Lots of acronyms and synonyms and kind-of-synonyms get thrown around in the case of hardware suppliers and understanding what kind you’re engaging in is very important to your business plans and bottom line. To muddle the point further some suppliers can fit all or some of these definitions or are open to different methods of engagement. These definitions can also help you understand at a high level what is being proposed.
- Original Design Manufacturer
- Responsible for Design and Manufacturing of a product
- Typically retains IP rights and owns the tooling
- In some cases they are the most expensive long term option, but with low or no upfront costs and large minimum order quantities
- ODM usually handles “everything” so great for a team with low head count
- Used by many name brand companies for lower volume products
OEM or CM
- Original Equipment Manufacturer or Contract Manufacturer
- Customer typically retains the IP and typically owns the tooling
- May contract out assemblies (or whole products) to EMS firms
- May contract out engineering activities as well (That’s where we come in)
- Due to the labor, tooling and the like this has the most upfront cost
- Companies that do their own final assembly are OEMs. Think Ford, Tesla or Black and Decker. This can also apply to firms that do this work on contract or are “white label” firms. Think Amana.
- Electronic Manufacturing Service
- Customer typically retains IP and owns tooling
- Typically only makes a major component such as the PCB
- May also offer other services like box builds, wire harness fab, injection molding, program/test and final assembly (making them an OEM)
- Typically relies on the customer for Engineering support or customer identified Product Development firm (us!)
- Many OEMs still rely on EMS firms for components or assemblies (think back to Ford and the other examples)
After all that still somewhat confusing right? The big difference is engineering/design/IP. Engaging with a EDM means you outsource engineering and design to the manufacturer, but lose IP control. Engaging with an OEM/CM/EMS means needing to supply engineering and design support, but also retaining IP. IP retention is typically a key component to valuations.
Bayard Design does work-for-hire engineering and design work that allows you to retain all your IP. The end game is to right-size your company’s engagement with an OEM/CM/EMS (or even a ODM for specialized components). We have many suppliers that we’ve worked and can find the right one for you!