What is OEM? Competitive advantages and differences between OEM, ODM, OBM

OEM (Original Equipment Manufacturer) products are products manufactured by a factory under contract, bearing the private label of the customer. Typical examples of OEM products are electronic products and phone components of many major brands manufactured by OEM factories in China.

According to data from the Vietnam Electronics Association (VEIA), more than 30% of consumer electronics products on the market today are OEM products. This figure shows the trend that Vietnamese enterprises are gradually shifting to the OEM production model to optimize costs and improve competitiveness.

According to research information from experts in the manufacturing industry that Kosmos has compiled, the 4 competitive advantages of OEM products are:

1.  Low production cost
2. Flexible production time
3. Product variety
4. Reduce research and development risk.

In modern industrial manufacturing, there are 3 main production models: OEM (Original Equipment Manufacturing), ODM (Original Design Manufacturing) and OBM (Own Brand Manufacturing), each model has its own characteristics and role in the production value chain.

The main differences between these three models are: Ownership of product design, quality control, cost and investment risk.

When buying OEM products, we need to pay attention to 3 main factors: Product quality, after-sales service and how to identify fake products. At the same time, to make the right purchasing decision, we should compare the benefits between OEM products and genuine products, making a choice based on needs and budget.

What is OEM product?

OEM (Original Equipment Manufacturer) products are products manufactured by original equipment manufacturers under contract for other brands, bearing that brand's own label.

Typical examples of OEM products are electronic products and phone components of many major brands such as Apple, Samsung, LG, which are manufactured by OEM factories in China such as Foxconn, Pegatron. In addition, OEM products are also popular in other industries such as apparel (Nike, Adidas), home appliances (Bosch, Electrolux), etc.

What is the competitive advantage of OEM goods?

According to reputable sources that Kosmos has researched, OEM ordering brings 4 main benefits: 15-20% reduction in production costs, flexibility in production planning, diversification of product portfolio and minimizing risks in research and development.

Low production cost

OEM manufacturers can optimize production costs by leveraging existing production lines and resources.

According to research by McKinsey (Global Management Consulting), the production cost of OEM products is usually 15-20% lower than genuine brand products. This helps OEM product prices to be more competitive in the market.

Note: The cost difference depends on many factors such as product type, order quantity, production process, etc.

Flexible production time

OEM manufacturers have the ability to quickly respond to urgent orders and flexibly adjust production according to market demand.

According to a report from Deloitte (One of the world's largest auditing and consulting companies), the average production time of OEM products is 30% shorter than that of branded products. This flexibility helps partner brands minimize inventory risks and respond promptly to market demand.

Note: The ability of OEMs to produce quickly depends on many factors such as factory capacity, raw material supply, etc.

Product variety

With diverse production capacities, OEM manufacturers can provide a wide range of products to partner brands.

Figures from the Vietnam Manufacturers Association (VMA) show that on average, each OEM can supply more than 100 different products. This helps brands expand their product portfolio quickly and effectively.

Reduce research and development risk

When using OEM products, businesses do not need to invest in product design.

According to statistics from Harvard Business Review, research and development costs account for an average of 15% of the total cost of a new product. Using OEM products significantly reduces the risks and costs associated with new product research and development.

What is the difference between OEM, ODM and OBM?

OEM, ODM and OBM products are 3 products manufactured from 3 different models as follows:

The most obvious difference between OEM, ODM and OBM goods is:

• Product design ownership
• Quality control capabilities
• Investment costs and risks.

Product design ownership

In the OEM model, the ownership of the design belongs to the Customer, while ODM and OBM design the product themselves.

Quality control

According to the International Organization for Standardization (ISO) 2023 report, 25% of OEM products have quality risks due to lack of strict control in the manufacturing process. To minimize this risk, OEM manufacturers need to achieve ISO 9001 certification for quality management and conduct periodic audits.

The OBM model has the most comprehensive quality control, from design to production and distribution. This OBM company can hire OEM, ODM companies if they want.

Investment costs and risks

OEM has the lowest investment costs and risks, while OBM has the highest costs and risks due to having to take on the entire value chain.

3 things to note when buying OEM products

According to supply chain management experts that Kosmos has researched, when purchasing OEM products, consumers need to pay attention to the following 3 things to ensure their rights:

1. Product quality
2. After-sale service
3. How to identify fake and OEM products.

Product quality

We need to carefully research the reputation and capacity of the OEM manufacturer to ensure product quality.

According to a survey by Nielsen (a global marketing and advertising company), 87% of consumers are willing to pay more for high-quality products.

After-sale service

We need to find out about the warranty and customer care policy of the OEM manufacturer or distributor. Make sure that you will receive full technical support and warranty when buying OEM products.

A report from Zendesk (Customer Support Software used by over 100.000 companies in over 140 countries) shows that 52% of Customers will return to a brand with good Customer Service.

Identify counterfeit goods

We need to pay attention to the brand, label and quality of the product to avoid buying fake or counterfeit goods. We should buy from reputable sources and have clear documents proving the origin of the product.

According to data from the World Intellectual Property Organization (WIPO), counterfeit and pirated goods account for about 2,5% of global trade, equivalent to 461 billion USD per year.

How to make the right purchasing decision

According to research from leading industry experts compiled by Kosmos, the most appropriate purchasing decision is when:

• OEM vs genuine products compared
• Selected based on needs and budget.

Compare OEM products with genuine products

Choose based on needs and budget

Clearly define the purpose of using the product and the budget you can afford. Carefully consider the price and quality, choose the product that suits your needs and financial ability.

OEM Product FAQs

What are the potential risks of using OEM products?

By synthesizing analysis from verified sources, Kosmos provides the following information: Some potential risks when using OEM products include intellectual property infringement, confidential information leakage, difficulty in controlling product quality, etc.

How to choose a reputable OEM manufacturer?

When choosing an OEM manufacturer, it is necessary to pay attention to factors such as: production capacity, quality management system, experience in the field, ability to meet technical requirements, etc.

The quality standards that a reputable OEM manufacturer needs to have are: ISO 9001 (International standard for quality management systems), ISO 14001 (International standard for environmental management systems), OHSAS 18001 (Standard for Occupational Health and Safety Management Systems developed and issued by the British Standards Institute),... and many other standards corresponding to each specific industry.

Are OEM products guaranteed to be of the same quality as genuine products?

Factors affecting quality are design, raw materials, manufacturing process, quality control, etc. The quality of OEM products depends on the manufacturer's capacity and quality control process. If you choose a reputable OEM manufacturer, the product quality can be equivalent or even superior to genuine products.

Are OEM products warranted like genuine products?

Depending on the OEM manufacturer and distributor's policies, OEM products may have the same warranty as genuine products. However, it is important to carefully read the warranty policy before making a purchase decision.

Does using OEM products affect brand reputation?

Kosmos has compiled information from reliable sources in the industry. If you choose a reputable OEM manufacturer and ensure product quality, using OEM products will not affect brand reputation.

Many big brands like Apple and Samsung still use OEM products and maintain their reputation in the market.

What is the future development trend of the OEM market?

According to Allied Market Research, the global OEM market is expected to reach $1.034,7 billion by 2027, growing at a compound annual growth rate (CAGR) of 4,4% during the period 2020-2027.

Is Kosmos Thaixin wooden flooring OEM?

Thaixin wooden flooring of Kosmos Vietnam is an OEM product manufactured by Vanachai. Kosmos Vietnam is the company that places orders, owns the “Thaixin” brand and distributes the products. Vanachai is the OEM company that receives orders from Kosmos Vietnam, headquartered in Thailand.

Thaixin wooden flooring in Kosmos Vietnam warehouse

Vanachai Group is a manufacturer of Thaixin wooden floors.

Recognizing the demand for premium laminate flooring products with advanced technology and unique designs, Kosmos Vietnam has expanded its product portfolio by importing and distributing world-famous laminate flooring brands such as Egger from Germany and Robina from Malaysia.

• Egger Laminate Flooring: Renowned for its superior quality, modern manufacturing technology and diverse designs. Kosmos guarantees 10 years of quality for Egger flooring lines. The Egger Aqua line will have an additional 10-year termite warranty and 1.000-hour water-ingress warranty.
• Robina Laminate Flooring: Known for its good water resistance, high durability and natural color. The product is recognized by NALFA (North American Flooring Association) for its 72-hour surface water-locking ability. Kosmos guarantees 10-year quality and 10-year termite warranty. With the Robina Aqua line, there will be an additional 10-day water-proof warranty policy.

>>> European industrial Laminate flooring price list | Egger Laminate flooring.

>>> How much is Robina laminate flooring per square meter? | Malaysian laminate flooring price quote.

OEM products offer many advantages such as competitive prices, product diversity and flexible production time. However, consumers need to pay attention to quality, after-sales service and be careful of counterfeit goods. If you still have many concerns about this type, please comment below for Kosmos to answer.