sometimes cause confusion and require members of your team to travel to the factory and provide support and assistance. This can cost your company time and money.
The OEM may also require changes to the product during the manufacturing process that are backed by their manufacturing teams rather than your design brief. Also, by not involving the manufacturing team during the development of the product, they won’t have the opportunity to provide their feedback and advice which could actually make it easier to manufacture and save you money when it comes to the production costs.
Comments