Lots of importers work with ODM suppliers to manufacture their new products. This is where the supplier’s existing design can be private-labelled and sold as your own branded product, for instance, you brand a generic toaster oven that they have designed and made with your logo. It’s a solution that importers with little design, development, and manufacturing skills choose due to the ease of getting to market.
But what happens if the ODM electronic products you’ve ordered don’t reach your expectations and the manufacturer refuses to take any responsibility..?
“The ODM electronic product we’ve ordered is poor quality! What can we do?”
A customer of ours (unnamed to protect their identity) had ordered an electronic product from an ODM supplier which didn’t reach their quality expectations even though a quality agreement had been signed by both parties.
The customer requested the supplier to pay for rework or repair of the defective pieces, but they refused to take any responsibility only offering to send replacement units for some of them.
You need to know the following about working with ODMs…
In this situation, here are a couple of points you should be aware of:
# The customer is not always right
An ODM product’s IP is owned by the supplier (That’s in theory only. In some cases, the supplier can’t show the logs of the design files, which would suggest that they didn’t do the design work themselves because they stole the design from another company… often another one of their customers). But, for all intents and purposes, the IP is not owned by the customer.
What is the effect of this situation?
The customer is seen as a distributor. In China, it’s OK to negotiate payment terms with a distributor. It’s generally OK to send some replacement units when the distributor finds defectives. But a challenge to the general quality of the product, coming from a distributor, is generally seen as out of place.
# Chinese ODM products tend to be quite shoddy
Before we are accused of being unfair, let’s get a few facts straight. Some large Chinese-owned companies (e.g. Huawei, Haier, Lenovo…) know how to bring a great product to market. They have their own versions of the NPI process, and sometimes it is quite good. They have accumulated a lot of experience and they have learned a lot from their large foreign customers/partners.
Unfortunately, that’s not true for 99% of Chinese-owned companies.
They haven’t got to the point where they have sufficient experience of what can go wrong coupled with exposure to the ways best-in-class companies develop new products. They also don’t take quality/reliability complaints very seriously, and often manage to avoid bearing the full cost of failures (as explained earlier in this article), so there is little motivation to improve.
As a consequence, most products that are “developed by a Chinese company” come with design issues, include unsuitable components, suffer from inconsistent manufacturing quality, are out of compliance with the regulations of importing countries, and/or may display yet other issues!!
The situation is improving, but that’s a slow process. As we noted earlier there is little motivation in many cases.
What to do if you’re in a similar situation
If you receive poor quality/reliability products from an ODM supplier based in China, what can you do?
First, some semantics and a quick rule of thumb:
- If the product fails very quickly after shipment, it is probably a manufacturing quality issue (of the assembly supplier, or their component suppliers).
- If the product fails later, randomly, say 3 or 6 months after the start of use, it’s usually a design issue that makes the product unreliable.
In both cases, the supplier is responsible if they are an ODM. But reliability issues are particularly painful for the customer since even a product inspection at the factory often fails to detect such issues. The problem starts to be visible after the goods have been shipped out of China — unless you do suitable reliability testing, but for some reason, it seems customers of ODM products never think of doing this, unfortunately for them.
Having a documented quality standard about what is, and is not, acceptable is great. But it is not sufficient in those cases.
A manufacturing agreement that includes penalties etc. for such issues, and is enforceable in China, is necessary.
Do you find yourself in a difficult situation with a Chinese supplier? Let us know and we might answer your questions in a post like this! Contact us here.
P.S. We can help you create a manufacturing agreement to protect against situations like this based on our tried-and-tested template. Feel free to ask about this if it’s of interest 👍
Other helpful content
You may also find these posts and podcast episodes helpful in this case:
- OEM, ODM, Contract Manufacturers: Which Chinese Supplier To Choose?
- Producing Private Label Products From Existing Products In China: 3 Supplier Options
- Sourcing Chinese Manufacturers: Western Or Chinese Model? [Podcast]
- Do I Need An EMS Supplier In China To Manufacture My Electronic Devices?
- The Danger of Developing your Custom Product with an ODM Factory
- Unsure where to start with sourcing a Chinese manufacturer? Listen to these podcast episodes! 👉 DIY Sourcing from China Series