Original Equipment Manufacturer (OEM): Meaning, Benefits and Examples

Original Equipment Manufacturer (OEM) is a category that applies to businesses that make components or parts that are used to make final products. These components are then integrated into the final product by their customers, often known as value-added resellers (VARs).

OEM’s contributions make them an important player in the supply chain. OEMs make goods for a variety of industries, ranging from customers like auto manufacturers to consumer electronics companies. OEMs add value in the form of efficiency and cost-effectiveness, quality and reliability, innovation, and customization.

Here is more to help you understand OEMs, their significance, and the benefits of using OEM products. You’ll also see the differences between OEs, ODMs, and OEMs, and you’ll find real-world examples of OEM parts and applications.

OEM Definition

OEMs are contracted to make components or parts to be used in finished products. OEMs aren’t limited to certain industries. In fact, their relevance and influence can be far-reaching, and it’s common for OEMs to partner with automotive, electronics, and manufacturing companies. For example, in the context of automakers, OEMs produce parts for car engines, transmissions, and brakes. These essentials are then used by car manufacturers to make cars.

OEMs are also defined by other characteristics. For example, they have business relationships with VARs. These third parties white-label and sell the OEM parts so that the OEM can focus on production.

Benefits of Using OEM Products

Companies stand to gain a lot by using OEM parts instead of aftermarket options. A few of the reasons include:

Quality

OEMs often have to adhere to stringent quality standards prescribed by the original equipment manufacturer. This approach offers assurance that the parts are compatible, reliable, and will last and maintain their condition.

Though it’s not necessarily standard across all OEMs, ISO certifications indicate they satisfy or exceed regulatory requirements and environmental stewardship. The ISO organization creates and upholds guidelines for companies in various industries. OEMs that have attained ISO certifications have put in the hard work to hit milestones related to quality, safety, and efficiency.

Warranty

OEMs often stand behind their workmanship with warranties or guarantees. Doing this helps consumers and businesses feel more at ease. If there is an issue with the part during the specified time period, the OEM will replace or repair it.

Reliability

OEM parts are engineered and tested to ensure they can meet the demands of their real-world applications. It’s also true that OEMs make their products with consideration for other variables that go into the final product. Their manufacturing customers can expect seamless integration, which reduces the chances that a part won’t be compatible with others.

Long-Term Benefits

Using original equipment manufacturer products can have other key advantages, especially when the stakes are high. Consider the fact that OEM parts can improve a car’s performance and result in better mileage. Also, OEM parts tend to be more durable than aftermarket alternatives. For example, it’s better to buy an OEM spare tire as opposed to an aftermarket one.

Specialized Expertise

OEMs tend to have a narrow focus, which means they know how to build a specific component at scale. They’ve laid the foundation for solid engineering and understand how to address and overcome manufacturing challenges. This familiarity allows them to focus narrowly on what they need to do to meet and exceed consumer expectations.

Reduced Development Time

This domain specialty means the OEM likely doesn’t need a long time to produce the part. They have the savvy and bandwidth to execute quickly and act as a partner in the manufacturer’s success.

Lower Costs

Manufacturers find partnering with an OEM can mean lower costs. A single template can produce thousands of widgets regularly without compromising quality or safety. To unlock the same benefits as OEM parts, a VAR would have to dedicate a great deal of time and resources. On the other hand, an OEM that already builds similar parts can adapt relatively quickly, so staff can apply their time and talents to solving other problems.

Commitment to Training

Many OEM companies make sure that both new hires and longtime staff are knowledgeable about their equipment. This training not only benefits employees but can also positively impact the manufacturer in the form of quality products, efficiency, accuracy, and agility.

Innovation

Generally speaking, OEMs are committed to developing new technologies and processes. They dedicate resources to R&D, experiment to develop more effective and functional designs, and try new materials and manufacturing techniques to enhance quality and performance.

Reputation

Many companies partner with a third party, like an OEM, to help them land more contracts. If you’re a small or medium-sized manufacturer, working with OEMs can help your cause because the OEMs have an established brand identity.

OE vs. OEM

It’s easy to confuse “OE” and “OEM” parts. However, there are distinctions, and they do matter. OE (Original Equipment) is a category that applies to original parts used in a product by the manufacturer. On the other hand, an OEM is a type of company that supplies the parts.

Sometimes, manufacturers will need replacement parts for various reasons. OE parts are usually preferred because they tend to be of the highest quality. Still, aftermarket widgets can be trustworthy and may also be more budget-friendly for replacement jobs.

OE parts can come with peace of mind, too. It’s common for OE parts to have related warranties or guarantees from the original manufacturer. That might not be the case for aftermarket parts.

Another important point of difference is that OE parts integrate easily with the original equipment. Aftermarket parts don’t come with the same assurance, and safety issues might arise as a result. Choosing OE or aftermarket parts is a matter of situation and preference.

OEMs vs. ODMs

It’s also easy to conflate OEMs with ODM (Original Design Manufacturer). Both are relevant to the manufacturing process, but they have a few key differences:

Product Design

OEMs usually make parts based on the directions given by the original equipment manufacturer. ODMs, however, may contribute to the product design.

Branding

OEMs often produce parts that reflect the original equipment manufacturer’s branding. ODMs may or may not be involved in this aspect of production.

OEMs and ODMs are two distinct types of companies that play different roles in the manufacturing and supply chain process. Here are the key differences between them:

Product Development

OEMs own the entire product development lifecycle. They come up with ideas, conduct market research, pursue design, and manage production. OEMs are concerned with their brand and how they can stand out from their competitors.

On the other hand, ODMs are primarily focused on the manufacturing side of things. They partner with OEMs to translate concepts into a finished product. ODMs have mastered manufacturing processes, cutting costs, and scaling.

Intellectual Property (IP) Ownership

OEMs hold the intellectual property rights related to their products. That means they maintain control over design, patents, trademarks, and other intangibles.

In contrast, ODMs operate based on the guidance provided by the OEMs. The IP rights usually belong to the OEMs unless otherwise stated.

Supply Chain Relationships

OEMs tap into their connections to suppliers and contractors to source necessary parts. They manage the overall supply chain and interface with various vendors and manufacturers.

On the other hand, it’s common for ODMs to have long-standing relationships with manufacturers and suppliers. They know who to contact to get the raw materials and components necessary for the production process. ODMs are more focused on maintaining production timelines and tightening up operations.

OEM Examples

OEMs add value to the manufacturing process in several practical ways. These are some examples of OEMs in practice:

Computer Manufacturing

A computer manufacturer may source OEM components like processors, motherboards, or hard drives from various OEMs and integrate them into their final product.

Automotive Manufacturing

An automotive manufacturer like Ford may rely on OEM components, such as engine parts, from various OEMs to make the car you see on dealer lots.

Electronics Manufacturing

OEM parts like screens, cameras, and processors can be used to create a final product.

Industrial Manufacturing

OEM components like motors, pumps, and valves go into many high-tech machines you see on factory floors.

Join Auto Dealers Using Podium

OEMs are often unseen but significant actors in the manufacturing process. By understanding the ins and outs of manufacturing, both consumers and business leaders can make better decisions that can save time and money. And when it comes to efficiency, Podium can help auto OEMs deliver a seamless customer experience. Here’s a look at how auto OEMs can use Podium’s suite of software tools to get results:

High-Touch Customer Communication

Auto dealers can use Podium’s centralized hub to manage all customer interactions in one place. OEMs can take advantage of this feature to communicate with customers however they prefer. Dealers can reduce response times while ensuring customers are engaged and feel like their business matters.

Efficient Lead Management

Auto dealers rely on leads to move inventory. Podium makes it easy for auto OEMs to source and evaluate leads from numerous places, ranging from website inquiries to live events. This visibility can speed up the sales process and help salespeople follow up on leads sooner.

Enhanced Customer Service

Podium stands out as an excellent resource that helps OEMs respond to prospects and customers in a flash. The automated tool can help with answering questions, remedying issues, and test drive appointment scheduling.

Reputation Management

Customers talk. They tell their friends and family about their experiences with car dealers. That can be good or bad, depending on your situation. Fortunately, Podium’s reputation management feature offers insights into customer sentiment. Auto OEMs can use it to improve their online reputation and respond to customers as needed. This shows they’re plugged in and committed to correcting any problems that might tarnish their reputation.

Data-Driven Insights

Podium provides a way to dig into customer behavior and preferences. This business intelligence can be used to inform marketing efforts, product development, and support customer service efforts.

Integration With Existing Systems

One key advantage is that Podium integrates with popular CRM systems and industry software. Auto OEMs find it easy to adopt and use in their day-to-day operations.

In short, Podium is the clear choice for auto OEMs looking to get ahead. There’s never been a better time to enhance the customer experience, increase customer satisfaction, and boost sales. Watch a demo and see why other auto OEMs trust Podium for smart growth.