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What is OEM?

Article Details
  • Originally Written By: R. Kayne
  • Revised By: G. Wiesen
  • Edited By: L. S. Wynn
  • Last Modified Date: 15 August 2014
  • Copyright Protected:
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    Conjecture Corporation
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An Original Equipment Manufacturer (OEM) refers to companies that make products for others to repackage and sell. Resellers buy products from these companies in bulk, without the costly retail packaging and customer service that comes with individually sold units. The product itself is essentially the same as more expensive, retail-packaged versions. OEM products are used in many industries, but are perhaps most prevalent in electronics.

How These Products Are Used

Generally, dealers of OEM products add something of value before reselling the merchandise. A vendor that does this is known as a Value Added Reseller (VAR). A VAR might build components, sub-systems, or systems from parts made by other manufacturers. These goods give VARs a wide range of creative marketing choices, which helps smaller dealers remain competitive in a marketplace.

Multiple VARs Working Together

OEM products can be utilized at several different levels of an industry. For example, assume a fictitious company, "Head Music," makes popular sound cards, but wants to introduce a Digital Versatile Disc (DVD) drives to the marketplace. Not making DVD drives themselves, they enter into a contract with another company to supply drives to them. "Head Music" receives the manufactured DVD drives in bulk, affixes their own logo to the players, and then bundles them with their sound cards and repackages them as "Head Music DVD Drive and Sound Card."

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Taking this a step further, another company can act as a secondary VAR and use Head Music's DVD and sound card package to build Personal Computer (PC) systems for sale. They contact Head Music and enter into a contract to buy the DVD and sound card combos in bulk. Head Music now acts as an OEM for this new company.

They ship bundles to the PC company, which acts as a VAR, without expensive retail packaging and at a substantial savings. The PC company installs the packages into their PCs, along with other products like motherboards and hard drives. Even the Operating System (OS) usually comes from a different manufacturer, for example a version of an OS from Microsoft®. When the VAR is finished, they offer a PC with brand name components and software at a competitive price.

Product Labeling and Tracking

OEM hardware and software often have different product numbers than retail packages, though manufacturers and resellers still track these products internally. Reseller and retail versions of software function essentially the same. There can be some differences, however, such as a software program tied to a particular component in a computer, allowing it only be used with that pre-built system and no other computers.

Warranties and Customer Service

The public can often purchase OEM hardware and software at a substantial savings. Hard drives are typical examples of these products, purchased in an anti-static wrapper without a box, cables and manual. The warranty is generally the same, with software drivers, digital manuals, and additional support available online, when not provided with the product itself.

Some products, however, do have shorter warranties. This is true of some computer processors, for example, where the retail version carries a three-year warranty, but the OEM version includes only a one-year or 90 day warranty. Manufacturers provide support and warranty details with products, which should be read by anyone considering using them. A VAR that uses these products typically offers its own warranty on the items it sells, rather than coverage from the manufacturer.

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Discuss this Article

clintflint
Post 42

@KoiwiGal - That's one reason it's a good idea to try and buy locally as much as possible. If something is grown from all local ingredients, you'll at least know who to blame if everything goes wrong.

But, generally, the food industry is pretty safe, simply because it's standardized. It's quite closely regulated as well. It's in every company's best interest for them to make sure their products are going to work, particular the company who is selling them with their name on the packet.

KoiwiGal
Post 41

@anon258016 - OEMs are used in the food industry in the same way that any other industry uses them. One company makes the products, another company labels them, markets them and sells them.

The problem here, more than any other industry, is that it makes it difficult to trace the foods back to their origins. Particularly when they change hands and are mixed into different products.

So, for example, that bread might say "made in America" but it might only have been mixed (or even just baked) in the US, while the wheat might have been grown in China, the salt might have been sourced in Israel and so forth. The bread might have been baked by a different company than the one that ultimately sells the bread.

So, if someone gets sick from the bread, it can be very difficult to pinpoint the source of the bad ingredient, and it can be difficult to figure out who to blame so that the problem can be fixed.

This is a problem in all industries but it's particularly important in the food industry.

anon258016
Post 40

Could you please tell me how we can use OEMs in the food industry?

anon252925
Post 39

Wow. Talk about real, genuine layman's terms! Thanks!

anon231967
Post 37

Thank you so much! I'm trying to find out exactly what is oem. I ran into confusing definitions from other websites! Thumbs up!

anon214329
Post 36

This 63 year old has learned what OEM is. This article is great and the examples are clear (even to me). Thank you.

anon167146
Post 31

Thanks for the info. If I want to become OEM (or value-added reseller) of a product, are there any legal requirements or is this strictly between my company and the manufacturer?

anon157731
Post 28

What about the performance?

anon149844
Post 27

Awesome work! This is great. Thanks.

anon134785
Post 26

Really excellent explanation, and can't imagine further better explanation then this.

anon132090
Post 25

Excellent. Thank you!

anon105335
Post 22

Can OEM software be sold individually by a reseller? or is it illegal?

anon86620
Post 21

Yes you are right. it is good article for OEM with examples.

anon75595
Post 18

bravo. it's satisfying.

anon74849
Post 17

very nice. keep it up.

anon69251
Post 16

If one upgrades a OEM version using an retail upgrade disc, will it change it to a retail version?

anon67847
Post 15

good. Nice info. Excellent explanation.

anon65948
Post 14

Good Information. Enough to get point from the data. Nice post.

anon64116
Post 13

what do i need to create an oem?

anon58243
Post 12

Very well explained - thank you. It's hard to find a good definition sometimes, but this one hit the nail right on the head.

anon56881
Post 11

Thank you. Very clearly explained.

anon52407
Post 9

I agree, very informatve. i learned new stuff today. thanks. - jun/phils

anon37027
Post 8

Very informative. This is a perfect explanation! Thank you.

anon7405
Post 4

Nice job. Remarkably easy to understand. Can't imagine an explanation being any better.

anon308
Post 2

What is the relation between OEM's and the EMS (electronics manufacturing services) industry?

anon296
Post 1

Excellent article. Answered all my queries.

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