What is an OEM?
OEM is an acronym for Original Equipment Manufacturer, a company that produces products, parts, or equipment that is generally used or sold by another organization. An OEM manufacturer often makes subsystems or parts that are used by other companies to make their end product.
An example of how an Original Equipment Manufacturer is used by manufacturers, and why
An example of this would be a vending machine manufacturer, they would not manufacture every single item that goes into the product. They may use different components from different OEMs, such as a drive motor from a motor manufacturer, bearings from another supplier, drive belts from another, etc…
This manufacturing process allows a manufacturer to focus on what they are good at and buy in other key components they do not have the capability of producing in-house. This also allows multiple businesses to prosper and grow.
Some of the key benefits of using OEM parts
- Reduces time to market for new product development
- Ability to use the latest innovative designs from OEM suppliers without the internal cost of R&D
- Reduces product development cost, time and risk for end-product manufacturers
OEM, or ODM?
An ODM has the capability to design, develop, and manufacture its own products which can be re-branded and sold by their customers. They retain the rights to these product designs.
An OEM typically uses your designs and specifications to manufacture your component or product on your behalf. They will not design and develop your product.
Listen to this podcast episode about OEM vs ODM vs Contract Manufacturer
We recorded an episode of the podcast where we discuss the difference between OEMs, ODMs, and CMs, including their benefits and drawbacks. This should help you make a decision on which supplier type is best for your needs: