Original Equipment Manufacturer
OEMAn Original Equipment Manufacturer (OEM) is a company that produces parts or equipment used in another company's end product.
An Original Equipment Manufacturer (OEM) makes components that another company, a value-added reseller (VAR), uses in its own finished product. The VAR sells the final product to consumers under its own brand name. The OEM typically designs and owns the intellectual property for the component it manufactures.
For example, in the automotive industry, a car company assembles vehicles using parts from many different OEMs. The engine, transmission, and electronic control units are often made by specialized OEMs. The car company integrates these components into its final design and markets the complete vehicle.
On the shop floor, an OEM's operations are defined by the needs of its business customers. Production is often high-volume and based on long-term contracts. The OEM must meet strict specifications for quality, delivery schedules, and cost. This requires precise production planning, rigorous quality control systems, and effective supply chain management to ensure a consistent supply of parts to the VAR.
A company manufactures custom microchips for a major smartphone brand. The microchip company is the OEM. It produces 2 million units per month based on the smartphone brand's performance specifications and delivery schedule.
What is the difference between an OEM and a contract manufacturer (CM)?
An OEM typically designs and owns the intellectual property for the part it produces. A contract manufacturer builds products according to the exact design and specifications provided by its client.
What does 'OEM part' mean for repairs?
An OEM part is a replacement part made by the same company that manufactured the original component. It is considered an authentic part that matches the original specifications.
How do OEMs manage quality for their customers?
OEMs use quality management systems (QMS) and statistical process control (SPC). They must often meet specific quality standards and reporting requirements set by their customers.
Can an OEM also sell products under its own brand?
Yes, some OEMs sell similar components directly to consumers or in the aftermarket. However, their primary business is supplying parts to other manufacturers.
Bill of Materials
BOMA Bill of Materials (BOM) is a complete list of the raw materials, components, and assemblies required to build a product.
Supply Chain Management
SCMSupply Chain Management (SCM) is the process of managing the flow of goods, data, and finances related to a product from procurement to final delivery.
Quality Management System
QMSA Quality Management System (QMS) is a set of documented policies, processes, and procedures for achieving consistent product quality.
Purchase Order
POA purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.
Make to Order
MTOMake to Order (MTO) is a production strategy where manufacturing starts only after a confirmed customer order is received.