Original Equipment Manufacturer OEM Definition

You can see the manufacturing facilities of the manufacturer first-hand. Outsourcing your manufacturing frees you from the hassles of in-house manufacturing, reduces manpower requirements, and cuts down costs.

An original equipment manufacturer traditionally is defined as a company whose goods are used as components in the products of another company, which then sells the finished item to users. In the hardware industry, the original equipment manufacturer usually refers to a company that builds a product designed for end-users, like a PC, laptop, or printer. Apple, HP, Dell, Canon, and Brother are all examples of original equipment manufacturers. ODM and OEM are often used interchangeably and cause a fair bit of confusion. An Original Design Manufacturer is any company that manufactures a new product based on exact specifications and designs provided by a client that owns all the license and branding. The original manufacturer of the auto parts sold at Penske Chevrolet of Cerritos is GM.

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However, it is important for businesses to take appropriate measures to protect their copyright. You do not want your unique product ideas what does oem stand for in business to be stolen by copycats. ODM suppliers can design and produce the needed product in bulk and often at a discounted bulk price, too.

• These finished products are then branded with the names of other companies who distribute the finished products.
• In informal usage, the term OEM can sometimes be used as an adjective, as in “OEM parts” or even as a verb, as when a manufacturer says that it plans to “OEM” a new product.
• Although processors, motherboards, and so on can also be sold to individuals as retail products, OEM hardware is generally cheaper than their retail counterparts.
• Companies that seek to do business with ODMs should do their due diligence and set needed business boundaries before signing on the bottom line.
• A company whose products, such as manufactured parts or computer software, are repackaged and sold by a second company, often as part of a larger system.
• One of the most basic examples of an OEM is the relationship between an auto manufacturer and a maker of auto parts.

An original design manufacturer tends to be less expensive than an OEM manufacturer. In addition, they may be willing to accept lower order quantities. Traditionally, OEMs focus on business-to-business sales, while VARs sell to the public or other end users.

What does OEM stand for?

The OEM then manufactures the products according to your desired design specifications. OEM manufacturing is cost-efficient, especially for companies that have large-scale orders. But OEM manufacturing is also popular among smaller companies because of the numerous benefits it offers. OEM or Original Equipment Manufacturer is a company that manufacturers products or components sold by another company. OEM meaning can be misleading as an Original Equipment Manufacturer does manufacture a product, but the design or specification is not their own. The design and specification of the product are provided by the company that they are manufacturing the product for. There are also types of manufacturers that are described as ODMs .

You can usually save a decent amount of money with OEM products, but you might find yourself entirely without support if you run into an issue. That could be fine if you’re technically minded; if you’re not, the retail version might be the better choice.

OEM vs aftermarket parts

Harness advanced technologies to simplify your IT support management. Many organizations reduce their OEM and vendor complexity with a centralized https://business-accounting.net/ support and service model. OEM software is usually licensed on a per-system basis, which means that you can’t install it on another computer.

Aftermarket OEM versions of parts and equipment often have generic equivalents that are built to the same specifications but are cheaper in price. Sourcing Allies is a team of expert China sourcing agents that has helped western customers manufacture and source products from low-cost regions since 2006. Companies usually do their own research and development before outsourcing manufacturing to an OEM. Hence, they hold the Intellectual Property rights to the products. Since you hold the IP rights, it puts you in a stronger bargaining position. It also makes switching manufacturers uncomplicated if you ever need to do so.

Original Equipment Manufacturer vs. Aftermarket

Before industrialization, most products only had a few moving parts. Honestly, OEM parts are going to be your best option more often than not because the OEM designs both the vehicle and the part. The same design specs are used and the same factory makes the part, which means there will be less of a discrepancy from part to part. Termination terms – Clearly spell out the events that can lead to contract termination as well as the consequences of termination .