June 16, 2020

Choosing Suppliers: OEM, ODM, Contract Manufacturer?

In episode 9 of the podcast, Adrian and Renaud discuss the different types of suppliers you may encounter in China (and Asia in general), their pros & cons, and what to look out for when sourcing suppliers.

Show Notes

We react to the worrying news coming out of Beijing about new clusters of coronavirus infections. How could this affect manufacturing in China? (Start to 3:45)

As the disputes and rancour between China and the USA rumble on, how are the trade war and the recent push to 'reshore' manufacturing going? (3:45 to 7:10)

Moving onto the episode's main topic, Renaud defines OEM and ODM - what these suppliers are, their features, and pros and cons of working with them. Factory audits are a useful tool here to help assess if the supplier is right for your needs. (7:10 to 23:50)

ODM - Expanding on some of the benefits and possible risks of working with an ODM specifically, such as their failure to alert you about who really owns the IP of the products they're suggesting they can produce for you, and also the need for a watertight Chinese manufacturing contract. (23:50 to 25:45)

OEM - Similarly expanding on OEMs. What are some of the key benefits (fast to market) and risks for importers when working with these suppliers? Such as being locked in with a supplier who won't produce the quality you need or the risk of losing your IP to them and finding your products on the market later on at a much lower cost! (25:45 to 32:56)

How to keep an OEM in line when working with them? Including arranging a suitable agreement with your lawyer and what it must contain in order to hold sway over the supplier. (32:56 to 36:05)

The rules of thumb for choosing suppliers - What production volume of yours would be best served by hiring an OEM, ODM, or CM (or even setting up your own manufacturing facility)? (36:05 to 37:25)

CM - What are contract manufacturers in more detail. Benefits of working with them and a number of best practices to make sure the production runs smoothly. Why CMs are less likely to play tricks than OEMs and ODMs and want to get to mass production and for it to run very smoothly. (37:25 to 45:10)

"Famous CMs produce products for HP, Apple, etc, so if I work with them I'll be guaranteed great quality products, too, right?"  Why this is not necessarily the case.
We also mentioned our own Contract Manufacturing subsidiary, Agilian Technology, at this point, which is one of the 'smaller alternatives' mentioned that will provide a better service for buyers who don't bring enormous orders to the table. (45:10 to 50:00)

The dangers of dealing with trading companies who may be leading you to believe that they are a manufacturer or who cannot handle the manufacturing project as capably as you need (due to not being particularly involved with the factory amongst other reasons).
In this section, we also mentioned due diligence and how we provide solutions like an affordable legal records check to help weed out trading companies or bad apples when sourcing suppliers. (50:00 to END)

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