China OEM Products: What Are the Potential OEM Risks?
Before start your China OEM products service, you have to master the potential OEM risk price
From the previous guide on OEM VS ODM and CM suppliers, it’s clear that OEM suppliers subsidize product development costs. Buyers end up paying development costs, but this pays off in the product unit costs.
This article explains why this is China OEM products risk for buyers.
Read on to find out more!
Table of Contents
Develop OEM Products in China Process:
What Does OEM Mean?
OEM stands for Original Equipment Manufacturer. It refers to a company that manufactures products according to the specifications and designs provided by another company. The “other company” then brands and sells the finished product under their own name.
All OEM products in China have to pass through two phases, i.e.,
- product development,
- and production phases
There are several activities in each phase. These activities are illustrated in this diagram.
The Meaning Of These Dissimilarities:
- When a new product is under the early stages of development, this is a discovery phase.
Here product design and manufacturing processes are involved. In most cases, this works if the product is uniquely new.
In case the product has some similarities with other products, there are fewer discoveries because the product doesn’t need extra features in its design.
When buyers pay for the services by hiring designers or engineers, some tradeoffs will be involved; hence they can make accurate decisions.
When the manufacturer is the decision-maker, their incentive is to start the production process a.s.a.p. the reason for starting the production process faster than usual is to attain money and keeping a product in its simplest form. That way, the managerial and production team can reduce headaches involved in the production process.
- After the product matures, it is considered to be ready for mass production.
Here the dynamic process changes! Here is a simple model:
The Unit Price of Production = Handling Costs+ Material Costs+ Export Costs+ Manufacturing Costs
When the supplier has financed a part of the product development, a certain amount will be added to each quantity’s Price.
It may be transparent at times, and the buyer can predict the amount to pay after the extra charges on each unit. In instances where there isn’t transparency, it allows out of control price increments.
Buyers get visibility in the cost structure even if the suppliers cannot know about future order quantities.
How OEM Suppliers Differentiate the Phases?
Many suppliers say they will absorb a part of the tooling costs and a high unit price. Buyers ensure that the total expenses are workable for product sales, and they take the offer from suppliers.
The incentive of many suppliers is to get done with the development process quickly. This causes production issues, but there are many reasons why suppliers don’t worry about such matters.
In many cases, a supplier may be intending to ship defective products to the client, or the supplier is over-enthusiastic, among others.
However, this incident occurs in rare cases. In many instances, the manufacturers will deliver great products. These negative instances occur several; Hence, it’s the buyer’s duty to look out for these patterns’ quality of products.
Potential Price of OEM Risks
The big question is what to do if your supplier offers you low-quality goods. Some suppliers place high prices for low-quality goods. Ownership of goods needs a legal contract; hence you can only pull the tooling with the enforceable contract.
In international supply chains, ownership of goods is only evident if legal documents show the enforceable contract.
Best China OEM Products Result:
The Result of Advanced Work is Low Production Costs and Low-Risk Products
Before products get into the production sector 80% of the Price will already be set. Due to this factor, process engineering and product design are essential.
Advantages of good product development include;
-
- Ease of conducting the assembling process
- You get the best professional suppliers and on-time delivery.
- You can efficiently conduct a price risk of OEM analysis.
- There will be an ease of detecting and addressing issues concerning the products.
- The follow-up processes will be better and more accessible.
- Well- trained operators.
You can get these benefits only if you antedate large volumes of products. If your OEM supplier does this, there will be low chances of reducing the price risks of OEM producing goods. You can start your OEM or ODM service after you understand how to choose OEM service.
As a business person targeting a specific market with high-risk levels, you can skip some steps and keep the development process simple.
In this case, There are some Potential Price Risks of OEM. So product sourcing company is the best fit if you are looking for OEM suppliers in China.
China OEM Products Sourcing:
What is China OEM Products?
“China OEM Products” refers to products manufactured in China by Original Equipment Manufacturers (OEMs).
China is a global manufacturing powerhouse, known for its large-scale production capabilities and competitive pricing.
OEM (Original Equipment Manufacturer): These are companies that specialize in manufacturing products according to the specifications and designs provided by another company. The “other company” then brands and sells the finished product under their own name.
What is OEM Factory in China?
An OEM Factory in China refers to a physical location or company that specializes in Original Equipment Manufacturing (OEM) services.
Where to Find China OEM Manufacturers:
Industry-Specific Directories:
Search for online directories specific to your industry sector. For example, if you’re looking for electronics manufacturers, you could search for directories like:
- Global Sources Electronics
- HK Electronics
General B2B Platforms:
These platforms list a wide range of online manufacturers across various industries. Some popular options include:
- Alibaba
- Made-in-China
Trade Shows and Events:
Attend trade shows and industry events in China related to your product category. These events offer a chance to meet and network with potential OEM partners directly.
China sourcing company ODMs
Consider working with a sourcing company specializing in connecting businesses with reliable OEM manufacturers in China. These companies can help you narrow down your search and manage communication with potential partners.
OEM Manufacturers in China:
There are numerous Original Equipment Manufacturers (OEMs) in China across various industries. These OEMs often specialize in manufacturing products for other companies based on their specifications and requirements. Here are some common industries with prominent OEM manufacturers in China:
1. Electronics:
China is known for its electronics manufacturing, with OEMs producing items such as smartphones, laptops, tablets, consumer electronics, machines and more. Some well-known OEMs include Foxconn, BYD Electronics, Huawei, and Xiaomi.
2. Automotive:
China has a growing OEM parts of automotive industry with OEMs producing vehicles, automotive parts, and components for both domestic and international markets. Companies like Greely, BYD Auto, Great Wall Motors, and Chery Automobile are prominent OEMs in this sector.
3. Textiles and Apparel:
China is a major hub for textile and apparel manufacturing. Many OEMs produce clothing, textiles, footwear, and accessories for global brands. Examples include Li & Fung, Esquel Group, and Youngor Group.
4. Home Appliances:
China manufactures a wide range of home appliances including refrigerators, washing machines, air conditioners, and more. OEMs such as Haier, Midea Group, Gree Electric Appliances, and TCL Corporation are prominent in this sector.
5. Toys and Games:
China is a significant producer of toys and games for the global market. OEMs in this industry manufacture a variety of products ranging from action figures to board games. Some examples include Hasbro, Mattel, VTech, and LEGO, which have manufacturing facilities in China.
6. Furniture:
China is a major exporter of furniture, with many OEMs specializing in the production of indoor and outdoor furniture for residential and commercial use. Companies like IKEA, Ashley Furniture Industries, and Huizhou Jinxin Furniture are notable players in this industry.
7. Medical Devices:
China’s medical device industry is growing rapidly, with OEMs manufacturing a wide range of products including diagnostic equipment, surgical instruments, and medical implants. Some prominent OEMs include Mindray Medical International, MicroPort Scientific Corporation, and Sinocare Inc.
Working with an China OEM Supplier – Benefits and Challenges
Collaborating with an Original Equipment Manufacturer (OEM) offers a range of advantages and presents certain challenges:
Advantages:
Specialized Expertise: OEMs concentrate on a limited range of products, enabling them to streamline production processes efficiently. With their extensive experience, they offer superior knowledge in engineering and development, ensuring high-quality and original products.
Cost Efficiency: Outsourcing manufacturing to an OEM is typically more economical than conducting production in-house. Leveraging economies of scale, OEMs can produce goods at lower costs, particularly in regions like China known for cost-effective manufacturing.
Speedy Production: As specialists in their field, OEMs can swiftly fulfill large orders, accelerating the time it takes for your product to reach the market.
Operational Flexibility: Entrusting manufacturing to an OEM allows businesses to divert resources towards other critical areas such as research and development. This focus on innovation and product enhancement is crucial for staying competitive.
Warranty Assurance: Reputable OEMs provide manufacturer warranties, offering assurance of product quality and reliability. When engaging with a China-based OEM, it’s advisable to secure a comprehensive warranty agreement.
Challenges:
Dependency Risk: Relying heavily on an OEM for manufacturing may result in vulnerability to supply chain disruptions or fluctuations in quality.
Communication Barriers: Working with overseas OEMs, particularly in regions with language barriers like China, can pose challenges in communication and coordination.
Intellectual Property Protection: Ensuring the protection of intellectual property rights when sharing proprietary designs and technologies with OEMs is a critical concern, especially in regions with lax enforcement of intellectual property laws.
Quality Control: Maintaining consistent product quality and adhering to specifications may require close monitoring and quality control measures, particularly when dealing with offshore OEM partners.
Manufacturing Agent ODM/OEM in China:
Working with Supplyia for large-scale, cost-effective production begins with providing detailed product specifications and target pricing.
Supplyia sources suitable manufacturers through platforms like 1688.com or its own network, negotiating favorable terms while ensuring quality. After sample approval, mass production is coordinated, with Supplyia managing production schedules and bulk material procurement to lower costs.
Throughout the manufacturing process, quality is monitored, and pre-shipment inspections are conducted to ensure standards are met. Supplyia also arranges logistics and bulk shipping, selecting the most cost-efficient methods and assisting with customs clearance to ensure timely delivery. This end-to-end service enables businesses to produce large quantities quickly and affordably.
