What Is an Original Equipment Manufacturer OEM? Definition

One of the most outsourced segments in the auto industry is the design and manufacturing of car parts. Automotive companies have found that outsourcing allows them to cut costs while maintaining high-quality standards and innovation in design. Volkswagen AG, Mercedes-Benz Group AG, and Toyota Motor Corp are all examples of popular and successful OEMs. There are many different types of companies in this sector, from small businesses to multinational corporations. The main goal of all these companies is to make a profit by manufacturing or assembling a product for another company that will sell under the value-added reseller’s name. This is especially prevalent in large-scale projects because many industries will need large quantities of certain parts or goods.

  • An OEM (Original Equipment Manufacturer) is a typical manufacturer with the capability of manufacturing or producing products as per a customer’s specific requirements.
  • The OEM parts are then sold to an auto manufacturer, which assembles them into a car.
  • However, that is no longer the case, as many companies outsource their parts production.
  • The company that produces the screens doesn’t leave their branding on the screen, nor do they advertise their products to consumers.

The repair shop you take the vehicle to can typically get the parts needed, but the type of parts you get will depend on several factors. One of these is your auto insurance, which can sometimes dictate the type of parts it will cover depending on the state you live in that governs insurance repairs. The three types of parts for automotive repairs are OEM, aftermarket parts, and “recycled” – or used. When compared to a retail warranty, the length offered might be reduced or non-existent.

How Does OEM Work for Hardware Products?

Under such an arrangement ODMs enter into a manufacturing contract with a specific set of clients where products are manufactured and sold exclusively to them for rebranding/re-selling. The bottom-line in this model is all about the ODM doing the R&D, Testing and Manufacturing; the client just rebrands and markets the same. OEM companies, competing with aftermarket businesses, increasingly innovate supply chains and product lines to deliver a superior product at competitive pricing. Both OEM and aftermarket companies are actively using technologies such as 3D printing to efficiently create on-demand parts and make their supply chains more flexible. Rapid changes in product demand may be costly for traditional production to respond to and may require companies to maintain higher inventory levels. On-demand production is providing auto parts manufacturers with additional production options.

  • But there are stipulations attached to the product which you accept by purchasing it.
  • Does GM or Toyota task their army of engineers to design every window switch, engine gasket, or electronic sensor that their products require?
  • If that’s the case, be sure to use a custom PC builder or deals website to ensure you get the cheapest components.
  • The OEM parts are then sold to an auto manufacturer, which adds value to the original product by making it part of an automotive vehicle.
  • Using an OEM also allows the purchasing company to obtain needed components or products without owning and operating a factory.

ODMs such as Foxconn Electronics Inc. and Quanta Computer Inc. historically have sold systems to OEMs, but in recent years, some ODMs have begun selling directly to large end customers. In the auto parts world, OEM refers to the company that manufactured the original parts used when the vehicle was newly constructed. Because OEM parts are made by a specific manufacturer to align with a vehicle’s exact specifications, they fit perfectly into that space. In the automobile industry, one example of an original equipment manufacturer is Goodyear.

What’s the meaning of OEM, ODM, & After Market? Definitions & Examples

Original equipment manufacturers usually work within a business-to-business (B2B) model, meaning they are a business that sells to another business. The value-added resellers typically have a business-to-consumer (B2C) model, where their revenue comes from selling to consumers. Original equipment manufacturer (OEM) refers to a company that sells its products for use as a single component in the creation of another company’s product — which is typical in the auto and computer industries. Zebra’s healthcare technology solutions provide patient identity management, mobile health devices, and business intelligence data to improve efficiency.

ToolSense IoT Hardware

They supply every other part/component manufactured by an OEM at a cheaper cost albeit with lesser quality. Original Equipment Manufacturers do many things for both their business clientele as well as consumers. This is the case not just in the automotive industry but in all complex manufacturing of goods. Computer manufacturers like Lenovo and Dell buy internal components like circuit boards and chips from OEMs. The aerospace industry uses OEMs to build certain ancillary aviation componentry.

Aftermarket components differ in quality but have many high-quality products available, often at a lower price than OEM parts. Competition with aftermarket manufacturers drives down prices and may eventually bring OEM prices in-line with aftermarket offerings. OEM products are usually only available for purchase directly through dealerships while aftermarket parts may be purchased online from a variety of vendors.

OEM Industry Trends and Market Outlook (2023 Update)

The company that buys the product from the OEM is the value-added reseller (VAR) because they add value to the original item by combining it with other products or features. The term OEM is most common in certain industries — specifically the automobile industry and the computer industry. In the case of automobiles, one company, the OEM, would create a car part. Zebra Technologies has a vast portfolio of products and services designed to meet the needs of businesses across various industries. The company invests heavily in research and development to ensure that its solutions are innovative, reliable and scalable.

Nobody is looking to buy a cruise control stalk by itself – they want it attached to a fully-functional new car. There are numerous companies that specialize in OEM manufacturing and never sell anything under their own brand (see contract manufacturer). They manufacture and sell retail, but also have a separate OEM division for goods that are private labeled.

You’ll pay less money for a product that’s quite similar to the original. It’s just a matter of preference and comfort level with the product you’re buying. While some original equipment manufacturers, like Goodyear and Microsoft, are household names, there are plenty of others that aren’t. For example, when Apple builds an iPhone, it doesn’t make the phone screens in-house. Instead, they contract with a different company that manufactures the screens. The company that produces the screens doesn’t leave their branding on the screen, nor do they advertise their products to consumers.

The quality of some aftermarket parts equals or exceeds OEM products, while other parts companies compete by offering lower-priced products of inferior quality. Aftermarket parts – specifically aftermarket car parts – describe replacement parts which are functionally alike to the original part. However, when deciding between OEM or aftermarket parts, customers should be aware that aftermarket parts were not made by the original equipment manufacturer.

Even medical equipment manufacturers work with OEMs to develop certain parts. Aftermarket parts refer to those made by any company other than the company the automotive manufacturer contracts with to make its parts. Companies that produce aftermarket parts can make them at a higher volume, and one part might fit multiple makes and models instead of a single vehicle. Original equipment manufacturer (OEM) stands for companies that carry out bulk productions, while original design manufacturer (ODM) stands for the company that designed the product. In the business world, this means a company that makes a product to be sold by another company under its own name. For example, an OEM computer manufacturer might make computers for a brand like Dell or Lenovo, who then sell the products under their own brand names.

Additionally, Zebra’s imagers are built to last, with rugged designs that can withstand harsh environments and heavy use. They will not produce only one type of the product but several versions of it, which are then, in turn, sold to various computer manufacturers/retailers. Those companies are value-added resellers who market directly to the public.


Original equipment parts (OEM) parts are components used on or in a vehicle that come from the original equipment manufacturer. Understanding the difference between OEM parts and aftermarket parts can change in accounting estimate examples help you determine what you want to use when your vehicle needs a repair or a replacement. OEM hardware and software is packaged for distribution to companies who build systems, like Dell and Apple.

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