An original equipment manufacturer, or OEM, manufactures products or components which are purchased by a purchasing company and retailed under the purchasing company's brand name.^{[1][2][3][4][5]} OEM refers to the company that originally manufactured the product.

It is a type of contract manufacturing and a form of outsourcing.

When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part.^[6]

[edit] Contradictory and confusing definitions

Confusingly, OEM may also refer to a company that purchases a component made by a second company for use in the purchasing company's products.^[7][8][9] For instance if company 'A Inc' purchases optical drives from company 'B Ltd' that will be used in 'A Inc' computers , then 'company A' is the OEM.

An even more confusing, contradictory definition for OEM is a company that sells the product of the second company under its own brand name.^[10][2]

Companies who follow the above practices are better termed VARs (value-added resellers) or resellers, respectively.

[edit] Economy of scale

The practice of utilizing OEMs relies on their ability to drive down the cost of production through economies of scale. It also allows the purchasing company to obtain the needed components or products without owning and operating a factory.

[edit] Automotive parts

An automobile part may carry the designation OEM if it is made by the same manufacturer and is the original part used when building and selling the product.^[6] A replacement part specifically approved by the brand owner of the end product may also reasonably be referred to as OEM. The term "aftermarket" is often used for non-OEM replacement parts.^[6] The automobile industry also may use the notion of Tiers where the 1st is the manufacturer, the second a Dealership, and the 3rd the local dealer when describing a component's sourcing.

[edit] Origin of term

The term OEM was used in the early 1960s by Digital Equipment Corporation and its vendors to refer to value-added resellers.^[9]

[edit] See also

• Contract manufacturer
• Rebranding
• Golden sample
• Original design manufacturer
• Outsourcing
• Private label
• Value-added reseller

[edit] References