What do OEM, EMS, CEM, ODM, and CMO signify, and why does it matter?
The terms OEM versus EMS provider, CEM, ODM, and CMO are applied to various businesses in the electronics manufacturing value chain. However, they are often misconstrued and misused. This article post defines them all and outlines their key distinctions and respective responsibilities within the industry.
What is an OEM?
OEM is an abbreviation for Original Equipment Manufacturer. An original equipment manufacturer (OEM) may choose to design and market complete "turnkey" products for their customers or only select subsystems and components. In the second scenario, an OEM provides components or subsystems that another company subsequently resells as part of their final product. However, the 'M' in OEM is frequently a misnomer, as many OEMs no longer manufacture their products. While they design most of their products and own the 'rights' to them (i.e. intellectual property), they increasingly outsource all or a portion of their manufacturing to third parties like EMS providers. By doing so, many OEMs focus only on product innovation and development.
What is an EMS provider?
In electronics, an EMS (Electronic Manufacturing Services) provider is the generally recognised term for a contract manufacturer. Typically, these providers manufacture products for original equipment manufacturers and provide a vast array of value-added services. These services include initial concept and design assistance, DFX (Design for Excellence), configure-to-order, supply chain management, repair elements, and outbound logistics. EMS corporations can be independent multibillion-dollar enterprises in the so-called "Tier 1" environment. Therefore, it is unsurprising that they produce some of the most well-known products globally. Apple's iPhone, HP printers, and numerous other famous branded products are believed to be manufactured by Tier 1 EMS companies. While these suppliers frequently appear on "Top 10" lists, they specialise in producing high-volume, low-complexity products and, as a result, demand multimillion-pound expenditure levels; consequently, many of the world's consumer electronics are shipped from their factories. Tier 1 suppliers may be better suited for OEMs that design and sell low- to medium-volume, often complex products in industries other than consumer electronics. Instead, OEMs are encouraged to adopt an alternative perspective of the EMS landscape to identify the most suitable supplier for their business model and product portfolio.
CINCARIA is an EMS provider and these are the expertise we provide:
Global Procurements and Supply Management
Horizontal and Strategical Alliance in Electronic and Related Components
Casting, Sheet Metal, Precision Machining, Plastic Injection Moulding, Wire Harness, Packaging, Logistic, and Distribution.
Manufacturing Engineering Experiences and Knowledge from Product Design to Actual Mass Production
Integrating Electronic, Electrical, and Mechanical Assemblies
Product Functional Testing and Validation
Box Build, Warehousing, and Final Distribution
What is a CEM?
Contract Electronic Manufacturers (CEMs) manufacture products on behalf of other corporations. They typically undertake responsibilities for original equipment manufacturers (OEMs) in the industrial, oil and gas, defence, computation, test and measurement, instrumentation, communications, and transportation industries. Each week, contract manufactures produce thousand of unique products, typically branded with the original equipment manufacturer (OEM) name and sold by the OEM to its customers.
What is an ODM?
Original Design Manufacturer is the abbreviation for Original Design Manufacturer. ODMs are comparable to contract electronics manufacturers, but they typically own the IP for the product itself. In contrast, contract electronics manufacturers use the designs and IPs of their consumers. In addition, CEMs often produce a vast array of products across multiple markets. In contrast, ODMs typically specialise in a limited number of specific product types. Typically, a CMO (Contract Manufacturing Organisation) or CDMO (Contract Development and Manufacturing Organisation) provides pharmaceutical and biotech companies with extensive services. These services include stability studies, clinical trials, method development, and scale-up. They range from early-stage formulation development to commercial production. CDMOs are distinguished from conventional contract manufacturers by adding development to their standard services. Customers of CDMOs anticipate not only competitive pricing but also regulatory compliance, adaptable production capabilities, and on-time delivery dependability. In the 2020s, these companies were instrumental in accelerating the vaccine development, production, and distribution that halted the Covid-19 pandemic. Covid-19 highlighted the significance of third-party expertise in assisting specialist, cutting-edge companies to meet unanticipated demand spikes. Their ability to accelerate and scale up drug design and production cycles prevented years of additional deaths and lockdowns.
What is a CMO?
Typically, a CMO (Contract Manufacturing Organisation) or CDMO (Contract Development and Manufacturing Organisation) provides pharmaceutical and biotech companies with comprehensive services. From early-stage formulation development to commercial production, these services encompass everything in between, including stability studies, clinical trials, method development, and scale-up. CDMOs are distinguished from conventional contract manufacturers by adding development to their standard services. Customers of CDMOs anticipate not only competitive pricing but also regulatory compliance, adaptable production capabilities, and on-time delivery dependability. In 2020s, these companies were instrumental in accelerating the vaccine development, production, and distribution that halted the Covid-19 pandemic. COVID-19 drew attention to the significance of third-party expertise in assisting specialist, cutting-edge companies to meet unexpected demand spikes. Their capacity to accelerate and scale up drug design and production cycles prevented decades of additional deaths and lockdowns.
Why do OEMs outsource manufacturing?
Why, then, do some of the most successful businesses in the world choose to outsource their manufacturing? It is not due to a lack of funds to establish a plant. Consider Apple as an example. Still one of the most valuable companies in the world, their product design capabilities and end-to-end industry knowledge are unmatched. However, they continue to outsource. According to Apple, the company's manufacturing and logistics challenges are typically addressed by its suppliers. Apple has continued to focus on environmentally friendly technology and repairability features. We can see that the company is tackling some of the most complex materials and manufacturing challenges confronting the technology industry. Apple has realised that others can respond to specific manufacturing challenges faster and more cost-effectively than they can. By outsourcing, their manufacturing associates can assist them with the details of DfM (Design for Manufacturability) and DfS (Design for Sustainability), allowing their teams to concentrate on innovating and enhancing the most recent models. While this is a typical "high profile, high volume" example, the same principle applies to the distinct low-to-medium volume, medium-to-high complexity sector: it's all about central focus.
OEMs vs EMS - what's the difference?
The distinction lies in the central focus. Original Equipment Manufacturers are OEMs. They focus on R&D and market expansion while possessing intellectual property. EMS are experts in design, manufacturing, supply chain, and logistics, concentrating on assisting OEMs to accelerate their design process and scale their production to conquer new markets and sectors. These distinctions become even more glaring when looking at OEMs that still manufacture their products.
Choice of assembly equipment - OEMs frequently use surface mount equipment that requires more installation time but operates faster. In addition, they may have dedicated production cells and lines for each product in their range. On the other hand, EMS enterprises must be more agile. They will choose to invest in equipment that allows for significantly quicker switchovers and programming, providing them with greater flexibility but may operate at a lower rate.
The New Product Introduction (NPI) process - An OEM will design its products and, as a result, will have an established product portfolio to sell. Consequently, the frequency with which they introduce new products to the market is typically low. Suppose they are presently constructing the products internally. In that case, sharing build documentation with a third-party supplier is unnecessary. Contrast this with a CEM that collaborates with numerous OEMs across multiple markets. Customers will frequently request that they deliver "new" products. Consequently, the NPI process for CEMs must be significantly more refined and robust, as the volume and completeness of the data they manage will vary considerably for each customer and product they manufacture.
Supply chain expertise - EMS companies manufacture for multiple clients, producing various products, necessitating a significantly more extensive global supply chain.
Test design expertise - Likewise, the variety of PCB assemblies and "box build" items for which EMS companies have to develop test solutions means they frequently have a far greater length of experience than OEMs' engineers.
Therefore, OEMs and EMS companies have different priorities, core competencies, and levels of manufacturing resource utilisation. Consequently, the time necessary for an OEM to recoup these investments is typically much longer.
OEMs contemplating outsourcing their manufacturing should take comfort in knowing that numerous EMS companies can do all that the OEM can do but frequently do it more effectively, consistently, and efficiently due to the extensive range of products and markets they serve and the expertise and experience that this creates. This scope of knowledge can contribute value throughout the OEM's entire operation.