Original design manufacturer

An organization that makes products under contract for other companies. It caters to the OEM market. In the computer and electronics fields, thousands of products are manufactured by contract manufacturers. These products are ordered by and branded with the OEM's name, which sells them to its customers.

Contract Manufacturers Can Be Huge

Some of the most popular products in the business are made by contract manufacturers. For example, Microsoft's Xbox game machine is made by Flextronics Corporation www.flextronics.com), a huge company with factories around the world and nearly $15 billion in sales in 2004. Flextronics also makes cellphones for Ericsson, routers for Cisco and printers for HP. Other major contract manufacturers are Flextronics International www.flextronics.com), Sanmina-SCI Corporation www.sanmina-sci.com) and Celestica www.celestica.com).

The ODM

An "original design manufacturer" (ODM) is similar to a contract manufacturer, but typically owns the intellectual property (IP) for the product itself, while the regular contract manufacturer uses its customer's designs and IP. Contract manufacturers can make hundreds or even thousands of different products, but ODMs often specialize in only a handful of categories.

EMS and CEMS

Contract manufacturers in the electronics field that not only make products, but offer assistance with the design and supply chain generally prefer to call themselves "electronics manufacturing services" (EMS) or "contract electronics manufacturing services" (CEMS). See OEM.

Download Computer Desktop Encyclopedia to your iPhone/iTouch

This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (July 2008)

An original design manufacturer (ODM) is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce (either as a supplement or solely) without having to engage in the organization or running of a factory. ODMs have grown in size in recent years and many are now sufficient in size to handle production for multiple clients, often providing a large portion of overall production. A primary attribute of this business model is that the ODM owns and/or designs in-house the products that are branded by the buying firm. This is in contrast to a contract manufacturer (CM).

This model is especially used in international trade, where a local ODM is used to produce goods for a foreign company which sees some advantage in the transaction, such as low labor inputs, transport links or proximity to markets. This is also used where local ownership laws possibly prohibit direct ownership of assets by foreigners, allowing a local firm to produce for a brand company for either the domestic market or export.

This type of business is part of "outsourcing". An example is Compal Electronics, which makes notebook computers and monitors, and operates as a mass producer for numerous brand companies, assisted by low labor costs, low-cost transport, and the near commodity nature of the physical inputs (in Compal's case, computer components).

The market research firm iSuppli issued a report in 2006 which demonstrated that 82.6% of PC notebooks are made in Taiwan by Taiwanese original equipment manufacturer (OEMs) and ODMs.

References

See also

• Original equipment manufacturer (OEM)

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)