Nine (9) Key differences sourcing EMS v. ODM suppliers

By Steve Linahan

THERE ARE KEY DIFFERENCES by definition between an electronics manufacturing services (EMS) provider of manufacturing services and an original design manufacturer (ODM) that incorporates design as the additional variable into the equation.

However, that equation isn’t as precise as it used to be anymore as it is more of a blurry line between them.

The days of black and white EMS v. ODM differences aren’t that applicable any longer, one has to look deeper.

It is widely contended these days that it is common knowledge that EMS providers provide design services, not all do, but the top tier EMS providers do, to my knowledge. It is also common knowledge ODMs can provide strict EMS services without the design support.

So the point of this blurry line is demonstrated in the following simple assessment based on questions OEM executives should ask themselves that address some of the “other” primary distinctions between the two models. (View OEM decision maker favorites)

1. Who owns the design IP?
Traditional EMS providers do not warrant the design unless they designed it for you and release all IP to the customer, except for their manufacturing processes, which can also be deemed IP.

With ODMs, there’s a mixed response to this question. Typically, you own whatever you brought to the table in the form of patents, and they own what they design, or offered you. (This is obviously a simplified explanation but you get the idea.)

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2. Does the EMS / ODM supplier have their own product lines / brands?
Traditionally, EMS providers do not and ODM providers (typically) do, but not always. In the realm of the ODM, this practice lowers the NRE costs for development as costs are shared across platforms.

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But with this you also face potentially competing products the ODM manufactures that may be similar to yours – if not exactly the same product as yours. After all, most ODMs have standard motherboard designs (and other products) and you provide the fit, finish and features you want to complete the package. I suggest a non-compete clause in your supply agreement that at least limits direct competition based on time or features.

3. Do you get a costed, detailed BOM?
EMS providers typically will provide a full, costed bill of materials (BOM). ODM providers may provide this BOM but if this is shared, they usually won’t, and even if it is unique you probably won’t get a full BOM.

OEM RFP/RFI Form Presented to EMS Provider
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Instead, you typically get a generalized BOM of the major product elements plus field replaceable unit (FRU) levels. FRUs are printed circuit boards, parts or certain assembly portions of an electronics product already in use in the field that can be easily swapped out or removed by the user or repair person without the customer needing to ship the unit to a specified location for repair. (See, also: 80 Metrics EMS providers use to manage profits)

4. How easy is it to move your product from one supplier to another?
In an OEM-EMS relationship it is painful but definitely executable as you have access to, or at least should have access, to all drawings; CAD files, authorized supplier lists, costs, test files…

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