Original Equipment Manufacturer: OEM’s
It has been a case of past when OEM serves to be an adjective only used to describe a company that produces items, which is marketed under the banner of some other company. In recent years, OEM have begun to sell their products more widely, in some cases even reaching out to public directly.
OEM is however a misleading term used to describe a company that has special relation with IT and computers. While OEMs are not to be confused with VAR (Value Added Reseller), it loosely refers to the act of company in branding a product on its own name and offering its own warranty, support and licensing the product. The term is perhaps a misnomer because OEMs are not the original manufacturers, they customize the original products.
In the context of automotive, OEM refers to the original equipment that is part assembled and installed during construction of new vehicle. Contrary, Aftermarket parts are the one made by companies other than OEM which serves as a replacement after the car leaves the factory.
It is on the part of manufacturers to specify standards for equipment as well as determine its quality before letting it go into the products. Market has variety of assembled products that are not manufactured but are put together from variety of purchased component parts. Then comes some components, majority of which are custom made, that not only require a greater complimentary teamwork between buyers and sellers but also with the management involved in negotiations and other terms.
The emphasis on quality is due to the fact that components become a part of organizations own product and thus quality do matters. Who wants to risk entire marketing mix and obviously the much famed name? Thus, it leads to buyer going for an entrusted source only in hope of getting the best. The cases have been registered when the buyer is completely diverted to on single supplier who shares the same objective as the buyer and use that partner as a sole source supplier.
It is important to note if such co-branding and awareness of OEM manufactures continue, it will give rise to a more profitable replacement market adding to the goodwill of the producers. The replacement market that come into being since components parts go into finished products, this after market can be very large as well as very profitable.
OEM rely on their ability to drive down the cost of production by economies of scale, which are nothing but the cost advantages that the enterprise obtain due to size, output or scale of operation with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of input. Also, using an OEM allows the purchasing company to obtain needed components or products without owning and operating a factory.
In the past, little do the customers care as who had made the component as far as component worked as expected. However, with the development of technology,
components and processed items are becoming branded and as such their names are becoming familiar with the customers. After all the brands do matter!