What Type of Manufacturing Firm Works Best with OEMs?

Let’s say you have a product, or sub-component of a product, that is costing you too much and having some quality issues. Let’s also pretend to say you are the COO (Chief Operating Officer) of an original equipment manufacturer (OEM) and you decided to change the supply chain for this specific product to a different firm, but you are unsure where to start.

First, you go back to your contract manufacturer (CM) and let them know of the existing problems and explain that you are considering a different manufacturing firm unless certain processes are changed for the better. Despite notifying them, you decide to shop the manufacturing market to see the potential of other firms anyways.

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OEMs offer complete products, sub-components, and/or sub-systems in various industries and sectors branded under their label, using original design manufacturers (ODMs), contract electronics manufacturers (CEMs), and/or electronic manufacturing services (EMSs) to build and deliver their product(s) prior to distributing to a supplier, retailer or end-user. Obviously, here are more options to chose from, but it all depends on what you want from a product and services standpoint as the COO of this OEM.

These three services often get confused, not to mention there are more than just these three, since there is a significant amount of overlapping of activities, but to help clarify, here is a breakdown of each of these services… After all, as the COO you have a large decision in front of you…

Original Design Manufacturer

ODM Original Design Manufacturer_01

An ODM is a company that designs and manufactures products that will ultimately be re-branded by another firm for sale. As of late, ODMs have grown in scale and now can handle production for in-house proprietary products that ultimately get re-branded by a buying corporation. This model is mainly used in international trade, where local ODMs produce goods for foreign enterprises because of the advantage cost and efficiency.

Contract Electronics Manufacturer

Supply Chain Management Wordcloud

CEMs or contract manufacturers (CMs) make products under contract for other companies, taking up any portion of manufacturing responsibility for OEMs in various sectors. CEMs and CMS are often affiliated with outsourcing. The typical relationship between a CEM and the hiring firm begins with the firm approaching the CEM with a design or formula for the CEM to quote based on a few key variables (parts, labor, tooling and materials). This often occurs in some sort of bidding process with the hiring firm sending a request for quote (RFQ) to multiple CEMs. Once the CEM wins the business they produce the agreed upon product or component and re-brand it for the hiring company.

Electronic Manufacturing Services

OEM-Manufacturing

An EMS (not referring to an emergency medical service) is a company that manufactures, tests, distributes and provides additional services for electronic components and assemblies for OEMs. The hiring firm would most likely seek an EMS for design, supply chain, or other services for assistance. The business plan behind EMS is to specialize in large economies of scale in manufacturing, raw materials procurement, conglomerating resources, industrial design expertise and to create other added value services, like quality and/or customer service. An EMS can even provide design services at product conception, offering development advise and mechanical and electrical assistance to OEMs. The final product is branded to the liking of the hiring company.

Overall, as the COO of an OEM, you should take reassurance from the fact that ODMs, CMs, and EMSs are in place to assist with the development and production of your products and/or services. However, EMS companies can essentially do everything an OEM can, but more efficiently and consistently because of the extended range of products and markets they have to service. A veteran EMS company has a full breadth of experience that can add value for an OEM’s business at multiple stages of the process.

GII considers itself the best EMS in the business 😉

About Global Interconnect: GII is a team of engineers and decently awesome professionals providing custom cable and wire solutions based outside of Boston, MA. Founded in 1995 GII has consistent revenue growth supporting some of the world’s leading medical device and high-end industrial companies. You can learn more about our products and solutions by contacting Colin Angle, Digital Marketing Manager, at (508) 563-6306 EXT 122 or by going to our new website: www.GlobalInterconnect.com.

Sources: Source 1 Source 2 Source 3 Source 4