Definition
An Original Equipment Manufacturer (OEM) is a company that produces parts and components that are used in another company’s end products. While the OEM supplies products to other companies, the term is also used to describe software that comes bundled with a computer or the initial supplies that come with computer peripherals. OEM terms are used in various industries, most notably in computers, automotive, and electronics sectors.
Examples
- Automotive Industry: In the automotive industry, an OEM would produce components like engines or tires that are then assembled by another company to create the final automobile.
- Computers and Technology: A company like Dell may use motherboards from Intel, which is considered the OEM, in their desktop products. Similarly, OEM software such as Windows might come pre-installed on a new laptop.
- Consumer Electronics: In the consumer electronics space, an OEM might supply key components for smartphones, such as screens or chipsets, to major brands like Apple and Samsung.
Frequently Asked Questions (FAQs)
What is the main role of an OEM?
An OEM’s primary role is to supply parts and components or assemblies that will be used by another company to create a finished product.
How is an OEM different from an ODM?
An ODM (Original Design Manufacturer) designs and manufactures a product as specified, which will then be rebranded by another company. An OEM might produce parts designed by the purchasing company.
Can software be considered OEM?
Yes, OEM software refers to software that is sold to computer manufacturers who then bundle it with the hardware.
Why don’t software publishers typically support OEM software?
OEM software is often sold at a discount to hardware manufacturers, and the customer support responsibility generally lies with the hardware seller, not the software publisher.
What industries most commonly use the term OEM?
The automotive, computer hardware, and consumer electronics industries are primarily associated with the term OEM.
ODM (Original Design Manufacturer)
An ODM is a company that designs and manufactures a product as specified, which is then rebranded by another company for sale.
VAR (Value-Added Reseller)
A VAR modifies or adds features to a product and then resells it as a new product. Typically, VARs bundle OEM parts into more complex systems or provide additional services.
Aftermarket
Parts not made by the OEM but made to fit and function similarly to the OEM parts.
Contract Manufacturer
A company that produces goods under the label or brand of another company. They may produce items as specified without branding them as their own.
Online References
Suggested Books for Further Studies
- “OEM Principles, Practices, and Politics” by Michael S. Kunzman
- “Understanding the Manufacturing Process: Key to Successful OEM Transformation” by Joseph Berk
- “The Handbook of Logistics and Distribution Management: Understanding the Supply Chain” by Alan Rushton, Phil Croucher, and Peter Baker
Fundamentals of OEM: Business Basics Quiz
### What does OEM stand for?
- [ ] Official Equipment Marketer
- [ ] Original Equipment Manager
- [x] Original Equipment Manufacturer
- [ ] Original Engineering Material
> **Explanation:** OEM stands for Original Equipment Manufacturer, referring to companies that produce parts and equipment that may be marketed by another manufacturer.
### Which industry commonly uses OEMs for creating end products?
- [x] Automotive
- [ ] Agriculture
- [ ] Sewing
- [ ] Food services
> **Explanation:** The automotive industry commonly uses OEMs to create various components like engines or tires that are then assembled into automobiles by another company.
### How is OEM software commonly provided?
- [ ] As a downloadable app
- [x] Bundled with hardware
- [ ] As standalone retail packages
- [ ] Manufactured abroad
> **Explanation:** OEM software is typically bundled with hardware such as a new computer or laptop and is not sold as standalone retail packages.
### Why is customer support typically not provided by software publishers for OEM software?
- [ ] The software is usually ideal and does not need support.
- [x] Responsibility lies with the hardware seller.
- [ ] Companies cannot keep track of OEM software versions.
- [ ] OEM agreements disallow support services.
> **Explanation:** OEM software often comes with the understanding that customer support is the responsibility of the hardware seller, not the software publisher, due to its discounted cost structure.
### In terms of production, what distinguishes an OEM from a VAR?
- [ ] A VAR produces brand-new original parts.
- [x] VARs add features to products and rebrand them.
- [ ] OEMs handle customer service and support.
- [ ] OEMs do not engage in manufacturing.
> **Explanation:** A Value-Added Reseller (VAR) modifies or adds features to OEM parts and rebrands them for sale as a new product.
### In which industry might OEMs engage in producing CPU chipsets?
- [ ] Agriculture
- [x] Consumer Electronics
- [ ] Oil and Gas
- [ ] Apparel
> **Explanation:** In the consumer electronics industry, OEMs may produce CPU chipsets that are used in devices such as smartphones, tablets, and computers.
### Why might a company choose to use OEM parts?
- [x] Cost efficiency and reliability
- [ ] High exclusivity and customisation
- [ ] Limited availability
- [ ] Specialized customer targeting
> **Explanation:** Companies might choose to use OEM parts due to their cost efficiency and reliability, as OEMs usually produce standard, high-quality parts that fit seamlessly into the end product.
### What is a primary disadvantage of buying OEM products?
- [ ] Higher reliability
- [ ] Lack of availability
- [x] Absence of direct customer support
- [ ] Increased costs
> **Explanation:** One primary disadvantage of buying OEM products is the absence of direct customer support from the OEM, as support is usually provided by the company selling the final assembled product.
### How does an ODM differ from an OEM?
- [ ] ODMs consume products from multiple OEMs.
- [ ] ODMs only produce final products, not parts.
- [x] ODMs design and manufacture entire products.
- [ ] ODMs do not have branding rights.
> **Explanation:** Original Design Manufacturers (ODM) design and manufacture entire products which can be rebranded by another company, whereas OEMs produce parts that are used in other companies' products.
### OEM parts produced for which product are mentioned as an example?
- [ ] Tires for bicycles
- [x] Motherboards for Dell desktops
- [ ] Agricultural pesticides
- [ ] Restaurant equipment
> **Explanation:** Motherboards produced by OEMs such as Intel for use in Dell desktops are an example of OEM products in the technology sector.
Thank you for deepening your understanding of OEMs through these detail-oriented explanations and quiz questions!
