OEM (Original Equipment Manufacturer) skincare manufacturing is a popular option for many businesses in the skincare industry. It involves outsourcing the production of skincare products to a third-party manufacturer who will then produce the products according to the client’s specifications. However, like any business strategy, OEM skincare manufacturing has its own set of pros and cons. In this blog post, we will explore the pros and cons of OEM skincare manufacturing to help you determine if it is the right choice for your business.
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Cost Savings: Outsourcing production to an OEM manufacturer can save businesses money on equipment, labor, and raw materials. This can be especially beneficial for small businesses or startups that may not have the resources to produce products in-house.
Expertise: OEM skincare manufacturers have extensive knowledge and expertise in skincare product development and manufacturing. They can provide guidance and advice to businesses throughout the production process, helping to ensure that the final product meets the desired specifications.
Efficiency: OEM skincare manufacturers are equipped with the latest technology and production processes, which can result in greater efficiency and faster turnaround times.
Quality Control: Outsourcing production to an OEM manufacturer can make it more difficult for businesses to ensure that their products meet their quality standards. It is important to choose a reputable and experienced manufacturer that has a strong track record of quality control.
Dependency: By outsourcing production to an OEM manufacturer, businesses become dependent on the manufacturer for their product supply. This can make it difficult to switch manufacturers or make changes to the production process in the future.
Intellectual Property: Businesses may be required to share proprietary information and intellectual property with the OEM manufacturer. This can pose a risk of theft or unauthorized use.
OEM and ODM are two items that you must have heard about before in business, but you may be confused about them. Actually, they are two important and common kinds of cooperation models in industrial society, especially in international trade.
This blog will explain OEM and ODM meaning, products and business models through typical examples, and tell you how to select OEM and ODM services and suppliers.
Nintendo, a famous company in Japan that specialized in the development of computer games, completes the software design and development by itself. They just provide firmware, equipment for Foxconn, and assist Foxconn in analyzing statistics and testing products.
And Foxconn just completes the manufacturing, without any opportunities to access to source code. The final product sales, including time to market, sale price and sales areas, are all decided by Nintendo.
Besides, many processes are dominated by Nintendo, such as choosing the type and price negotiation of CPU, DDR or other components. Foxconn just conducts Nintendo’s decision accordingly. Except for Nintendo, Apple, also a typical OEM example, it cooperates with Foxconn in the same business model.
Hence, the typical characteristic of the OEM model is that the brand company has the ability of design and R&D, and they just cooperate with a factory located in human resource-intensive areas to help them conduct the manufacturing process. The cooperation model between Foxconn and Nintendo these brand companies is a typical OEM model.
You may think such examples about famous brand companies are uncommon for small businesses. Let’s take another example of OEM. Last year, we received an OEM order from the Middle East, and the buyers wanted to customize a kind of brand new design ring. But the design would be provided by themselves.
ODM stands for original design manufacturer. Under this model, the brand company needn’t design and R&D. The factory will finish the whole process from design to maintenance, and provide several existing styles of products for the brand company to choose from.
In some cases, a manufacturer produces a kind of product, and this product is chosen by some other companies, they will ask the manufacturer to produce with their brand name or changing the design a little bit. In this way, the manufacturer is called ODM Manufacturer, the product it produces is called ODM Product.
This process is similar to booking a cake. When you want to book a cake, the staff usually provides you with several styles to choose from, and then you will choose a style and want to make some changes, like the material, decorations.
Just like the above example, small businesses that choose ODM manufacturing usually lack R&D ability. They will buy from the current products from China and make some small changes to products’ accessories or other aspects, and then they will print their own logo before sales.
Especially for some ordinary small items, what you need to do about customizing is just to tell the factory about your demands.
Take an ODM example of a small business, one of our customers intended to purchase beer bottle sleeves from China, but he found the existing product style was unsatisfactory. Then he wanted the factory to add an element: bottle opening function as the following picture shows:
OBM means original brand manufacturer. In other words, foundries themselves found their own brands as private brands (different from private labels), and use this brand to sell on the market. Its business covers from design, procurement to production and sale.
However, it requires them to put a lot of money and investments into building a perfect marketing system, OBM business costing more than OEM and ODM business, even conflicting with their own OEM and ODM customers.
So, fewer foundries would like to make a big production in the OBM business.
For instance, many manufacturers provide OEM or ODM products and services on Alibaba. And on this website, you can find many factories that produce a large number of different kinds of products. But most of these products seldom sell in the brand name of these factories. Why?
The reason is that they can benefit more from providing ODM and OEM products directly to their customers than investing a lot in marketing their own brands and products sales. But there also are some large ODM or OEM companies doing both businesses at the same time.
There are 2 situations for adopting the ODM service.
Situation 1
Contact us to discuss your requirements of OEM ODM Cosmetics. Our experienced sales team can help you identify the options that best suit your needs.
Brand companies have wide sales channels and market operation ability, but they lack R&D ability. Then they will find a factory with strong R&D capabilities to make the product according to their demands.
Situation 2
Brands companies have R&D capabilities, but some low-end products with low profit are not worthwhile for them to invest a lot of time or labor into completing it. Then they usually choose one type from other companies’ existing products and make some adjustments, then sell products under their brand name.
In international trade, for many ordinary products like beer bottle sleeves, many companies usually make some small changes to existing products.
Offline trade fairs or wholesale markets
If you think finding suppliers online is not a reliable way, you can visit your local wholesale markets to find suppliers. There are two reasons for choosing the way: convenience and high efficiency.
If you can come to China directly, you can attend some Chinese fairs or visit wholesale markets. Compared with finding suppliers in your country, it may be more troublesome to find suppliers in China while it can also be a more cost-saving solution for your business ultimately.
Troubles you can expect include language barrier, much more expenses on hotel and transportation. Besides, you need to know the main district the wholesale markets and fairs located at, Shenzhen, Guangzhou, or Shanghai.
So, you need to make a detailed agenda before visiting China. But there are also merits for you to visit China. The most advantageous point is that you can have more OEM or ODM suppliers to choose from and get products at a very competitive price.
OEM products meaning is the products designed by customers and produced by manufacturers; while ODM products refer to those products both designed and produced by manufacturers. Most products can be chosen as OEM or ODM products.
Here are 7 main steps in the process of OEM & ODM products. There will be a little difference in some steps for different products. Take cosmetics as an example of ODM and OEM, I will tell you their working process. But I will mainly focus on explaining the process of ODM products as both models’ process is similar.
Step 1: Create a prototype or design of your product
The factory will choose the suitable cosmetic formulations and make a sample according to your requirements of products, and then give it to you for a test.
Step 2: Find a China manufacturer
After the test, if you are satisfied with the cosmetic sample and the price, it will be necessary for you to come to the factory for an inspection in person, including R&D ability, production capability, the workshop, etc.
Besides, as make-up will be directly used on the skin and its security must be guaranteed, it is very important for you to cooperate with reliable and qualified factories. But if you import some other small items like beer bottle sleeves mentioned above, you can choose not to make a field visit to the factory.
Step 3: Estimate the cost of the whole project
After the field visit, you will sign the contract with the factory. In the meantime, the factory will charge a certain deposit. (NOTICE: the sum varies from different factories.)
Step 4: Make a pre-production sample
The factory will be responsible for the package design and sourcing package material, which is usually a free service provided by factories. Of course, they will design the package to meet your demands and then let the professional package factory make some package PP samples for your choice.
Step 5: Choose private label and packaging solutions
After confirming the cosmetics material, ingredients, and package design, the factory will go to FDA for product tests and filing.
Step 6: Start massive production
After the test and filing, the factory will conduct the product fill, packing and QC process. Generally, it will take 15-20 days to complete the whole massive production process. After finishing the whole manufacturing process, you need to pay for the balance.
Step 7: Delivery
The factory will arrange the shipment, and they will choose the best shipping method according to the delivery time and goods volume. The cosmetics are usually shipped by sea.
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