Manufacturing Transformation: From OEM Capability to Brand Orders

Summary: This article explores the core proposition of manufacturing transformation—why "having technology and capacity" still does not necessarily win brand orders. The article analyzes common commercial transformation gaps of OEM/ODM companies from the perspective of brand-side procurement and offers a prudent, actionable 90-day starter framework to help companies translate factory capabilities into supplier value that brand buyers can understand.

Introduction:

People who run factories all understand that the golden era of manufacturing has passed. It did not just end today; it has been declining for several years. Competition within and outside the inner circle keeps intensifying, orders are becoming harder to win, profits are getting thinner, and payment terms are being extended.

Even more unsettling is that external environmental uncertainty is becoming the norm. A 2026 report from the United Nations Conference on Trade and Development noted that global merchandise trade growth is expected to slow from 4.7% in 2025 to a range of 1.5% to 2.5% in 2026 (United Nations Conference on Trade and Development, 2026). World Bank data indicate that global trade growth in 2025 is expected to be only 1.8%, a near ten-year low (World Bank, 2025). A World Economic Forum report stated that global value chains have entered an era of structural volatility: tariff escalations among major economies in 2025 reshuffled over USD 400 billion of global trade flows, while disruptions to major shipping routes drove container shipping costs up 40% year-on-year (World Economic Forum, 2026). Geopolitical risk has evolved from occasional "black swan" events into high-frequency, high-impact "gray rhinos"; uncertainty has become the most unpredictable yet unavoidable core variable in global production and supply chain adjustments (Economic Daily, 2026).

But strangely, some companies, no matter how the environment changes, remain busy with orders pouring in. Their equipment may not be the newest, their scale not the largest, their prices not the lowest, yet brand buyers still choose to work with them. What are they doing right?

This article attempts to answer that question—not from theory, but from the practical decision logic of brand-side procurement.

Why manufacturing transformation cannot focus only on factory internals Over the past decade, when people talk about manufacturing transformation, most immediately think of things on the shop floor: installing automation equipment, implementing MES systems, doing lean production, obtaining ISO certifications. Are these things valuable? Yes. But for OEM/ODM companies, a more fundamental commercial issue is often overlooked—doing well inside the factory and winning brand orders are two different matters.

According to data released by the National Bureau of Statistics in 2026, the operating revenue profit margin of industrial enterprises above designated size nationwide in 2025 was 5.31%, and manufacturing was even lower at 4.70% (National Bureau of Statistics, 2026). What does that mean? For every CNY 100 of business, less than CNY 5 is actually pocketed. Zhou Weifu, a researcher at the Institute of Industrial Economics, Chinese Academy of Social Sciences, pointed out that under the traditional development model, enterprises are generally locked into low-end segments of the global industrial chain, at the bottom of the "smile curve," mainly engaged in low value-added processing and manufacturing activities (Zhou Weifu, 2025). This model can be sustained when the external environment is stable, but in today’s era of normalized uncertainty, its fragility is fully exposed.

It is also worth noting that the profit decline is not cyclical fluctuation but a structural downward shift. Financial reports from 2025 for sports footwear and apparel contract manufacturers show that among 14 OEMs, 10 saw revenue growth, but net profit year-on-year growth was achieved by only Jingyuan International; the largest profit decline was at Zhongjie (New Balance’s core OEM), which fell by 68.61%. Leading OEMs generally face profitability pressure: Shenzhou International’s net profit attributable to shareholders in the first half of 2026 dropped about 40% year-on-year, and Huali Group’s net profit attributable to shareholders in the second quarter fell 37% year-on-year (Jinri Toutiao, 2026). "Revenue up but profit not up" has become a collective dilemma for the OEM industry.

Research from the Chinese Academy of Social Sciences further points out that the "involution-style" competition in China’s manufacturing manifests in two dimensions: horizontal "price involution" and vertical "chain involution," and the rise of platform companies has further intensified this "involution-style" competition, leading to the risk of manufacturing becoming "big but not strong" (Huang Qunhui, Ye Qichu, Reform, 2025). A 2024 study by the Hong Kong Productivity Council also shows that 81% of Hong Kong manufacturing enterprises have not yet adopted intelligent solutions to cope with the new trend of "small batches and customization," while 67% of enterprises have received or expect to receive customer demands to join green and sustainability standards (Hong Kong Productivity Council, 2024). These data reflect that manufacturing enterprises are facing not only internal efficiency issues but also problems of external market access capability.

Common commercial transformation gaps of OEM/ODM companies From the brand-side procurement perspective, OEM/ODM enterprises that possess technology and capacity often have gaps in the following areas:

First, unclear market positioning. Companies are used to describing themselves with "we have XX equipment" or "we can do XX processes," but brand buyers do not care about an equipment list; they care about "what problems you can solve for me." A lack of clear market positioning makes the company appear to the brand buyer as just a "capacity supplier" rather than a "solution partner."

Second, unclear target brands. Many companies try to contact brand buyers but lack systematic target screening, resulting in dispersed resources and low contact efficiency. Brand procurement decisions involve multiple departments and roles; if a company does not understand the decision chain, it often contacts the wrong people and wastes time. B2B International’s "Superpowers Index" research notes that B2B procurement decisions involve multiple functional roles, including procurement, technical experts, senior management and end-users; each role participates at different stages of the decision journey and focuses on different dimensions (B2B International, 2026). Companies need to prepare different communication materials for different roles.

Third, insufficient exposure channels. Brand buyers will not actively look for unknown suppliers. If a company lacks sustained exposure through Douyin, Xiaohongshu, Video Accounts, industry trade shows, industry media and other channels, it will be difficult to enter the brand buyer’s supplier radar. Mainland manufacturers should particularly emphasize operating corporate accounts on Douyin and Xiaohongshu. Xiaohongshu’s monthly active users exceeded 350 million in 2026, and B2B search volume grew 62% year-on-year (Hucheng, 2026). On Douyin, Hebei Boang Auto achieved CNY 350 million in sales for 2025, with 85% of orders coming from online live streams and 70% of customers from other provinces (Economic Daily, 2026). Shijiazhuang Kolin Electric conducted 110 live streams in 2025, acquiring nearly 1,200 effective sales leads and directly driving contract signings of nearly CNY 20 million (Hebei News Network, 2026).

Fourth, failure to translate technical language. Companies habitually list technical specifications, but brand buyers need to know "how these specifications translate into commercial value in terms of stable quality, controllable cost, low supply risk." B2B International further indicates that 78% of manufacturing buyers globally say procurement cycles have lengthened compared to last year, and "technical expertise" and "innovation capability" have become the primary considerations for manufacturing buyers when selecting suppliers (B2B International, 2026). But technical expertise must be effectively communicated to truly influence brand-side decisions.

Fifth, assuming low price will win orders. Many manufacturers still believe "as long as I offer the best price, the brand buyer will choose me." This notion is outdated. B2B International’s three consecutive years of research consistently show that trust—defined by buyers as "feeling secure at the time of signing"—is the strongest driver of B2B selection, ranking first ahead of price, innovation and functional performance (B2B International, 2026). Domestic research also confirms the central role of trust in Chinese B2B relationships. Research based on the China Entrepreneur Survey System shows that bilateral trust significantly promotes cooperation by reducing search costs, contracting costs, and management and supervision costs between enterprises and distant suppliers (Xiamen University, 2025).

How to translate factory improvements into supplier value brand buyers can understand Factory-internal improvements—such as upgrading quality systems, optimizing lead-time management, and preparing for ESG compliance—are valuable in themselves, but these values must be "translated" into language that brand buyers understand.

Translating technical language is key. Companies should not merely list equipment and specifications; they should connect these capabilities to the brand buyer’s concerns about quality stability, cost control, supply risk management and compliance sustainability. How to translate this concretely needs to be customized according to the company’s product characteristics and the procurement priorities of target brand buyers. This usually requires assistance from external professionals. If you need to understand specific methods, please contact us.

ESG compliance pressure is particularly evident. Apple plans to achieve a production supply chain "carbon neutral" target by 2030, and suppliers participating in Walmart’s "Project Gigaton" must disclose carbon footprint data. The EU Carbon Border Adjustment Mechanism (CBAM) was officially implemented in 2026 and is expected to expand to more than 180 downstream products by 2028. Electronics contract manufacturers also face multiple pressures of "Scope 3 + customer audits + digital product passports" (21st Century Business Herald, 2026). Translating these compliance requirements into value language brand buyers understand likewise requires professional guidance.

Four layers from market positioning, procurement access, supplier onboarding to sustained delivery The ultimate goal of manufacturing transformation is to move the company from "passive order-taking" to "proactively engaging brand buyers." This process can be divided into four layers:

Layer 1: Market positioning. Companies need to clearly answer "who we are, whom we serve, and what problems we solve." This requires systematic sorting and external validation.

Layer 2: Procurement access. Companies need to understand the brand buyer’s procurement process, decision chain and supplier evaluation criteria. How to prepare appropriate materials and communication strategies should be customized to the company’s situation.

Layer 3: Supplier onboarding. Brand buyers have strict audit requirements for new suppliers. Domestic standards for supplier management have been issued, such as the "Technical Guide for Quality Management of Suppliers of Industrial Enterprises" (T/GDFCA 085-2025), which stipulates lifecycle management requirements including supplier onboarding, daily management and performance assessment (China Standards Service Network, 2025). Large enterprises like Yili have already required suppliers to conduct self-evaluations according to social responsibility audit guidelines (Yili Group, 2025). Systematically identifying and meeting these requirements requires professional diagnostics.

Layer 4: Sustained delivery. Obtaining the first order is only the beginning. Companies need to establish operational systems capable of sustained delivery and continuous improvement to upgrade from a "trial supplier" to a "strategic partner."

A prudent, actionable 90-day starter framework Below is a general 90-day plan example; it is not a promise or guarantee and is provided for company reference only. How to implement it specifically needs to be customized according to the company’s status.

Days 1–30: Diagnose current situation and clarify objectives. Systematically assess your status across six domains—order sources, profit distribution, technical capacity, brand recognition, sales and service, and onboarding readiness—and identify priority gaps for improvement.

Days 31–60: Organize capability evidence, prioritize target brand buyers and onboarding materials. Convert factory capabilities into verifiable evidence for brand buyers and establish a target brand buyer list.

Days 61–90: Begin targeted outreach, collect market feedback and improve the highest-priority gaps. Use channels such as Douyin, Xiaohongshu, Video Accounts, and industry trade shows to rhythmically contact target brand buyers, and adjust strategies based on market feedback.

If you want to learn how to customize a 90-day action plan for your company, please contact us.

Conclusion Manufacturing transformation is not just equipment upgrades or software implementation; it is a commercial transformation from "OEM capability" to "brand-side orders." Companies need not only better products but also a set of supplier capabilities that brand buyers can understand, evaluate and choose.

If you would like to understand your company’s priority gaps in brand-side onboarding, please download the sample report or complete the free "Brand Order Onboarding Assessment Questionnaire."

FAQs Q1: Does manufacturing transformation necessarily require the implementation of ERP or MES systems? A1: Not necessarily. System implementation can be part of transformation, but the core of transformation is the enhancement of commercial capabilities. Companies should first clarify business objectives and then decide whether system support is needed.

Q2: Can OEM/ODM companies directly engage brand buyers? A2: They can, but systematic preparation is required. Brand buyers have strict supplier evaluation standards; companies need to understand procurement processes, prepare onboarding materials, build exposure channels, and translate technical capabilities into commercial value that brand buyers can understand.

Q3: Does the 90-day framework guarantee obtaining orders? A3: It does not guarantee. The 90-day framework is a planning example to help companies start systematically. Actual results depend on the company’s execution capability, market environment and the specific needs of brand buyers.

Q4: What supplier conditions do brand buyers value most? A4: According to B2B International’s three consecutive years of research, trust is the strongest driver of B2B selection, ahead of price and innovation. Domestic research also shows that bilateral trust significantly promotes cooperation between suppliers and enterprises by reducing search costs, contracting costs and management and supervision costs (Xiamen University, 2025).

Q5: Besides connecting me to brand buyers, can you provide guidance in other areas? A5: Certainly. In addition to assisting companies in obtaining brand orders, we also provide operational optimization guidance, including supply chain and sales-side restructuring, cost compression, and organizational optimization. If a company has technology but lacks market channels, we can help commercialize the technology; if a company wants to shift from OEM to branded products, we can provide capacity transformation advice; if a company is considering expansion, mergers, divestments or exits, we can also provide capital transaction support.

Q6: Many manufacturers believe "if I offer the best price, I will win the order"—is this view still valid? A6: This view is outdated. B2B International’s research shows that trust has been the strongest driver of B2B selection for three consecutive years, ranking ahead of price (B2B International, 2026). We recommend that companies compete on value anchors rather than price wars to win orders.

Internal Link Suggestions Further reading: OEM / ODM 如何由代工能力走向品牌方直接订单？（链接至 /oem-odm-brand-orders）

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