Tens of thousands of companies around the world are choosing China to produce their goods. Contract manufacturing in China is becoming increasingly popular due to the existence of a good raw material base, cheap labor, flexibility and highly developed logistics. All this has enabled the country to claim the status of “The world’s factory.” While large companies are building their own factories in China, all the others are organizing the manufacture of their products through OEM/ODM or CM contracts. There are also quite a few large corporations that have chosen ODM/CM contracts, in order to focus mainly on promoting their brand in the global market and not on production.
What is the difference between OEM, ODM and CM?
- OEM (Original Equipment Manufacturing) - this model of contract manufacturing in China means the purchase by a foreign company of products that are already being produced at a Chinese factory. In this case, the foreign buyer makes only minor adjustments, meaning that they modify the product for selling in their market: changing the shape and color to a limited extent, adding or removing certain functions. The product is produced bearing the trademark of the foreign buyer, and in the buyer’s own packaging. In this case, the intellectual property rights to the product belongs to the factory, but the brand and the packaging belong, accordingly, to the foreign company.
- ODM (Original Design Manufacturing) is a type of contract manufacturing in China which means that the production of the goods is done strictly according to the design of the foreign company. This type of cooperation is possible with technically competent manufacturers, to which the buyer can entrust a part or all of the activities of the project. In the simplest case the foreign company merely provides the drafts and specifications, and the Chinese manufacturer takes the rest of the work upon itself. In such a case, the manufacturer carries out all the research and development (R&D), and the customer expects samples to be ready for testing.
- CM (Contract Manufacturing) is when all the intellectual property belongs to a foreign company. Often, the product is already being produced by the foreign buyer in their own country, but then a decision is made to transfer its production to China.
Each of these models has its advantages and involves risks, and a foreign buyer should be aware of them in advance and prepared for potential problems. Our company will help you optimize the costs by selecting the best manufacturers to implement your project, and will help you avoid risks when working with Chinese suppliers.