In recent posts, we explored opportunities in Vietnam’s precision manufacturing industry and covered general trends in the country’s manufacturing sector as a whole. Building on that topic, we will take a closer look at key considerations when having your products made in Vietnam.
OEM vs ODM vs OBM
When considering sourcing or custom production in Vietnam, the first step is to clarify which type of manufacturer is right for your business:
OEM (Original Equipment Manufacturer): A manufacturer who manufactures products based on the design specifications of the buyer. This category can also include Contract Manufacturers (CM).
ODM (Original Design Manufacturer): A manufacturer who designs and manufactures products to then be branded and sold via the buyer.
OBM (Original Brand Manufacturer): A manufacturer who designs and manufacturers products to be sold under the manufacturer’s brand name.
All three options can be readily found in Vietnam – it just depends on your specific needs.
Sourcing Considerations
When sourcing your product from an existing production line (ODM/OBM), some key considerations include:
Catalogue & inventory: Finding a manufacturer with excess capacity and/or inventory of the specific product you are looking to source is vital. This process can be time consuming, but is essential to the overall success of your sourcing project.
Ordering Intervals and Pricing Negotiations: The volume and frequency of your orders will greatly influence cost and your ability to negotiate with the manufacturer. Typically, Vietnam caters to high-volume orders, meaning small-batch sourcing for most product categories requires a careful strategy to maintain cost feasibility.
Quality Control: Sourcing from an existing production line typically requires less quality control oversight from the buyer, given the manufacturer’s expertise in producing the product. However, it is still recommended that the buyer ensure that a clear quality control plan is in place.
Production Considerations
For buyers looking to source from an existing production line, savings in cost and time provide an advantage. However, the lack of customization can be a major downside. Thus, the alternative is to explore custom production according to your own design specifications (OEM/CM). Some key considerations include:
Production Lines:
Buyers seeking custom production solutions will need to forge a partnership or arrangement with a manufacturer who is equipped with the necessary capabilities and is willing to establish a new production line.
Typically, a Minimum Order Quantity (MoQ) as part of the production agreement negotiation process will determine the feasibility of this type of arrangement. Examples of production run options include: Batch, Project Based, Intermittent, Recurring and Continuous.
The more standardized and frequent the production, the lower the cost. Highly complex, infrequent production runs will be the most expensive for the buyer, but can be suitable for high-value products.
Input Materials:
Establishing a reliable and cost-effective input material supply chain is vital to the success of any production run. Key aspects to identify from the onset include: Whether the responsibility for procurement of input materials falls on the buyer or manufacturer, if the input materials can be sourced domestically or must be imported, and the process that will be used for quality control inspection of input materials.
Structuring the Process:
As the buyer, you should expect to be fully involved in the production process, from setup to final inspection to ensure your custom production project is done according to your specific design and specifications.
The Bottom Line
The Herbers Agency is ready to help your business find success in sourcing and production in Vietnam. From start to finish, we are your trusted partner to find the right manufacturing partner, negotiate and structure the project, and provide on-the ground support to see your project through to success.
Contact us today to begin your journey in Vietnam!
