What Does OEM Mean?
OEM, or original equipment manufacturer, is a term that is heard most often within two industries: the automotive industry and the IT industry. Initially, this term was associated with a company that manufactured a product that was then resold or rebranded by another company. However, the meaning of this term has evolved over time and today is used to refer different things. For instance, OEM can refer to a company that manufactures the actual components that are used by another company to build a whole system. In other instances, the OEM is a company that rebrands another company’s products and sells them to end users.
In the automotive industry, a car company purchases components such as batteries, fuel injectors, and spark plugs from other manufacturers. While the whole car is built and sold by one company, the actual components are manufactured by different companies. All of the companies that manufactured the actual components are called OEM companies. Similarly, a PC manufacturing company purchases IT components such as hard drives, optical drives, and expansion cards from other manufacturers and builds a whole PC. While the PC is branded and sold under a company name, the inner components are actually manufactured by OEMs. In other cases, the entire system is built by one company and rebranded and sold by another company. A notable example is Lenovo which sells IBM computers.
OEM is also associated with the software industry. When PC manufacturing companies such as Dell and HP build a PC, they provide the operating system to the end user. This operating system is not developed by the hardware company but is actually a product of another company, Microsoft. In this case, Microsoft is called the OEM, while the PC is actually sold as a Dell PC or a HP PC.
How is an OEM product built, partnered, and resold?
Before delivering a solution to the end users, companies figure out the best way to serve customer needs. They evaluate several options such as whether to buy, manufacture, build, or partner with someone to design the solution. By partnering with OEMs, an organization can minimize the investment in manufacturing and reduce production and material costs while gaining expertise in the product design. A shorter product life cycle is another important reason to partner with an OEM. While concentrating on their core competency, organizations can still build products using best-of-breed components.
OEMs do nothing extra to the product and some only brand a product with their logo. Other OEMs only supply components to their partners and do not sell anything under their brand. However, many companies do both. You can purchase these products from the company directly as well.
Why are OEM products cheaper?
Products from an OEM are normally cheaper thanks to economies of scale. As the company partners with other companies to manufacture goods in large numbers, both the price and production time are significantly reduced. However, you need to verify what you are getting when you purchase a product from an OEM. While the products are cheaper and deliver the same features and performance, you may not receive some of the “extras” like tech support, which would normally be handled by a PC company.
References
OEM: OEM| pcmag.com
OEM: Original equipment manufacturer| en.wikipedia.org
OEM: What Are OEM Products & Why Are They Cheaper? [MakeUseOf Explains] | makeuseof.com
OEM: OEM – original equipment manufacturer | webopedia.com
OEM: OEM Partnerships Are a Key Ingredient in the iPhone’s Success. What About for Your Medical Device? | mddionline.com
