Full Form of OEM – Original Equipment Manufacturer
The full form of OEM is an Original Equipment Manufacturer. In the computer industry, Original equipment manufacturer is a misleading term which actually doesn’t mean the original manufacturer but refers to a company that buys equipment from other manufacturers, customizes products, sells it in its own name and brand, and offers a warranty, license, and, support in its own name. However, it normally means a manufacturer who produces goods that are used in other company’s products. The other company here is referred to as the value-added resellerThe Value-added ResellerA Value-Added reseller is an individual or an organization who adds value to a product before selling it in order to enhance its utility and appeal to end customers. This is a regular phenomenon in the information technology and consumer electronics industries, when resellers bundle old products with a range of new services in order to resell them..
How Does it Work?
The value-added reseller (VAR), referred to above, and the original equipment manufacturer works in tandem. Original Equipment Manufacturer makes articles or equipment or parts and then sells them to the VAR. The VAR then makes necessary changes, customizes the products, does some rework job on the product so supplied by the OEM. After all such tasks are performed, the product is sold in the market.
Examples of OEM
Let us first consider the example of Hewlett Packard.
Many enterprises have OEM Partnerships with Hewlett Packard, such as C3, Cohesity, GRC, etc. Hewlett Packard Enterprise has almost 6 decades of experience as an OEM. It acts as a supplier that provides support offering products of high quality globally. It is said to understand the customer needs, provide high quality customized solutions and products to its customers over the lifecycle, and helps in third-party integration.
Let us take another example of Panasonic TVs.
Panasonic purchases electronic components and assembles those parts and makes TVs and sells them to customers.
- Customization: The products supplied meet the specified needs and demands of the customers to the components. They are made with high precision.
- Support: There is after-sale support that is provided by the manufacturers. The staff will provide technical and engineering support for all the parts related needs.
- Response: The response will be quicker. There aim to ensure the delivery on time and check the performance closely.
- Quality: They shall give VARs the confidence that they would be provided with the original products and the products that meet the original specification if they require a part replacement.
- Warranty: If a product is received with any defects, the manufacturer of the parts will replace the part because usually, they come with this feature called warranty of spare parts.
- Valuable Products and Longevity: The products manufactured and sent by OEMs are usually of high value than that of the aftermarket and are durable.
- Single Option: The VARs are provided with only one option of parts replacement, so they need not select a brochure full of options.
- Price: The price mentioned by OEMs is usually much more than that of the aftermarket body parts.
- Delays: Original Equipment Manufacturer body parts are usually subject to availability. The manufacturers and dealers may usually create delays in delivery or delay in manufacture.
- Partnership Relations between OEMs and VARs: Its partnerships should be entered into after giving much though; otherwise, the relations may be faded easily. In any partnership, all the parties’ interests must be protected, and the expectations must be met, so is the case with OEM – VAR partnership. Due to a change in personal goals or a lack of understanding, the relationship may be affected.
Difference between OEM and Aftermarket
Original Equipment Manufacturer and aftermarket are opposite to each other. Aftermarket uses reverse engineering on OEM original products to attain the same quality and better technology at better prices. The following are the other differences between OEM and Aftermarket:
|They make products to be used specifically for the original product.||They are used as a replacement by another company as spare parts.|
|Products are costlier compared to the aftermarket.||Products are cheaper.|
|Since original products are obtained, it may be less convenient.||More convenient to obtain and available in lots.|
|A single option, i.e., an original part from the manufacturer, is available to the VAR.||There may be multiple choices available in the market for a single part.|
|These products come with after-sale service and warranties.||Such facilities may not be available in aftermarket supplies.|
|Quality is guaranteed while purchasing from OEMs as the original product is delivered.||Because of the low price, there may arise situations where the buyer has to compromise with the quality.|
In simple terms, for a vehicle repair, if you reach out to the dealership of the vehicle’s brand, you are opting to get it repaired by an OEM, whereas if you go to a vehicle repair shop, you are opting the aftermarket. It all depends on individual preferences and choices. If premium quality is preferred, Original Equipment Manufacturer would be the best choice, whereas if the best price is preferred, the aftermarket may be the best option. With all that said, it is not implied that the aftermarket products do not have good quality. A wide range of products are available, and one must make sure the right products are used.
This has been a guide to the Full form of OEM – Original Equipment Manufacturer and definition. Here we learn how does it work along with examples, advantages, and disadvantages. You may refer to the following articles to learn more about finance –