Chinese factories are known as the world’s foundries, with 60 percent of luxury brands choosing Chinese foundries. According to the global luxury report, as early as 2009, 60 percent of international luxury brands had OEM production in China.
In recent years, with the increasingly frequent trade friction between the United States and China, orders have decreased, labor costs have gone up, raw material prices have remained high, and the RMB exchange rate has hit new highs. In 2018, the pressure coefficient of China’s OEM enterprises soared from 55.56%, 52.10% and 32.95% to 81.43%, 81.67% and 48.11% respectively. News reports of modern factories closing in dongguan, foshan, guangzhou and elsewhere in guangdong province, China, once known as the “World factory”, is at risk of losing its status
As the foundries at the bottom of the supply chain, they are gradually seeking transformation. 「create my own brand」 This has become a common understanding of many OEM factory directors. The revolution from traditional OEM to ODM to OBM has not been so easy.
OEM means Original Equipment Manufacturer, focus on manufacturing, only manufacturing. They don’t need to do market research and after-sales service for consumers, no need to establish product sales channels and no need to create product brands. How to transform the business model of these OEM factories. There are three big problems for their factory CEO to consider.
１．served different people
OEM factories only need to face the production of the principal, or wholesalers，But OBM factories, they need access to the market, need access to the users, need to know what the consumers want, need to know how to judge the product. The ability to build a factory is different from the ability to build a brand. The core capability of enterprise are different, OEM factories need the following two capabilities to better become OBM factories:
The first: Insight into final requirements. Make use of Internet big data to select popular products in the market and launch products that meet the requirements of different customers.
The second: Utilization of new capacity. It means the ability to apply the knowledge of the new manufacturing system, the internet-based manufacturing system. The implementation of factory automation, in the key position to eat machine instead of people to work, reduce human error, improve product qualification rate, improve production efficiency, reduce costs.
From the year before last, our factory introduced the electronic laser cutting machine and the numerical control machine, which officially started our automation era. The quality of semi-finished products coming out of the cutting machine every day is 3 times higher and the speed is 7 times faster than before. This year we are going to introduce a robotic arm, which will become a major force in our factory. This is an important deployment to upgrade our OBM factory.
２．How to sell
In fact, the advantages of OEM factory in China are very obvious. Most of the OEM factories have already possessed the product control system of design and development. The essence of OEM factory is that its factory has no brand, no brand, no channel, no market advantage. So they don’t know how to sell? where to sell? sell to who?
Coming of the Internet age provides a new opportunity for China’s OEM factory. On brand building, traditional practice requires large-scale investment in advertising media, Large companies also take decades to show results. But now in the Internet era, No matter the size of the company, Companies can effectively interact with customers』 fans by setting up websites or open a account in alibaba . In addition, Google AD have good publicity effect on this platform. Factory + Internet, brand building have many new ways, new methods, and the cost is more than the traditional way, more flexible operation.
Just like our factory, Previously, the products we processed were all light luxury brands in the world, and the product quality is beyond doubt. But along with the change of economic environment and competitive environment, the profit of the factory is shrinking. For the plant to continue to grow，we determined to set up our own studio, build our own website and sales channels, To make new national goods, make our brand. The development of Internet and e-commerce market makes everything possible.
３． Brand building takes a long time
The establishment of a brand needs to invest time and money if not handled properly, it will bring down the factory. In terms of promotion and transformation of input and output, sometimes it is not in direct proportion. Millions of funds are invested every year, but the short-term effect is not visible. In this case, whether to continue to be a problem faced by many OEM factories.
Incubating your own brand from the OEM business is one way to achieve brand building, Issues to pay attention to in brand creation:
- existing brands are not in conflict with OEM partners
- solve cultural conflicts. Manufacturing and marketing are two different cultures, but they are not in conflict. They need to operate independently and cooperate with each other
- Manufacturing itself is a brand, and strong production strength and production scale are also successful elements of brand promotion. Brand is not only manufacturing, it contains a series of meanings, the understanding of brand value, the understanding of customers, the commitment to society, the experience and feeling it brings to customers
As a pure productivity, OEM factories will occupy a lower and lower position in the world’s manufacturing system. This production method relies too much on low cost, but this advantage will be lost in a moment. How China’s factories seize the opportunity, through their own efforts, coupled with the progress of Internet technology, to develop and expand themselves, climb from the low end of the supply chain to the high end from OEM to ODM leap to OBM, from “Made in China” to “Create in China”, is not only a matter of one factory and one enterprise, it is also the only way for the development of the whole China.