People often don’t understand the development of Chinese manufacturing. As a result, many analysts unilaterally attribute the reasons to China’s lower labor costs and trends or help in government policies. But in fact, the trade competition index (TCI) of the Chinese luggage OEM market is higher than the world average. In terms of scale, China’s luggage exports have reached and have exceeded 50% of the world’s luggage exports. (Data from potential industry research institutes).
What is OEM&ODM?
OEM is the abbreviation of Original Equipment Manufacture, which refers to a “OEM” method, which means that the producer does not directly produce the product, but uses the “key core technology” he masters. Design and develop, control sales “channels”, the specific processing tasks are handed over to other companies to do it. This kind of method is a common phenomenon that is gradually generated in the world after the large-scale development of the electronics industry. Microsoft, IBM and other major international companies adopt this approach.
ODM (or ORIGINAL DESIGN MANUFACTURER) means “original design manufacturer”, which refers to a company that designs and produces a product based on the specifications of another company. For example, computer companies such as HP may make specific specifications for a laptop they want to market. They will specify the appearance requirements of the product, such as the size and technical requirements of the screen, the input/output port, the forward tilt of the keyboard, the shape and color of the computer bag, and the position of the speaker. They also typically specify the main internal details of the product, such as CPU or video controller specifications. However, they do not design the pattern, do not specify the type of switching transistor used for the power supply, and do not select the backlight converter frequency. These are the jobs of ODM. ODM designs and manufactures notebooks based on specifications from computer companies. ODM is also sometimes produced from existing samples. The ODM approach tends to focus more on cooperation, and in the case of OEMs, the buyer does not participate in the specific specifications of the product.
OEM is a production method that allows more and more products to be circulated in the market at a price. Handbag OME is one of the important “products” of the world’s factories in China. From the perspective of the manufacturing environment, the data released by the National Bureau of Statistics of China shows that in September 2019, the China Manufacturing Purchasing Managers Index (PMI) was 49.8%, up 0.3 percentage points from the previous month. Due to the reform of the overall economic structure, China’s current manufacturing expansion has stopped, but in some daily necessities, it still has advantages over emerging markets such as India and Vietnam. In addition to the maturity of the production process, it also includes the continuous expansion of the overall market capacity.
In fact, the OEM production of handbags in China is not only the choice of some small and medium-sized brands, but also the “benefit of wealth” of well-known handbag brands such as LV, Gucci, Prada, etc. – while ensuring production quality and reducing production costs.
So how do you do the actual OEM production work in China? As an area that has joined the World Trade Organization (WTO) for nearly 20 years, China has a relatively complete external service and external production process, which focuses on the determination of the price of two different international trade orders: CIF and FOB.
CIF refers to Cost, Insurance and Freight (insert named port of destination; in short, it is the entire customs declaration process by the seller (OEM producer or its foreign trade company), and the seller will undertake the entire cargo transportation process. Risks and losses.
FOB refers to Free On Board; corresponding to CIF, such a transaction process refers to the designated offshore port of the buyer and the seller to deliver the goods, the seller has to bear only the export customs clearance process.
Compared to this prevailing international trade rule, handbag transactions also need to consider standard issues in different countries, which is critical for buyers or OEMs:
For example, the current heavy Sino-US trade dispute has had a certain impact on Chinese handbag factory manufacturer production and exports, but after moving simple and rough production lines to Myanmar, Vietnam and other regions, some of China’s higher standard production lines still Stay in Guangzhou, Dongguan and other places to meet the higher standardization and production needs of the bag brand life cycle.
For Chinese OEM companies, the shift of production lines will bring difficulties to enterprises. However, while competing, the competitiveness of Chinese handbag factory manufacturer industry is in line with the trend of modern luggage development. The owner of the brand enjoys more bonuses in the process.