White Label ODM, which is the process by which a brand owner or marketing company gets an outsource company that makes virtually the product they are seeking, to refine or alter the design in relatively small (and fast) ways, to produce a unique version of an existing and (presumably) market successful product. This allows the brand owners to differentiate in the market place by the addition of features or capabilities, by quality or performance differentials and by own-branding a unique SKU of a product, without the major commitment of a start-from-scratch development process. White Label ODM allows brands to access goods and are made in lager quantities than they can currently market, allowing smaller brand holders to benefit both from economy of scale and the established sector expertise of the ODM manufacturer.
Private Label, which is the more in depth process required to develop a new product (i.e. novel or more distantly related to existing marketed goods). This is a much more intricate process and will generally (but not always) entail in-house aspects that fit in the hands of the customer/brand holder better than they do in a subcontract service. The Private Label definition can range from a new type or interpretation of an existing product, through fundamental improvements in an existing category, all the way to novel technologies representing a whole new category or sub category.
ODM design allows a brand holder or OBM (Original Brand Manufacturer) to utilise the services of a supplier that already supplies products in the general category of the goods required – medical, consumer, industrial, military – or already supplies almost the exact product required. ODM generally refers to companies that design products as well as manufacture them, offering a potential one-stop-shop for unique product delivery to market OR for versions of existing SKUs, allowing the brand to benefit from integrated and larger scale operations.
Whichever category of service provision your needs fit into, you can benefit from reduced costs and often shorter schedules in bringing your product to market, and freedom from the burden of much of the delivery process, allowing you to focus on your business process.
The Product Design Process
Product design is a broad description of a sometimes relatively simple and often potentially very complex and intricate process. No two products ever require exactly the same steps – and there are always new mistakes to be guarded against.
It’s important to understand that, while the process is defined in quite linear and distinct steps, in reality it is likely to be much more organic – particularly at the early and/or more creative stages. This is not a bad thing – but it is possible (and often critically important) to impose ‘good-enough’ decision making. A perfect product that never quite gets to market is worth MUCH less than a good-enough product that is delivered on time. The key is in defining what good-enough means in a dynamic and agile way.
For the simplest products, with little or no novelty, this can be an aesthetic re-execution of a well tested idea/product that refreshes it in presentation to familiar or new markets. Products such as kitchenware, hand tools, simple auto accessories, toys etc. rarely involve significant technical steps beyond the existing marketed SKUs – but great businesses can be built on the principle of doing things a little better, or better looking, or at lower cost than than the market norm.
For more complex products that are applying known solutions to an already solved market problem, the development process often requires closer integration of a wider skillset and carries more technical risk – often integrating electronics. Sectors such as travel goods, consumer audio, wearables, industrial equipment, simpler medical and healthcare products etc. require more knowledge and experience to be applied.
Truly complex products, containing new ideas/IP and new uses of materials require the most care, attention and expertise – and therefore demand the most complex teams and high level engineering skills.
The basic stages of the product development process are discussed below. There is an ODM outsource capable of fulfilling all of these – but there are also stages that properly belong in-house in some developments – building the IP knowledge and control of the brand holder/OBM. Each client must make the decision about which aspects to in-house for the maximum benefit and minimum cost.
Define the problem
If the problem identification and definition process is not completed with great care, then the product development will go wrong. This is only a function that belongs in an ODM supplier’s hands when THEY are the effective product owner – i.e. when the service you are receiving from them is White Label. If you own the product concept, YOU must define the problem – and while you can certainly get help with this from various service providers, an ODM factory is not high up that list.
Considering the market/customer/user pain that the product is aiming to solve – and achieving clarity and depth in the understanding of whose pain point it is and why it should be solved. If the product is following on from your own (or others) successful prior solutions, then a path to this analysis already exists – but that does not mean there aren’t badly identified opportunities that can lift the solution out from the crowd.
If the pain point is newly defined – or has not been previously solved because it was out of technical or commercial reach – then even more care is required at this stage. These questions may help in developing understanding:
What is the primary goal of the product?
What is the pain point that this product is intended to address?
What is this product’s unique value proposition?
What does the competitive landscape look like?
Who is the end-user and will they pay to have their pain point eased?
Can the product solve the identified market need well enough to stand out?
What technical and commercial resources will be needed to develop the product?
To develop a well targeted product, the developers must research any competition and analyse competitor or foundational products, seeking opportunities for improvement and market/user impact – better-cheaper-faster-nicer opportunities. Marketing and R&D knowledge will help in competitor analysis, in understanding consumer behaviour and in fully integrating market trends into the development process. This is an area in which the most capable ODM developer services can make a contribution – but this process must be lead by the product owner, if the process is to deliver with confidence. The early stage product research needs to answer these questions:
Why would the buyer/user choose this product?
How much use will the product get – and under what conditions?
Have other solutions to this pain point been marketed – and did they succeed – and if so, why?
What does the path to market look like?
How can the existing solutions (if there are any) better serve the user?
It’s likely that the concept will have been developing for some time – and likely in a very non-linear fashion. A capable ODM supplier can certainly help with this stage, but the brand/product owner must lead and select directions for development.
There is a danger that confirmation bias gets in the way of clear decision making – you don’t need to develop a vacuum capable biro if a pencil will do the job – however brilliant the biro is. Keeping a clear view of the end goal and cutting through the noise to really solve the real problem in a marketable way is what differentiates great products from failures in the market.
This is the development stage in which most ODM suppliers can begin to take the lead in the product development process, reducing the burden of effort and team development on the brand holder.
Make as many generations of prototype as are appropriate – these should be increasingly refined and progressively closer to the ‘real’ thing – but it’s often necessary to backtrack to the concept stage as prototypes test the reality and achievability of the product concept.
Start from an MVS (Minimum Viable Solution) that tests only the fundamental principles – which could be functional, deeply technical, aesthetic or simply customer impression issues.
As early as you can, start user testing of your product to identify design/concept flaws or user issues you missed. This will help you iterate your design in prototype, to refine and debug before production.
Detail, Detail, Detail
With the product concept finalised and the basic functions evaluated so that there is high confidence that the product will a) work and b) meet a real market need, the detailing effort begins. This is the stage that virtually all ODMs are best equipped to lead – nobody understands their manufacturing services/capabilities better than they, and their experience in knowing how much detailing in design, specification, schematics, BOMs, supply chain, tooling schedules, line setup and balancing and much more becomes the clients best route to a great outcome.
The intensive detailing required for even simple products is discussed elsewhere – and it’s important to remember that the prototyping process will need to continue right up to mass production, delivering increasingly refined and serviceable product models.
Once the product is detailed to a reasonable degree, the prototypes reach the ‘good enough’ point and the design is beginning to reach ‘frozen’, the last development task is to prepare the handover for manufacture.
If the detailing of the products components, assemblies and testing has been completed well, through the development process, then the manufacturing handover is only a LARGE task – whereas if the development detail has been shortcut and resulted in gaps, all that effort will fall at the end.
Without an excellent manufacturing handover process, the product will stumble in pre-production and may still be part thawed in mass production – this is a situation to be avoided at all costs, as it creates stress and market difficulties, just when the development team should be able to reduce their effort and move on to the next product.
A capable and experienced ODM service provider is a huge asset at the start of manufacturing handover – precisely because they will carry the pain of a poor manufacturing handover more than any other team member, so their interest in getting it right is intense.
With mass production under way, the necessary effort is reduced but non zero. There WILL be issues and opportunities that present in the product – either in the factory or in the market. Addressing these and continuing (lighter) development is in part a function of the ODM production engineering team, who are best positioned to see the manufacturability improvements and cost down opportunities that cement the products success as a mass produced item.
Pros and Cons of ODM Design Services
The biggest advantage of the ODM approach to product development (and manufacturing), for both white label and private label, is that development overheads can be tightly controlled in the outsource, likely in a lower labour cost region. This frees more resource and effort for core operations, while providing access to the potentially more honed skills and experience of the ODM design team.
Often new companies possess stronger market and sales knowledge than development experience – and building those skills is generally of low long term productivity, unless the company intends to continue intensive product R&D long term. Partnership with an ODM development team brings valuable skills and experience of an established developer, with low overhead costs.
When it comes to manufacture, it is probable that the ‘right’ ODM will already be producing significant quantities of parallel and related products, allowing the client to benefit from advantages of scale. This may even allow access to the same supplier as already successful competitors – although this carries risks.
Chief among these risks is that a brand using ODM services may well find itself in competition with a) its own supplier and b) its suppliers’ other customers. This is guaranteed and intrinsic, in the White Label ODM route – but still quite possible in the Private label pathway. Where the ODM has specific skills that make them a must-choose option, the brand holder can choose to in-house these aspects, to widen the field of potential ODM suppliers that can be considered suitable.
Many or all technical aspects of production setup are taken care of by the ODM manufacturing firm, and the integration of design and manufacture in one supplier offers significant setup advantages – assuming that the client is content to be hands-off to such an extent.The reduced time taken in setup represents both a cost saving and a schedule control/shortening opportunity. Designing your product and setting up production is time consuming and risk intensive. Choosing to ODM some or all of the development process allows you to devote time to branding and marketing, and generally accelerate marketing and market testing.
Where the product has a significant IP component, choosing an ODM who specialises in a completely different market sector can offer significant advantages in preventing special capabilities and knowledge from ‘leaking’ into the brands competitors’ hands.
Example Sectors Using ODM Manufacturing
Various product sectors and industries take advantage of ODM services, to widely varied degrees. For example, ODM is heavily utilised within the small consumer goods, cosmetics and food industries. Most major channels have their own range of products, but in virtually all cases these share the same supplier with other well-known brands, simply White Labelling (or lightly modifying) existing products.
The electronic cigarette industry is a prime example, in which most of the players are marketing companies who compete on aesthetics rather than function – and buy the functional aspects of the product from a commodity source, using ODM services to integrate these into unique product exteriors, simply branding and presenting/packaging the goods to match their own market pathway. This avoids all investment in production AND R&D, allowing an explosion in small, modestly funded and highly localised brands to develop.
Consumer electronics, clothing, wearables, tools, service consumables and other sectors get their products from specialist ODM suppliers, uniquely branding and packaging generic goods and the acceptance of White Label products is positive in the West.
Specialist ODM suppliers exist in all market sectors – from military to medical, from automotive to automation.
Conclusion: ODM Manufacturing in China
The majority of good ODM suppliers are based in China, for a range of reasons – labour cost, skills concentration, infrastructure/environment, centralised shipping services and more. The sector is very diverse – from small workshops to industry titans such as Foxconn – and growing rapidly, making sector statistics difficult to estimate. China’s manufacturing sector has lead the OEM solutions sector (factories to make your product) for several decades, the benefits offered by the ODM sector are becoming increasingly significant across many product sectors.
White Label and Private Label ODM product development services require China suppliers to be both rigorous and creative in delivering their own and their customers’ products, forcing the pace of the R&D sector development. According mordorintelligence.com, EMS growth in China varies around 9% and is not expected to slow.
As primary manufacturer to the world, China capabilities are still expanding and the quality and volume of ODM output is steadily improving, with increasing emphasis on innovative product design and brand support. This involves Chinese OEM manufacturers making the shift to the higher value ODM sector, developing their own and others high quality products using the increasing sophistication of the regional capabilities and sophistication. They are increasingly well equipped to undertake design/make support, from concept to mass production support, through the entire product lifecycle.
With these enhanced capabilities, China’s ODM sector is able to create widely varied and excellent quality products, based on their own design services – and sell these to brandholders who offer them as their own prior to the market. The overwhelming majority of ODM contracts in China are for this White Label service, offering relatively small MOQ (Minimum Order Quantities), easy customisation and no exclusivity of the core product concept. Near ready-made generic designs at low costs, customised and branded to client specifications, with low friction, low overhead and volume advantages that cannot otherwise be achieved.
China continues to see marked growth in ODM production capabilities and volumes, with the greatest part of this being tier-two ODM suppliers. Tier-two suppliers offer flexibility in services and volumes that the tier-one sector cannot accommodate, focussed as they are on large-scale customers and very high volumes.
The ODM industry in China is busy and healthy, dominated by a mix of large-scale and smaller ODM firms – the larger being companies such as Yulong, Pegatron, Hui Ye, Huanquin, Hongyu, Foxconn and Inventec, the largest examples.
The key to success in using ODM and EMS services in China, as with almost all sectors of business, is to focus on relationships; choose a partner who fits your needs and your culture; and find the right skills to energise your process and deliver exceptionally.