What is Oem? Definition of Oem, Oem Meaning – The Economic Times
OEM complete form stands for Original Equipment Manufacturer. Traditionally, an OEM definition is any company that makes parts or a system used in other companies’ products or items. For example, Honda manufacturers usually collect different details like tyres and seat covers and integrate these OEMs into the manufactured vehicles they sell.
What are OEM and VAR?
OEM is used for those manufacturers whose products get incorporated into other companies’ products. This second company is mentioned as a Value-added Reseller or VAR. They are so named because by integrating components or services, they increase the original item’s worth.
Understanding the relationship between Original Equipment Manufacturer and Value Added Reseller
VAR goes hand in hand with OEM, as OEMs often design their products according to the needs and specifications of the VARs. OEMs make components to sell to VARs and become an integral part of their finished products. OEMs usually play no primary role in the establishment of finished products. However, nowadays, OEMs also make complete equipment to sell to VARs.
A typical example of this relationship can be companies like Sony and Lenovo partnering up with different OEM companies to assemble parts for their TVs, laptops or other gadgets. Even more simply, we can take examples of Gucci and Armani getting their button from some other OEM button maker with their logos engraved on them.
Mostly, no companies take majorly significant products from OEMs that can define the integrity of the final product. When sold in the market, the full product goes under the big name of the corporate brand.
Initially, OEM was made to make only business-to-business sales. VARs, after incorporating the products, bring the products to the customers or any other end users. As of last year, OEMs are now selling parts directly to the market. This potentially makes them a VAR.
For instance, anybody who wants to build their own desktop can buy its processors or graphic cards from OEMs like Intel, Nvidia or directly from distributors who stock these products. If you want to build or fix your car parts, you can instantly buy different parts from OEMs or any wholesaler in the market.
One of the most notable examples of a relationship between OEM and VAR is auto part makers and auto manufacturers. A diverse number of OEMs make equipment like exhaust systems and brake systems to be installed in the vehicles. These OEM-made parts are sold to the auto manufacturer who puts together the whole car. This now goes to auto dealers to get sold in the market for individual customers.
The latest definition of OEM related to computer industries is now widely popular. In this pattern, OEMs cite the companies that buy the products and rebrand them into entirely new products under their name.
Let’s look at this example to understand it better. Microsoft provides its Windows software to HP, which uses it in their personal computers and laptops. It goes further to sell the complete PC directly to the customers. If we look at the traditional definition, Microsoft is supposed to be the OEM, whereas HP is the VAR. But the desktop’s guide papers will most probably reveal HP as the OEM and Microsoft as the VAR.
Original Equipment Manufacturer and Aftermarket
Aftermarket is precisely the opposite of OEMs. OEMs refer to those products that are specially designed for the original product. Aftermarket refers to different parts made by other companies that any customer can buy too, say, replace the product in the original.
For example, someone needs to replace their car stereo created especially for their Toyota Avalon by XYZ Stereos. They can buy another copy of the same item by XYZ Stereos (the OEM) as used in the precise manufacturing of the car. They could, however, also buy an alternative made by another company altogether. This is called purchasing an aftermarket part. In simple language, if the replaced part comes from XYZ company, it will be mentioned as OEM. If it comes from anywhere but OEM, it will be an aftermarket product.
Commonly, customers prefer aftermarket products as they are cheaper to buy and readily available. Frequently, the aftermarket commodities are so good at manufacturing a particular item that people start seeking it out more than the original. Aftermarket goods have become more popular than the OEM.
There is a real-life example of this happening. The success of Hurst Performance of Warminster Township, Pennsylvania, is owed to its brilliance in making the gear shifters. This gear-shifter manufacturer became so widely popular that buyers would request their product be used as a replacement. Sometimes the gear shifts were replaced before the original would wear out. Hurst also made OEM products for many muscle cars.
Why are OEMs important?
By contracting with OEMs, huge brands can deduct the manufacturing costs. They do not need to worry about facilities and any in-house production hassle. All they need to do is incorporate the products under their name and sell the items. This cost-saving can now directly be passed to the end consumer buying the entire system. Moreover, the technology grows faster since OEMs adopt new advancements in hardware and software both.
What are the risks of working with OEMs?
OEMs are always at scary risks and susceptible to unexpected supply chain failures and interruptions. These include:
- Quality failures.
- Economic risks.
- Supply chain disruptions.
- Negligence of IT.
- Cybersecurity collapses.
- Manufacturing defects.
What are other characteristics of OEMs?
Some of its characteristics include:
- OEMs sell product licences. They sell it to VARs to use their parts in their products.
- We can buy hardware from a retailer or manufacturer or OEM. OEM companies usually lack some of the parts like adapters or chargers. These are necessary for the usage of other hardware components.
- OEM software is also similar to hardware. They do not have all the needed items. They have the primary software and its license.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
OEM complete form stands for Original Equipment Manufacturer. Traditionally, an OEM definition is any company that makes parts or a system used in other companies’ products or items. For example, Honda manufacturers usually collect different details like tyres and seat covers and integrate these OEMs into the manufactured vehicles they sell.OEM is used for those manufacturers whose products get incorporated into other companies’ products. This second company is mentioned as a Value-added Reseller or VAR. They are so named because by integrating components or services, they increase the original item’s worth.Understanding the relationship between Original Equipment Manufacturer and Value Added ResellerVAR goes hand in hand with OEM, as OEMs often design their products according to the needs and specifications of the VARs. OEMs make components to sell to VARs and become an integral part of their finished products. OEMs usually play no primary role in the establishment of finished products. However, nowadays, OEMs also make complete equipment to sell to VARs.A typical example of this relationship can be companies like Sony and Lenovo partnering up with different OEM companies to assemble parts for their TVs, laptops or other gadgets. Even more simply, we can take examples of Gucci and Armani getting their button from some other OEM button maker with their logos engraved on them.Mostly, no companies take majorly significant products from OEMs that can define the integrity of the final product. When sold in the market, the full product goes under the big name of the corporate brand.Initially, OEM was made to make only business-to-business sales. VARs, after incorporating the products, bring the products to the customers or any other end users. As of last year, OEMs are now selling parts directly to the market. This potentially makes them a VAR.For instance, anybody who wants to build their own desktop can buy its processors or graphic cards from OEMs like Intel, Nvidia or directly from distributors who stock these products. If you want to build or fix your car parts, you can instantly buy different parts from OEMs or any wholesaler in the market.One of the most notable examples of a relationship between OEM and VAR is auto part makers and auto manufacturers. A diverse number of OEMs make equipment like exhaust systems and brake systems to be installed in the vehicles. These OEM-made parts are sold to the auto manufacturer who puts together the whole car. This now goes to auto dealers to get sold in the market for individual customers.The latest definition of OEM related to computer industries is now widely popular. In this pattern, OEMs cite the companies that buy the products and rebrand them into entirely new products under their name.Let’s look at this example to understand it better. Microsoft provides its Windows software to HP, which uses it in their personal computers and laptops. It goes further to sell the complete PC directly to the customers. If we look at the traditional definition, Microsoft is supposed to be the OEM, whereas HP is the VAR. But the desktop’s guide papers will most probably reveal HP as the OEM and Microsoft as the VAR.Aftermarket is precisely the opposite of OEMs. OEMs refer to those products that are specially designed for the original product. Aftermarket refers to different parts made by other companies that any customer can buy too, say, replace the product in the original.For example, someone needs to replace their car stereo created especially for their Toyota Avalon by XYZ Stereos. They can buy another copy of the same item by XYZ Stereos (the OEM) as used in the precise manufacturing of the car. They could, however, also buy an alternative made by another company altogether. This is called purchasing an aftermarket part. In simple language, if the replaced part comes from XYZ company, it will be mentioned as OEM. If it comes from anywhere but OEM, it will be an aftermarket product.Commonly, customers prefer aftermarket products as they are cheaper to buy and readily available. Frequently, the aftermarket commodities are so good at manufacturing a particular item that people start seeking it out more than the original. Aftermarket goods have become more popular than the OEM.The success of Hurst Performance of Warminster Township, Pennsylvania, is owed to its brilliance in making the gear shifters. This gear-shifter manufacturer became so widely popular that buyers would request their product be used as a replacement. Sometimes the gear shifts were replaced before the original would wear out. Hurst also made OEM products for many muscle cars.By contracting with OEMs, huge brands can deduct the manufacturing costs. They do not need to worry about facilities and any in-house production hassle. All they need to do is incorporate the products under their name and sell the items. This cost-saving can now directly be passed to the end consumer buying the entire system. Moreover, the technology grows faster since OEMs adopt new advancements in hardware and software both.OEMs are always at scary risks and susceptible to unexpected supply chain failures and interruptions. These include:Some of its characteristics include:Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
