ODM – How to Make Custom Products in China
Most importers find that the most challenging aspect of their business is developing a product sourcing strategy. When choosing a low-cost country to source from, China is often at the top of the list. As the largest manufacturing hub in the world, China accounted for 30 percent of global manufacturing output for the 11th consecutive year.
A successful import business requires a strategic and enduring relationship with a Chinese product sourcing agent. This article will discuss what makes China such an attractive destination for Original Design Manufacturing ( ODM ) and Original Equipment Manufacturing ( OEM ), as well as how to work with Chinese manufacturers to create custom products. Here are some helpful tips to navigate the process successfully.
ODM meaning
Original Design Manufacturing ( ODM ) is a form of contract manufacturing that includes a variety of functions, including product development, manufacturing, and product lifecycle management. Hence, original design manufacturers assist companies in developing customized specifications and designs based on ideas provided by their clients. Some manufacturers already have their own products, which can be customized to meet the brand’s needs. Regardless of the method used, businesses can import from China by working with an ODM and branding the products with their own logo.
OEM meaning
In contrast, original equipment manufacturing ( OEM ) is a form of outsourced or contract manufacturing that’s more narrowly focused than original design manufacturing ( ODM ). OEM involves an importer/buyer and a manufacturing unit that manufactures products to their specifications. Most commonly, OEM is used for products that require minimal customization and require new tooling, such as plastic injection molding, before production can commence. The most popular place for auto manufacturers to get OEM parts is China. However, before working with an OEM, a company must conduct its own research and development and develop its own design. This is what makes it different from ODM, where the importer gets end-to-end designing and manufacturing services.
What is the best option?
If you’re looking for a low-cost country for sourcing, China is a great option for both OEM and ODM. Nevertheless, many businesses may find OEM unfeasible if their product concept is based on an existing design. It is possible for SMEs and startups with a shoestring budget to import ODM products from China. As a result, they would have enough scope for product customization at a greatly reduced cost.
What makes China an attractive location for sourcing products?
China contributed 28.7 percent to global manufacturing in 2019, beating the US by almost 10 percent. In the same year, Chinese manufacturers contributed close to $4 trillion to global economic output and 30 percent to the country’s gross domestic product. Because of the COVID-19 pandemic, the manufacturing sector in China had a very unfavorable year in 2020. However, by January 2021, production had reached 39.5%.
Despite the linguistic barriers and differences in work standards, China has developed into one of the world’s most competitive and welcoming manufacturing destinations. However, businesses around the world see the Chinese market as an integral part of their sourcing strategy for several reasons:
Cost-effective manufacturing
According to 2020 figures, China’s manufacturing workforce is the largest in the world with 112 million employees. If a business imports from China, the company is likely to obtain low-cost labor in excess. Therefore, the country has a large number of plastic manufacturers, aluminum extrusion companies, die casting companies, metal stamping companies, and other labor-intensive industries.
Impressive turnover
Large orders are handled by factories in China equipped with the latest technology. The capacity of their facility is impressive, and they turn around orders very quickly. As a result of the low cost of labor, importers are able to hire more employees to accomplish high-volume production.
Sourcing support services
Chinese sourcing providers take the needs of their clients extremely seriously, which is why they go to great lengths to provide the best sourcing support services possible. As a result, they often exceed their clients’ expectations and adhere to all the terms outlined in the contract.
Wide reach
Both domestically and internationally, Chinese manufacturers enjoy a broad market base. Therefore, if a business works with a Chinese company, it will have ready access to a huge market. In this way, they may have the opportunity to expand their business.
Reduced MOQ
Because ODM products are less time-consuming and less risky to produce, suppliers are able to offer lower minimum order quantities. The reason for this is that these manufacturers have already gained experience in making the specific design and may be able to utilize existing materials and subcontractors.
What’s the best way to make custom products in China?
By now, you probably have a clear understanding of the manufacturing sector in China as well as how working with Chinese manufacturers can prove economically beneficial. The following tips will help you develop a long-term relationship with them:
Prepare a strategic plan
Customizing products in China is certainly appealing, but if you do not have a solid sourcing strategy, your journey might seem vague. It is difficult for a newcomer to gain a thorough understanding of the Chinese market. Nevertheless, entering unchartered territory with little or no information can prove detrimental.
Therefore, it is imperative that you conduct your own research about Chinese manufacturers and agents. You should have a clear vision of what your product should look like and what you wish to achieve from the marketing to the sale of the product. A well-informed sourcing strategy will allow you to make more informed decisions.
Become familiar with the Chinese business culture
A sourcing agent in China will operate in a very different manner from a sourcing agent in another country of the same profession. In comparison to other countries, the Chinese business culture differs greatly.
China has a large population and a diverse demographic composition. Although there are cultural norms that are widely accepted that the country’s citizens wish to adhere to at all times, work cultures vary from company to company. Thus, in order to establish a long-term relationship with Chinese manufacturers, it is important to be aware of these norms.
Identify the type of factory
When manufacturing custom products in China, this is perhaps one of the most important decisions you will have to make. With an Original Design Manufacturer, you will have the opportunity to leverage your existing technology without investing in a new one – something that keeps your overall business costs low.
You should also consider the size of the manufacturing unit, its production capacity, workforce, quality control, and logistics. A Chinese manufacturer must meet your product sourcing needs and be equipped with the latest technology to produce superior-quality products. The most suitable manufacturer can be identified by conducting a detailed process audit of different factories.
Establish your supply chain
After identifying a factory and procurement agent in China, the next step is to establish your supply chain. No matter if you’re looking for a wire harness manufacturer or another supplier, there should be a clear-cut process to discuss requirements.
Consider the case where you work with a Chinese purchasing agent and a wire harness manufacturer. Therefore, the Bill of Material (BOM) should list the raw material supplier and the consistency of the quality. Your supply chain needs to be flexible enough to meet increasing demand and ensure timely delivery.
Conduct quality verification of prototypes
If you do not have a test plan in place, you will not be able to evaluate the performance of your product engineers. A product prototype must be tested for its performance, safety compliance, strength, and other characteristics. Therefore, testing a product’s functionality is to determine whether it meets its intended uses and pushes it to its limits.
Upon approval of the prototype, you will need to examine the quality monitoring process and resolve all issues at the source. The accuracy and efficiency of the manufacturing processes can be determined by performing a quick test on product batches on the assembly line.
Know how to negotiate
Last but not least, making custom products in China requires you to enhance your negotiation skills. All Chinese manufacturers place a high value on trust and transparency. Consequently, you should take great care when negotiating.
Whenever possible, you should try to establish a personal relationship with a Chinese buying agent and manufacturer so that they can trust you. It is the goodwill you build over time that is most important to the success of your business. Ensure that you are familiar with the terms and conditions of the manufacturing contract and remain calm throughout the negotiation process.
Conclusion
The development of an innovative product can be a messy and stressful process because you must juggle many tasks. However, this does not mean you cannot manufacture custom products in China. In China, you can certainly reap benefits with the right information and procurement agent. For a new product to succeed, it must be of high quality and developed with innovative thinking. When you choose China as your sourcing destination, you can rest assured you’re dealing with the right people. Keep up the hard work and be patient!
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