What OEM actually represents is a kind of division of labor, a kind of refined competition thought, the core of which is that enterprises must “do what they do best.”
OEM is not a new organism, but it has new vitality, because it has penetrated into various industries, not taking the high-end route, not high-end customization, but customized high-end.
As the division of labor in society becomes more and more detailed, many companies pay more and more attention to in-depth product research, and will outsource some processes with high production costs and complicated processes.
Friends who have had entrepreneurial experience know that it is difficult to go from 0 to 1 and from 1 to 100, and then from 0 to 1. OEM processing is to let you skip the process from 0 to 1 and leap to the process of drawing 0 behind the 1.
What is OEM?
Original Equipment Manufacturer, literally, should be translated as original equipment manufacturer, which means that a manufacturer produces products and product accessories for another manufacturer according to the requirements of another manufacturer. It is also called OEM production or authorized OEM production.
OEM is commonly referred to as “OEM” or “OEM”. Due to factors such as differences in understanding and regional and cultural differences, OEM is also called “commissioned production”, “commissioned processing”, “special-brand manufacturing”, and “production”. Outsourcing” and so on. Although the appellations are different, the essence is the original unit (brand owner) entrusts the contract for product development and manufacturing, uses the original unit’s trademark, and is sold by the original unit.
OEM originated in the computer industry, and its operating mode was first established in Europe and the United States. OEM is an inevitable way under the trend of large-scale social production and large-scale collaboration. It is also one of the effective ways to rationalize resources and is the result of large-scale social production. In Europe, OEM industry associations were established as early as the 1960s. OEM production has become an important part of modern industrial production.
What are the advantages of OEM?
1. Reduce investment costs and investment risks
On the one hand, the existence of OEM factories directly saves investors the cost of repetitive investment in building factories and purchasing equipment, and regular products can be obtained by paying the corresponding processing costs. Compared with building a production and sales system by ourselves, the cost is greatly reduced.
On the other hand, the market is changing all the time. Some brands often use trial and error to enter the market, and they will choose the OEM method to test the possibility of entering the market. Brand owners outsource their products to OEM manufacturers for small-scale production, and then push them to the market to observe the market’s response. If the response is good, the brand owners can mass-produce and launch their own new products and new brands; if the response is flat, the brand owners will also You can terminate the OEM contract and give up the intention of entering the market for the product, so that you can use trial and error to gain more opportunities and reduce your own risks.
2. Mature product building model
The contract factory will have a mature process for product research and development, design, proofing, and mass production. It can not only ensure that the products are of regular origin and complete relevant qualifications, but also can ensure product quality through standardized production models and quality control programs.
3. Increase product diversity
For single-brand companies, because their brands are already very well-known and have a certain customer base, they want to broaden and develop more types of products, OEM processing methods can be a shortcut. There is usually a gap between product development and market orientation. Brands only need to have their own product formulas to use OEM processing methods to produce products, quickly fill the gaps in the market, and seize the market. For example, a certain brand manufacturer is better at producing water lotions and facial creams, but it is lacking in facial masks. At this time, OEM processing methods can be used to select professional facial mask processing manufacturers from outside. This not only saves production time, but also cuts production costs, and also obtains high-quality facial masks.
4. Highlight the company’s own advantages
The competitive advantage of some brands is not in their production, but in their multiple sales channels and perfect after-sales service. At this time, OEM processing cooperation is almost a win-win method for both sides. For example, Watsons, relying on its global sales channels and service network, does not need to produce goods itself, but can provide the reputation of high-quality goods to win the trust of customers.
5. Make the brand more competitive
Professional OEM OEM processing enterprises have a stronger macroscopic control over the market trend. According to the trend of popular and mainstream products in the industry, we can provide customers with constructive customized solutions. The R&D and design advantages of the foundry can change the idea of product creation at any time according to customer needs. Individualized, differentiated, and branded products are more flexible in production. The strengths of processing enterprises are the improvement of the process and the control of the production process, and the ability to control product quality is stronger and more professional, which is faster than building a factory on its own.
What should I pay attention to when looking for an OEM?
1. Understand the hardware & software of the factory
When looking for a factory OEM, consider its hard power and soft power:
Factory environment: The environment and overall planning of the foundry are more important, and these are directly related to the production scale and actual capacity of the foundry.
Factory equipment: As far as factory equipment is concerned, in fact, most foundries are not too bad, mainly because of production capacity and whether they can provide sufficient and sustainable output.
Product research and development capabilities: OEM foundries that can do product research and development are stronger and more capable of in-depth cooperation. A professional OEM foundry that has been constantly researching market needs for a long time and can make different product formulations will naturally compete for brand owners. cooperate.
Service attitude: It mainly depends on whether it can meet the reasonable requirements of customers, including product design, concept, raw material selection, etc., and plan a single brand or package strictly according to customer requirements.
Minimum order quantity and delivery time requirements: some large OEM foundries have higher requirements for customers. If they are big brands, and have a large MOQ and a relatively long delivery period, they can cooperate. When choosing, you should also consider your own cost factors. .
2. What is your product budget?
If you want to do product processing, you first need to budget for product placement, whether you want to make professional line products or daily popular products, whether you want to take the high-end route or the low-end parity route. Good product positioning is very important, which affects the choice of foundry, the choice of internal materials, and packaging materials.
Generally speaking, there is no clear price for product processing. This is a variable, which can be changed according to your needs.
Under normal circumstances, product processing price = internal material cost + packaging material cost + processing fee + MOQ. Do a good job in product positioning, choose appropriate internal materials and packaging materials, the price is affected by the MOQ issue. The higher the MOQ, the lower the unit price of the product and the processing cost. Of course, when the price is extremely low, it will be difficult to bring down the price no matter how large the quantity is. The minimum order quantity of packaging materials determines the minimum order quantity of finished products to a certain extent. If you can provide the packaging materials yourself, the foundry will also provide services below the MOQ and earn part of the processing fee.
3. Does the factory operate legally and compliantly, and is the quality control system complete?
Whether the factory operates in compliance with laws and regulations, and whether the quality control system is complete, this determines whether there is a product risk issue after the product goes on the market. Products that were produced in violation of regulations and added in violation of regulations were stopped and fined every minute, and all the previous efforts would be frustrated. Generally, the three-in-one business license + production license is necessary, and there are some corresponding product certification certificates, which can be obtained by larger and more powerful companies, such as ITAF16949, ISO quality certification, GMP certification, GMPC certification, etc.
But saying it a million times, it’s not as reliable as if I personally inspected it. If possible, you must personally inspect whether the factory has its own laboratory, the scale of the laboratory, the number of R&D teams, and the number of formulation engineers equipped, what is the laboratory equipment, whether the production equipment is advanced, and whether the workshop production equipment meets the specifications. Choosing an OEM processing factory must depend on the equipment and qualifications of this factory.
4. Look at the brands that this foundry has cooperated with
An OEM processing factory must have processed products for many brands. You can see which brands the factory has processed for, so as to judge the credibility and product quality of the factory.
Generally, the company website has an introduction. If you want to find more authentic information, you can check the record information, the factory qualification record, the brand record that the factory has cooperated with, and the number of product catalogs that the factory has successfully filed. Big brands have higher requirements for product processing plants, and they usually conduct factory inspections. Suppliers that can reach the entry threshold of big brands have relatively strong basic qualifications and can be selected as options.