Why Switching to OEM Contract in China?

The highly advanced product manufacturing sector and quality control make China the go-to place for industrial and consumer components and products. China is home to many unique folkways, traditions and business practices found nowhere else. Domestic manufacturing can be extremely expensive. Between labor and training costs, complications in the manufacturing process, and equipment costs. But there are several factors foreign business owners need to consider and OEM manufacturing is the most important of all.

 

What is China OEM?

The abbreviation “OEM” stands for original equipment manufacturer. The OEM definition can be misleading, as an OEM manufacturing does produce the product or components but they are created based on the design specifications produced by the original company. So if you have given your product’s technology and signed an OEM contract with the Chinese manufacturer, you can be sure that you will get the product according to your product specification.

 

Managing the OEM agreement in China

The biggest advantage of China OEM is that you have complete control over your Intellectual Property (IP). Because you have done all the R&D yourself, all IP rights belong to you. The OEM manufacturing company in China specializes in producing one particular product or part of a product, which allows that company to produce this item at a low cost and at a competitive price. The OEM manufacturing company in China specializes in producing one particular product or part of a product, which allows that company to produce this item at a low cost and at a competitive price. It is vital that the right China supplier is selected at the very beginning to make sure you are getting the best product without the fear of losing your IP.

 

Staying with the wrong OEM manufacturer is potentially harmful to your business. In the view of the prominent China business lawyers, foreign firms should note that not all the contract manufacturing companies are the same. You need to keep a comprehensive checklist of questions in hand while interviewing the contract manufacturer for your OEM product. It is essential that you and the contract manufacturer are working together to successfully bring your OEM products to the market and expand your business.

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Why Businesses Should Opt for Manufacturing Contract

Often businesses come up with the idea or design of the product but they do not have the capital to manufacture the product on a wide scale. Most of the time they lack the resources required to produce the items. This is where manufacturers come into the picture with their Manufacturing Agreement.

The importance of having a manufacturing contract:

Clarity- Manufacturing agreement brings the much-needed clarity to both the parties. A well-written contract help the manufacturer to understand the exact requirement of their clients.

Pricing– The detailed provision of pricing in the manufacturing contract will help preventing unexpected price adjustments in the future.

Assurance– When the task of production is undertaken by these contractors, they maintain quality standards and follow strict procedures as specified by the client to deliver high quality products that are then exported to the client’s country.

For companies engaged in large scale or high volume manufacturing, partnering with the efficient contract manufacturer is the single most important element. Three popular manufacturing contracts businesses can opt for:

Original Equipment Manufacturing (OEM)

OEM is essentially when a company designs a product from the ground up and then contracts another company to manufacture it for them. Apple uses OEM for producing the iPhone. They come up with the design, then contract a number of third-party manufacturers to handle the mass production. The main benefit offered by OEM products is their price. Owing to economies of scale, OEM products significantly reduce the cost of production. Moreover, the company purchasing these products can use them to build systems without running their own factory.

Contract Manufacturing (CM)

Contract manufacturing is a process in which one company outsources a job to another company, typically for the creation of a specific part or full product that is needed. Contract manufacturing (CM) companies can help you solve most of the issues related to evaluating your designs and manufacturing your product components. Contract manufacturing can also help you save time and money on hiring, as CMs already have highly qualified, trained production as well as research and development staff.

Original Design Manufacturing (ODM)

ODM manufacturing allows you to make use of a supplier that can already produce the good you are interested in. an ODM provides “ready-to-go” products for the OEM. The latter purchases products from the former who determines what design and products to be built. 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.

Conclusion

Working with a China manufacturer is significantly less costly than having your own manufacturing facilities. When a contract manufacturer takes the responsibility of their own hands, they are not only responsible for delivering the finished product but also doing what needs to be done per the standards set by the clients.

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