What Is an Original Equipment Manufacturer (OEM)?
An original equipment manufacturer (OEM) traditionally isdefined as a company whose goods are used as components in the products of another company, which then sells the finished item to users.
Thesecond firm is referred to as a value-added reseller (VAR)because by augmenting or incorporating features or services, it adds value to the original item. The VAR works closely with the OEM, which often customizes designs based on the VAR company's needs and specifications.
Key Takeaways
- An original equipment manufacturer (OEM) provides components for the finished products of another company, known as a value-added reseller (VAR).
- In the computer industry, OEM may refer to the company that buys products and then incorporates or rebrands them into a new product under its own name.
- Traditionally, OEMs focus on business-to-business sales, while VARs sell to the public or other end users.
- In manufacturing industries, OEMs stand in contrast to aftermarket products, which offer replacement parts that are generic and cheaper than OEM parts.
- An OEM is also different from an original design manufacturer (ODM), a company that customizes its own products for resale by the client.
1:21
Original Equipment Manufacturer (OEM)
Understanding an Original Equipment Manufacturer (OEM)
VARs and OEMs work together. OEMs make sub-assembly parts to sell to VARs. Although some OEMs do make complete items for a VAR to market, they usually don't play much of a direct role in determining the finished product.
A common example might be the relationship between an OEM of individual electronic components and a company such as Sony or Samsung that assembles those parts in making their HDTVs. Ora maker of buttons that sells customized fasteners to Ralph Lauren, with the branded monogram RL stamped on them.
Typically, no one integrated part from an OEM is recognized as playing an especially significant role in the finished product, which goes out under the VAR's corporate brand name.
Traditionally, OEMs focus on business-to-business sales, while VARs target the public or other end users. As of 2021, an increasing number of OEMs are selling their parts or services directly to consumers (which, in a way, makes them a VAR).
For example, people who build their own computers can buy graphics cards or processors directly from Nvidia,Intel, or retailers that stock those products. Similarly, if a person wants to do their own car repairs, they can often buy OEM parts directly from the manufacturer or a retailer who stocks those parts.
One of the most basic examples of an OEM is the relationship between an auto manufacturer and a makerof auto parts. Parts such as exhaust systems or brake cylindersare manufactured by a wide variety of OEMs. The OEM parts are then sold to an auto manufacturer, which then assembles them into a car. The completed car is then marketed to auto dealers to be sold to individual consumers.
There is a second, newer definition of OEM, typically used in the computer industry. In this case, OEM may refer to the company that buys products and then incorporates or rebrands them into a new product under its own name.
For example, Microsoft supplies its Windows software to Dell Technologies, which incorporates it into its personal computers and sells a complete PC system directly to the public. In the traditional sense of the term, Microsoft is the OEM, and Dell the VAR. However, the computer's product guide for consumers is most likely to refer to Dell as the OEM.
Original Equipment Manufacturer (OEM) vs. Aftermarket
An OEM is the opposite of a third-party manufacturer that produces parts for sale in the aftermarket. An OEM refers to something made specifically for the original product, while the aftermarket refers to equipment made by another company that a consumer may use as a replacement.
For example, say a person needs to replace their car thermostat, created expressly for their Ford Taurus by ABC Thermostats. They may buy the OEM part, which is a duplicate of their original ABC thermostat that wasused in the original manufacturing of the vehicle. Or they may buy an aftermarket part, an alternative made by another company. In other words, if the replacement also comes from ABC company, it is an OEM; otherwise, it is an aftermarket product.
Aftermarket equipment can be cheaper than an OEM product, but it may also come with a significant downgrade in quality or product lifetime.
Usually, consumers buy an aftermarket product because it's cheaper (the equivalent of a generic drug)or more convenient to obtain. Although aftermarket parts may be compatible with the original product, there may be a significant tradeoff in product quality or performance.
On the other hand, sometimes aftermarket producers do such a good job in manufacturing a specific part that it becomes well-known to consumers, who actively seek it out.
An example of this is the success of Hurst Performance of Warminster Township, Penn., a manufacturer of gear shifters for automobiles. Hurst shifters became so well-known for their superior performance that car buyers actually preferred them to the original part.
Eventually, Hurst shifters became so trusted that major manufacturers chose to install Hurst shifters in their own factory designs, effectively turning Hurst into an original equipment manufacturer.
Original Equipment Manufacturer (OEM) vs. Original Design Manufacturer (ODM)
An OEM is also different from an original design manufacturing (ODM), a type of private labeling for manufactured parts. An ODM company can produce and manufacture a product according to their own needs, but they may alter the design to meet a client company's specifications. These products may then be sold by the client under their own brand.
An ODM arrangement does not have as much flexibility as an original equipment manufacturer, since the client is simply customizing an existing design. However, original design manufacturing has lower costs for research and development, leading to lower prices for the end consumer. Moreover, ODM products typically have a lower minimum order quantity, making them more attractive to smaller clients.
An original design manufacturer (ODM) tends to be less expensive than an OEM manufacturer. In addition, they may be willing to accept lower order quantities.
Special Considerations
In informal usage, the term OEM can sometimes be used as an adjective, as in "OEM parts" or even as a verb, as when a manufacturer says that it plans to "OEM" a new product. This somewhat contradictory evolution is usually attributed to the computer hardware industry.
Some VAR companies such as Dell, IBM, and Hewlett Packard started to accept branded parts from outside sources in their own products. So over time, OEM came to refer to companies that rebrand or openly use other manufacturers' products for resale.
Most of this had to do with which company was responsible for warranties, customer support, and other services, but it also reflected a subtle shift in the manufacturing dynamics. In one instance, Dell stopped using chips from anonymous makersand switched to Intel for the computer processors in its computers.
Since Intel is a brand name, it brought added value to Dell’s computers. Not only did Dell advertise this prominently (using the slogan "Intel Inside!"), butits marketing materials also suggested that Intel and Dell were equal partners in the processor and computer design.
This is a contrast with Dell just telling Intel how to build the processors, as it did with its old suppliers. All of this made Dell the OEM, both in the minds of companies supplying the assembled parts and in the public's mind (after all, people think of the finished hardware and software package they buy as "a Dell computer").
What Does Original Equipment Manufacturer (OEM) Mean in Cars?
In the auto repair industry, an original equipment manufacturer(OEM) refers to the original products used by a car manufacturer. These are different from aftermarket parts, which are made by a third-party manufacturer but may be compatible with the same vehicles. OEM parts are usually preferable to aftermarket parts since they are specifically designed to fit the needs of your vehicle and may have a higher quality. Although aftermarket parts tend to be cheaper, they may also wear out more often.
What Does Original Equipment Manufacturer (OEM) Mean in Software?
In computer and electronics sales, OEM refers to the software or hardware that comes pre-installed on a new computer or device. This is typically cheaper than licensing or buying those products as an individual consumer since retailers can bundle their software at wholesale prices.
Is It Worth Paying for OEM Parts?
OEM parts tend to be more expensive than third-party manufacturers, but they are also made to a more exacting set of specifications. However, some third-party products are considered just as reliable as OEM parts, and others may be significantly cheaper. When searching for replacements, it is worth researching the different brands to determine which manufacturer offers the best combination of price and quality.
FAQs
What is an example of original equipment manufacturer? ›
In the hardware industry, the original equipment manufacturer (OEM) usually refers to a company that builds a product designed for end-users, like a PC, laptop, or printer. Apple, HP, Dell, Canon, and Brother are all examples of original equipment manufacturers.
What do you mean by original equipment manufacturer? ›An original equipment manufacturer (OEM) makes systems or components that are used in another company's end product. Computer manufacturers, for example, commonly bundle or integrate OEM parts – such as processors and software – into the solutions they sell. OEMs can save time and money.
What is an OEM product examples? ›One of the most basic examples of an OEM is the relationship between an auto manufacturer and a maker of auto parts. Parts such as exhaust systems or brake cylinders are manufactured by a wide variety of OEMs. The OEM parts are then sold to an auto manufacturer, which then assembles them into a car.
What does OEM mean original? ›OEM stands for original equipment manufacturer. The original manufacturer of the auto parts sold at Penske Chevrolet of Cerritos is GM. Aftermarket auto parts are parts made by third party companies based on OEM part designs. Which is better?
What are 3 examples of manufacturing? ›For example, bakeries, candy stores, and custom tailors are considered manufacturing, because they create products out of components. On the other hand, logging and mining are not considered manufacturing, because they don't change the good into a new product.
What is the difference between original and Original Equipment Manufacturer? ›Original equipment manufacturer (OEM) stands for companies that do the bulk production, while original design manufacturer (ODM) stands for the company that designed the product.
What is the difference between OEM and original? ›The OEM parts we carry are precisely the same as the part that came with your car. The difference is that it doesn't carry the manufacturer's logo. OEM parts are just as reliable as genuine parts, but you get them for a better value. Aftermarket.
Does OEM stand for Original Equipment Manufacturer? ›An Original Equipment Manufacturer or OEM is a company that manufactures and sells products or parts of a product that their buyer, another company, sells to its own customers while putting the products under its own branding. OEMs commonly operate in the auto and computer industries.
What does OEM only mean? ›If your vehicle has ever been in the shop for maintenance or repairs, you've likely heard of the term OEM in reference to replacement parts and components. OEM stands for “Original Equipment Manufacturer” and these types of components offer a number of advantages and benefits compared to aftermarket parts.
Is OEM the same as factory? ›Manufacturer. OEM parts are made by the car manufacturer's factory, not by a third party. They tend to fit perfectly because the car manufacturer backs them. Aftermarket parts are often manufactured by a company other than your car's manufacturer.
How do I find my OEM manufacturer? ›
- Telephone research may be the most direct way but whether the company would divulge this information could depend on why you want to know. ...
- You could try finding articles in industry-specific trade journals and newsletters, from our business databases.
An original equipment manufacturer (OEM) is generally perceived as a company that produces non-aftermarket parts and equipment that may be marketed by another manufacturer. It is a common industry term recognized and used by many professional organizations such as SAE International, ISO, and others.
What does OEM quality mean? ›OEM stands for Original Equipment Manufacturer, and OEM parts are branded with the automaker's name and/or logo. They also come in the automaker's packaging. Many consider OEM parts to be the best choice. They're built with high-quality materials and to the automaker's specifications.
Is OEM authorized Meaning? ›OEM stands for original equipment manufacturer; when a shop receives an OEM Authorization Certificate, it means that the auto body shop has been recognized by manufacturers as working within their repair parameters.
What are 10 examples of manufacturing industry? ›Among the most important manufacturing industries are those that produce aircraft, automobiles, chemicals, clothing, computers, consumer electronics, electrical equipment, furniture, heavy machinery, refined petroleum products, ships, steel, and tools and dies. Manufacturing is treated in a number of articles.
What do you mean by manufacture explain with example? ›Manufacturing is defined as the creation of new products, either from raw materials or components. Examples of manufacturing include automotive companies, bakeries, shoemakers and tailors, as they all create products, rather than providing services.
What are 5 examples of equipment? ›- personal computers.
- telefax equipment.
- typewriters.
- cameras of all kinds (film and electronic cameras)
- sound or image transmitting, recording or reproducing apparatus (tape and video recorders and video reproducers, microphones, mixing consoles, loudspeakers)
Equipment Manufacturer means an individual or entity engaged substantially in the business of developing, manufacturing, distributing, selling, installing, or launching with respect to communications or information technology products, primarily hardware.
What is the definition of manufacturing equipment? ›Manufacturing equipment is defined as “anything kept, furnished, or provided for a specific purpose.” Essentially, manufacturing equipment is anything that supports the function of manufacturing goods for sale by the company.
Are OEM parts original parts? ›What is an OEM part? OEM stands for 'Original Equipment Manufacturer', meaning that these parts are officially produced by the vehicle maker. As they're backed by the car manufacturer, they are specifically designed as replacement parts for the vehicle at hand, offering the perfect fit.
Are OEM parts better quality? ›
Because they are made in the same way as genuine parts, OEM parts tend to be more reliable than aftermarket parts and last for longer. Warranty. OEM parts should come with a warranty to protect you if the part is defective or doesn't work properly.
What's the difference between OE and OEM? ›OEM stands for original equipment manufacturer. OE stands for original equipment. OE parts are the components of the vehicle as it's made in the factory – all of the original parts that the car was first built with. Once the car comes out of the factory, everything else is not an OE part.
What does OEM mean in purchasing? ›What is OEM Procurement? An original equipment manufacturer (OEM) is a company that supplies components that are used in the production of goods by other manufacturers.
Is the OEM the same as a serial number? ›Sometimes abbreviated as Serial No., SN or S/N, a serial number is a unique number assigned to the PC by the OEM (Original Equipment Manufacturer) used for identification and inventory purposes.
How do I know if I have OEM or not? ›Open Start. Search for Command Prompt, right-click the top result, and select the Run as administrator option. Type the following command to determine the license type and press Enter: slmgr /dli Quick tip: You can also use the same command syntax in PowerShell.
Is Apple an OEM? ›Apple is the OEM. Apple designs its products, but Apple outsources the majority of iPhone manufacturing production to contract electronics solutions providers. Both EMS and ODM.
What does OEM mean in a job description? ›An original equipment manufacturer, or OEM, is a company that produces the parts and equipment another company markets. Manufacturers work with OEMs in different capacities, whether in vehicle manufacturing, parts installation or software systems.
What does OEM mean for maintenance? ›Original Equipment Manufacturer (OEM) Support
OEM network support is designed to maintain the uptime of equipment for a specified period.
Original Equipment Manufacturer (OEM)
As the name states this warranty is provided by the manufacturer of the device/product. Generally, that manufacturer will allow you to buy extended warranty once the initial term ends.
OEM (Original Equipment Manufactured) refers to products that are manufactured by the original brand, while non-OEM pertains to parts or equipment that is manufactured by a third party.
Who is the biggest OEM in the US? ›
The United States of America-based Ford Motor Co is the leading automotive OEM in the US (by revenue).
Which company is an OEM? ›An original equipment manufacturer (OEM) makes systems or components that are used in another company's end product. Computer manufacturers, for example, commonly bundle or integrate OEM parts – such as processors and software – into the solutions they sell.
What are the famous OEM companies? ›Volkswagen AG, Toyota Motor Corp, BYD Co Ltd, Stellantis NV, SAIC Motor Corp Ltd, Honda Motor Co Ltd, Ford Motor Co, Mercedes-Benz Group AG, General Motors Co, and Renault SA are the major 10 automotive OEMs in the world in 2021 by number of employees.
What is OEM labeling? ›OEM (Original Equipment Manufacturer) labeling is a practice used in manufacturing industries. Its primary use is to identify and label equipment that requires specific steps for operation, safety, and maintenance.
What is an example of an ODM? ›ODM (Original Design Manufacturer)
Since the ODM designed the product, it owns the “rights” to it. Example: Consumer electronics like phone cases and chargers are examples of ODM-created products, which are more common in the food industry (think of the term “generic” and “store brand”).
Examples of Manufacturing Business
Ford Motor Company (Automotive technology production) General Electric (Power production) Boeing (Aviation and spacecraft production) General Motors Corporation (Automotive production)
Manufacturing equipment is defined as “anything kept, furnished, or provided for a specific purpose.” Essentially manufacturing equipment is anything that supports the function of manufacturing goods for sale by the company. Examples of standard manufacturing equipment include: Machinery.
What is difference between OEM and ODM? ›OEM products are sold by the manufacturer based on the buyer's specifications. ODM products are finalized or are pre-designed products that are sold under the brand name of the purchasing company. ODM products are complete and finished products, unlike OEM products.
Is Apple an OEM or ODM? ›Apple is the OEM. Apple designs its products, but Apple outsources the majority of iPhone manufacturing production to contract electronics solutions providers. Both EMS and ODM.
What is the difference between manufacturer and OEM? ›An OEM partner is a company that manufactures products for another business. The manufacturer is the original equipment manufacturer because they manufacture the product for use in other brands.
What are the 5 types of manufacturing? ›
- Repetitive manufacturing.
- Discrete manufacturing.
- Job shop manufacturing.
- Process manufacturing (continuous)
- Process manufacturing (batch)
Aircraft, automobiles, chemicals, clothing, computers, consumer electronics, electrical equipment, furniture, heavy machinery, refined petroleum products, ships, steel, and tools and dies are some of the examples of manufacturing industries. Further Reading: Distribution of Major Industries in India.
What does manufacturing mean example? ›Manufacturing is defined as the creation of new products, either from raw materials or components. Examples of manufacturing include automotive companies, bakeries, shoemakers and tailors, as they all create products, rather than providing services.
What are examples of equipment? ›Computers, trucks and manufacturing machinery are all examples of equipment. They are tangible because they have a physical form—unlike intangible assets (such as patents, trademarks or copyrights) that do not.