What is an OEM?
It is common in the industry to hear about companies that brand themselves as OEM, but what does that exactly mean?
Definition of an OEM.
OEM stands for Original Equipment Manufacturer; it refers to the company that manufactures a component or a part.
Why do we use the term OEM?
After a part is produced, several actors may be involved in its commercial life cycle:
- Distributors, that will resale the product under the original manufacturer name (of example Sager Electronics)
- Integrators, that will use a part manufactured by other companies in its product manufacturing. (BMW is an integrator of components manufactured by other companies)
- Brands, that will only brand and market (and often design) a product that is manufactured by other companies. (Apple brands, markets, and designs the iPhone which is manufactured by other companies)
Calling a company an OEM differentiate it from the above 3 other types of sellers. It is important to identify a company as an OEM if you want to contact directly with the people producing the parts.
Let say you sell plastic injection press, when you are looking for potential customers, you want to focus on companies that inject the plastic parts and not the company that assembles them in their finished product, hence you’ll be looking for plastic parts OEM only.
What is the difference between OEM and subcontractor?
An OEM produces parts or components that can be sold as an identifiable product, whereas subcontractors may only provide partial manufacturing actions on these products.
For example, a cable OEM will manufacture cable bundles and sells them to their customers, while a subcontractor can be involved in only a partial process of the manufacturing like cable sheathing.
What is the difference between OEM and manufacturer?
OEMs are all manufacturers but calling them OEM implies that the product they manufacture will be rebranded afterwards either as itself or part of a further assembly.
“OEM” is sometimes used for other significations, pointing at integrators in some industries for example in automotive where big brands are often call “OEM” even if they are not at the origin of the manufacturing of most of car components, it is important to understand the context to be sure of the meaning of the term when used by someone else.