Original Equipment Manufacturer

Original Equipment Manufacturer

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An original equipment manufacturer, or OEM, manufactures products or components that are purchased by a company and retailed under that purchasing company's brand name. OEM refers to the company that originally manufactured the product. When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part. In this usage, OEM means "original equipment from manufacturer".

Confusing and contradictory definitions


OEM may refer to a company that purchases for use in its own products a component made by a second company. Under this definition, if Apple purchases optical drives from Toshiba to put in its computers, Apple is the OEM.

Contradictory usage:
An even more confusing, contradictory definition is a company that sells the product of a second company under its own brand name
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...

.

Alternatives to contradictory or confusing use:
Instead of OEM, companies may label themselves resellers.

Companies who buy parts and then resell those parts with some amount of additional value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...

 added along the way (such as assembly, customer support, or continued maintenance) may be better termed value-added reseller
Value-added reseller
A value-added reseller is a company that adds features or services to an existing product, then resells it as an integrated product or complete "turn-key" solution...

s (VARs) or reseller
Reseller
A reseller is a company or individual that purchases goods or services with the intention of reselling them rather than consuming or using them. This is usually done for profit...

s.

Automotive parts


When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part. In this context, OEM stands for "original equipment from manufacturer". As most cars are originally assembled with parts made by companies other than the one whose badge appears on the vehicle, it may happen that a car company sells OEM spare parts without claiming to be an OEM itself.

An automobile part may carry the designation OEM if it is made by the same manufacturer and is the original part used when building and selling the product. The term aftermarket
Aftermarket (automotive)
The automotive aftermarket is the secondary market of the automotive industry, concerned with the manufacturing, remanufacturing, distribution, retailing, and installation of all vehicle parts, chemicals, tools, equipment and accessories for light and heavy vehicles, after the sale of the...

 is often used for non-OEM spare parts.

In purchasing parts at national discount part chains, for example Autozone, Advance auto, Pep Boys
Pep Boys
The Pep Boys — Manny, Moe & Jack , branded as Pep Boys Auto and commonly abbreviated as Pep Boys, is a full-service and tire automotive aftermarket chain....

, Napa, etc., many parts will have OEM prominently displayed, and then a qualifier such as "meets OEM standards", etc. These parts are not OEM; they are simply made to the same specifications as the OEM parts. These parts are better termed "OEM spec. parts", although they may carry the label "OEM", instead.

Economies of scale


OEMs rely on their ability to drive down the cost of production through economies of scale. Also, using an OEM allows the purchasing company to obtain needed components or products without owning and operating a factory.

Origin of term


While the term was used in the early 1960s and 70s in the US to refer to value-added reseller
Value-added reseller
A value-added reseller is a company that adds features or services to an existing product, then resells it as an integrated product or complete "turn-key" solution...

s, OEM is currently defined by IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...

 to refer to "a manufacturer of equipment that may be marketed by another manufacturer". It may derive from a Dutch phrase, "onder eigen merk", which means "under own brand".

OEM labeling


OEM labels can help companies identify dangerous areas in the workplace or hazardous areas on the products they manufacture. Companies also use OEM labels to track the products they manufacture. This allows the company to track the product from the factory, to the warehouse, then to the store where the product is sold. When the store receives the shipment the product is removed from the company’s inventory control system.

See also

  • Contract manufacturer
    Contract manufacturer
    A contract manufacturer is a manufacturer that contracts with a firm for components or products. It is a form of outsourcing.-Business model:...

  • Golden sample
    Golden sample
    A golden sample is a sample produced by a manufacturer that is perfect in almost all ways so that when sent to the media it can be tested and receive a high standard review. The term golden sample can also be used to describe a product that is a very rare find and is perfect in almost all ways and...

  • Original design manufacturer
    Original Design Manufacturer
    An original design manufacturer is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce without having to engage in the organization or running of a factory...

  • Outsourcing
    Outsourcing
    Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

  • Private label
    Private label
    Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting...

  • Rebranding
    Rebranding
    Rebranding is the creation of a new name, term, symbol, design, or a combination of them for an established brand with the intention of developing a differentiated position in the mind of stakeholders and competitors....

  • Value-added reseller
    Value-added reseller
    A value-added reseller is a company that adds features or services to an existing product, then resells it as an integrated product or complete "turn-key" solution...