This article aims to discuss the definition of what an Original Equipment Manufacturer and how it works.
There are products that are composed of several components and not all parts are made solely by the company and this is where original equipment manufacturer comes into the picture because they are the ones that produce the other components of the final product. The reason why companies do this is because this type of practice actually adds value to the final product. Original equipment manufacturers create custom made parts for their clients and the effect of this kind of service would be an increase in selling price of the final product because nothing custom made ever comes cheap.
The best example to be given for this kind of relationship between two companies would be that of an auto company that orders car parts from another company. It is not uncommon for brake cylinders or exhaust systems of cars to be produced by an OEM. The sole role of OEM is to produce components because other tasks such as assembly or incorporation of these components to the final product would be the job of the company they are working with.. It cannot be denied that the more original equipment manufacturers are involved in make car components, the more the car becomes expensive.
As the world rapidly advances, OEM also advances with it and now these companies have a new term used specifically by companies under the computer industry. The OEM is the one that would create a product, another company would buy the product, rebrand it by incorporating it into their product, and then sell it off under their company name. A good example of this would be computer software being made by one company while other companies that sell computers would buy these software, use it in the computers they produce, and then sell them of under one brand name, their very own brand name. In this scenario, it would be the company selling the computers that would be considered to be the original equipment manufacturer.
The following paragraphs will now discuss the process that goes within OEMs.
When you run a business, there will always be a need for support from other companies especially if you are producing goods or products that have various parts in them and you are not the expert manufacturer of all parts. It is the OEM that helps the VAR make a sale by producing parts for them. The two companies may be working hand in hand to create the final product they can sell but in reality, the OEM just handles the making of the components and it would be solely up to the VAR to handle the finish product.