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Original Equipment Manufacturers (OEM)
Original Design Manufacturing (ODM)
The term original equipment manufacturer, popularly called the OEM (or O.E.M.), refers to company that actually manufactures a given product. Over the years, the term OEM used in international trade has evolved to convey other meanings. The OEM---the OEM contract, or OEM arrangement, or OEM transaction---may mean:
- The original manufacturer of a given product subcontracts the production of the product entirely in an exporting country. The subcontractor (the OEM supplier) follows exactly the product specifications, quality, packaging and labelling of the original product.
Subcontracting of production to overseas manufacturers is not uncommon in many countries and lines of products, particularly in developed countries, where their own productions may cost more than imports, for example toys, footwear and garments.
- The importer subcontracts the production of a given product in an exporting country. The importer can be a trading company or a manufacturer who does not make a product that is intended as a supplement to their own manufactured products or as a component part (the spare part) of a product, or a newly designed product which has never been manufactured in a production line. The exporter (the subcontractor) supplies the product according to the specifications, quality, packaging and labelling requirements of the importer. This OEM arrangement often refers to as the ODM (original design manufacturing)
- The importer, either a trading company or a manufacturer, buys the product of an export-manufacturer based on the latter’s product specifications and quality, but follows the importer’s specified packaging and labelling requirements, including the use of importer’s own brand name. This OEM arrangement is not uncommon when exporting the manufactured goods to chain stores.
The export-manufacturer must be cautious when selling to a prospective OEM buyer, particularly if the buyer is a manufacturer. It is normally expected that the OEM buyer, who may be a manufacturer, may request to tour the supplier’s production plant and see the production in progress. Being an OEM supplier, he/she does not have to divulge the production secrets or show the ’sensitive’ production facilities.
If a prospective OEM buyer is more interested in knowing the production know-how rather than the quality of the product and the supplier’s ability in meeting the quantity and shipping requirements of the buyer, by all means refuse dealing with such buyer, which is better than running the risks of divulging the production know-how.
For further information call direct on 01623 654080
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