Original Equipment Manufacturer (OEM)

Demystifying Original Equipment Manufacturer (OEM): What You Need to Know

Original Equipment Manufacturer (OEM) is a term often used in various industries, but its meaning and implications may not always be clear. In this article, we'll explore what OEM entails, its relationship with value-added resellers (VARs), and how it differs from aftermarket products.

Understanding OEM: The Basics

An Original Equipment Manufacturer (OEM) is a company that produces components or parts used in the products of another company, known as a value-added reseller (VAR). The VAR enhances the original product by adding features or services before selling it to end-users. OEMs and VARs typically collaborate closely, with OEMs customizing designs to meet the specific requirements of VARs.

OEM in Practice

In practice, OEMs often manufacture sub-assembly parts sold to VARs. While some OEMs may produce complete items for VARs to market, they usually have minimal involvement in determining the final product. For example, an OEM of electronic components may supply parts to companies like Sony or Samsung, which assemble them into HDTVs bearing their brand names.

Expanding Roles of OEMs

Traditionally, OEMs primarily engaged in business-to-business sales, while VARs targeted public or end-user markets. However, with changing consumer trends, many OEMs now sell directly to consumers, blurring the lines between OEMs and VARs.

OEM vs. Aftermarket

OEMs produce components specifically for the original product, whereas aftermarket products are made by other companies and may serve as replacements. While aftermarket products are often cheaper or more readily available, OEM parts are designed to match the original product's specifications.

Special Considerations

The definition of OEM has evolved, particularly in the computer hardware industry, where companies like Dell and IBM incorporate branded parts from external suppliers into their products. This shift reflects changes in manufacturing dynamics and customer expectations, with OEMs playing a crucial role in brand identity and product quality.