An ODM original design manufacturer 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. This allows the contracting company to concentrate on its core business and not day to day manufacturing headaches.
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. This is the case with the ODM Group who work as a Buying Office in China for multiple clients. Economies of scale and grouped purchasing power are key benefits of this model.
A primary attribute of this business model is that the ODM may own and/or design in-house the products that are branded by the buying firm. This is in contrast to a contract manufacturer or stand-alone factory.
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 the Tea Tool company , which have outsourced all manufacture and design work to the ODM Group. ODM manage factories in China to take care of mass production of tools and packaging for numerous brand companies, assisted by low labour costs, low-cost transport, and the near commodity nature of the physical inputs.