Have you ever wondered how the products you use daily, like your phone or car, are put together? You have probably heard the term OEM, but what does it mean? Well, it’s not as complicated as it may sound. OEM, which stands for Original Equipment Manufacturer, plays a vital role in products and technology.
This article discusses what OEM is, how the EM operates, the difference between similar terms and its role in various industries.
What is OEM?
An Original Equipment Manufacturer (OEM) is a company that specialises in producing components or parts that are used in the final products of another company, which is known as a Value-Added Reseller (VAR). This relationship between the OEM and VAR is often a collaborative one, with the OEM tailoring its designs and products to meet the specific needs and requirements of the VAR.
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How do OEMs operate?
OEMs typically manufacture parts or components to supply to VARs. While some OEMs may produce complete items for VARs to sell, they don’t typically determine the final product’s specifications. For example, an OEM might produce electronic components that a VAR like Samsung incorporates into its HDTVs. Likewise, a fashion brand like Ralph Lauren might purchase customised fasteners from an OEM bearing the RL monogram.
In most cases, OEMs focus on business-to-business transactions, while VARs target the general public or end-users. For instance, an automaker may source various components from OEMs, such as exhaust systems or brake cylinders. These parts are assembled into cars and sold to consumers through dealerships. However, some OEMs also offer their components to the public directly through manufacturers or retailers who stock their products.
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Difference between OEM and ODM
It’s important to distinguish between Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM).
- An ODM produces products to meet a client’s specifications and is often labelled and sold under the client’s brand name.
- ODMs have less flexibility in terms of design since they tailor their products according to the client’s requirements. However, this approach results in lower research and development costs, which can lead to more affordable prices for consumers.
- ODM products typically have lower minimum order quantities, making them appealing to smaller clients.
OEM vs Aftermarket
The aftermarket is the market for replacement parts, accessories, and equipment needed to maintain or upgrade a product after its purchase. OEMs create the original parts, while other companies produce aftermarket equipment for consumers to purchase as replacements.
Aftermarket replacement parts are often designed to match the specifications of the original OEM part. For example, suppose you own a Ford car and need to replace a thermostat. In that case, you can choose an OEM part from the manufacturer, an identical duplicate, or an aftermarket or generic part produced by a different company.
Consumers often opt for OEM parts for consistency, but in some cases, aftermarket equipment surpasses OEM replacements in performance and preference.
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Role of OEM in various industries
Technology and OEM
In the tech industry, OEMs are companies that either rebrand or openly use products from other manufacturers. This rebranding indicates which company is responsible for warranties, customer support, and other services. For example, Dell used Intel processors in its computers and marketed that they had Intel Inside; Dell is seen as the OEM in this case, responsible for the processor and computer design, even though Intel made the processor.
OEM in different industries
OEMs are essential in many industries, like automotive and technology. They create parts for cars, electronic devices, and even medical equipment. These specialised parts are crucial for ensuring the quality and functionality of the final products.
So, when you hear about OEMs, remember that they are the companies behind the parts that make the things you use every day work properly. Whether it’s your car, phone, or computer, OEMs play a vital role in ensuring everything runs smoothly.
