What are OEMs and how do they work?

Over time, the definition of OEM (original equipment manufacturer) has evolved. Previously, the company that originally made a product before reselling it to another was considered the original equipment manufacturer. Now it refers to the buying, rebranding and selling of equipment. So what are OEMs now? OEMs are the companies that ultimately buy and rebrand a manufacturer’s product that they then sell to customers.

Some examples of OEMs are Dell, HP and Lenovo because they rely on a manufacturer to create the initial products that they then customize. Once OEMs receive the products, they can work with them as they come and simply put their logo on the products before selling them or choose to add value to the product. The ladder is referred to as a value-added service. For example, a company can buy a computer and then rebrand it and customize it by adding its own software. Then, they can sell that final product.

On the other hand, an example of a company that sells its products to OEMs is ABB. Its products are available all over the world in more than 100 countries, so it has to guarantee that they meet worldwide electrical standards, get all required certifications and fulfill all requirements of its partners.

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To dig deeper in the possibilities for OEMs, there are both hardware and software OEMs. Hardware OEMs focus on the products, such as servers or storage systems. Software OEMs often entail combining and inserting another technology into its own. An example of this is tablet software.

The advantages of OEMs range from cutting costs to ensuring efficiency.

1. Cut costs

OEM products are sold at cost effective prices, which in turn cut costs. If you want to purchase software for your computer, for example, you can purchase an OEM version and pay substantially less than you would for commercial software. However, this also means that OEM products may come with a different warranty or accessory than you may except from other similar products on the market.

2. High quality products

OEM products are of high quality because the firms expect suppliers to meet high expectations and are very strict in ensuring they, at the very least, reach them. This makes sure that the supplier maintains high standards during the production stage to produce the very best products.

3. Efficiency

Efficiency is extremely important when it comes to OEMs. Suppliers are trusted to meet demands, even through significant peeks, without letting the quality of the products slip. The work that goes into the products is efficient as is the approach to how to make products in the most efficient way possible.

As we can see, an OEM is not actually what we may have initially thought of when we imagined an original equipment manufacturer. Instead, the original equipment manufacturers are the ones that take a product and make it their own. These OEMs, along with their relationship with manufacturers and system integrators, enable the process of products from production to customization to purchase to have lower costs and high quality while maintaining the upmost efficiency.