The Rundown on OEM, CM, and JDM Models

November 24, 2021

There are a lot of acronyms in hardware development. When it comes to manufacturing, OEM (original equipment manufacturing), CM (contract manufacturing), and JDM (joint design manufacturing) are three that’ll come up time after time. 

So, what exactly does it mean to use an OEM, CM, or JDM model? And, what are the challenges that come with them?

OEM (Original Equipment Manufacturing)

In an OEM model, a hardware company will design and manufacture a product. This model is often used in the automotive industry where highly complex parts are produced in low volumes (compared to common consumer electronics). The parts require unique machinery and functionalities that manufacturers often don’t support, making it logical for automobile companies to design and manufacture in-house. 

CM (Contract Manufacturing) 

In a CM model, a hardware company designs the product and outsources the manufacturing. These companies don’t have their own manufacturing facilities and work with contract manufacturers throughout the entire supply chain. For example, a company may work with one manufacturer to build one component, then give that component to another contracted manufacturer to use. This cycle continues up until it’s time for FATP (Final Assembly, Test, and Packaging), a process in which the final product is assembled!

JDM (Joint Design Manufacturing)

Less commonly used than OEM and CM models, the JDM model is a blend of the two. In the JDM model, the hardware company and manufacturer act as partners to design a product. Both companies have their own product engineers who collaborate on the design. Once a product is designed, the OEM takes charge of manufacturing it.

Manufacturing markups found in the CM model are absent in this agreement, because the OEM and hardware company are partners in a revenue share agreement. They are similarly invested in the project. This model’s low procurement costs makes it an attractive option for companies with limited budgets and bandwidths, despite being the most expensive in the long run.

What are the challenges with these models?

Since OEM, CM, and JDM models all involve cross-functional stakeholders, they face great challenges with information transfer and loss. This is especially evident in the CM model where the hardware company and CM are two separate companies. They use fundamentally different tools, making communication between product and manufacturing engineers difficult. Without a shared tool, the two parties are forced to manually email lists of replies and replies to each other, slowing down the design process. 

On the other hand, some OEMs may be structured in a way that allows for design and manufacturing engineers to work closely together. In these situations, design changes and feedback can be addressed and shared on a more ad-hoc basis. These design and manufacturing teams can have access to the same tools through enterprise licenses, easing information transfer. 

However, big OEMs often have design and manufacturing engineers who sit on different systems, making information transfer difficult. Sharing information becomes even slower and more convoluted for the biggest OEMs with lots of stakeholders. 

Slow and incomplete information transfer artificially inflates design cycles, while information loss often leads to misbuilds and delays. Bild provides a centralized, accessible platform to smoothly and securely share information, allowing engineers to iterate better and faster!

Learn more about Bild by booking a demo!