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HomeIndustriesERPOriginal Equipment Manufacturer: Definition, Characteristics, and Benefits

Original Equipment Manufacturer: Definition, Characteristics, and Benefits

When you buy a manufactured product, you may come across the term OEM Original Equipment Manufacturer. Initially, OEMs had a meaning as companies that produced spare parts for sale to other companies. The aim is for rebranding and resale. However, the meaning has changed, referring to the product that the company will acquire.

Some companies create products that other companies will use in the procurement process, that can be managed by the most refined E-Procurement Software, for their final products. Thus, the existence of an OEM is essential for you who need products to add value to your products. Therefore, we will assist you in understanding the full explanation of the original equipment manufacturer in this article.


What is an OEM (Original Equipment Manufacturer)?

An original equipment manufacturer is a company that produces spare parts for other companies used as components to add value to its products. The focus is on business-to-business sales. The company that makes the initial product or system is an original equipment manufacturer. Value-Added Reseller (VAR) is a company that buys products from OEMs to add value by incorporating them into company products. 

An OEM was the first company that made the main components to make a product. You will use the main components that have been purchased to make the same product that the company previously produced. However, the product cannot show previous branded products, especially for brand users, thus creating new packaging designs and brands. 

Today, many industrial sectors have practiced OEMs ranging from automotive, technology, catering, and fashion. The existence of these products will help you reduce the company’s operational costs, improving product quality and product quality speed.

The Characteristics of an Original Equipment Manufacturer

An original equipment manufacturer has certain inherent characteristics. You can identify an OEM by some of its characteristics. There are two characteristics of OEM that you need to know as follows:

Selling license

The first characteristic of OEM is selling licenses. An OEM as the licensor will license the product to you as the licensee. An OEM license is a license sold together with the hardware and software product. Original equipment manufacturers usually sell their product or component licenses to Value-Added Resellers (VARs), then market them.

Incomplete spare parts

Another characteristic of OEMs is the incompleteness of parts. Both hardware and software OEM usually do not include additional components. For example, you probably won’t get the cables or adapters when buying an OEM hard drive. This happened because VAR or OEM buyers will usually separately secure these components in bulk.

Also read: 7 Common Manufacturing Challenges & How to Overcome Them

The Benefits of Purchasing in OEM

advanced manufacturing

When you buy OEM products, you will get benefits that you don’t encounter when buying products elsewhere. There are three reasons you need to buy a product or spare parts at an OEM original equipment manufacturer.

High quality

It would be best if you did not hesitate to buy products in the OEM. The reason is that they have superior quality compared to aftermarket. They also have undergone rigorous industry testing before they are eligible for use. This test makes the fit and durability of the product guaranteed. Therefore, the price of OEM products certainly reflects their quality.

Stronger durability

The high quality of OEM products also indicates that OEMs must guarantee the product to have stronger durability. With solid durability, you should not be afraid to use it for a long time. An original equipment manufacturer is a supplier that gives you an estimate of the replacement period of the parts. Thus, it will help you to do better planning.

Longer lifespan

Another benefit from buying OEM products is a longer life because it is guaranteed quality. The value comes from its ability to last for a particular duration and is tough enough to survive. Therefore, you can use OEM products for a long time.

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download skema harga software erp

Original Equipment Manufacturer vs Aftermarket

There are pros and cons regarding buying parts from OEMs or aftermarkets. An OEM is a safer option when you buy parts to complement your product. OEMs have designed their products with high quality, stronger durability, and longer life span. Thus, OEMs will guarantee your purchase. You will also get a guarantee if something goes wrong with the product you purchased earlier. You can specifically order OEM products that will add value to the products you sell to consumers. In addition, the product also tends to be more expensive than aftermarket products.

Suppose you want to buy products that can reduce the company’s expenses. In that case, products from the aftermarket can be your consideration. Aftermarket products are usually not included in the manufacture of VAR products, so they are cheaper than OEMs.

Also read: Know the Importance of Product Design in Business Development

An OEM and an ODM Company

An Original Design Manufacturer (ODM) is similar to an Original Equipment Manufacturer (OEM). Both are companies that make products for you to finish your product. The difference is that an ODM does the product design and manufactures it. The development of OEM capabilities makes its tendency change from good and cheap products to ODM focused on design innovation. Within ODM, design makers produce products using brand-to-order. Therefore, buyers can be interested in high-quality products with unique looks and innovation. This allows your product to have unique characteristics to attract the consumer market.


The Examples of an Original Equipment Manufacturer

original equipment manufacturer

You can distinguish the examples of OEMs into hardware and software products. Hardware products have the same capabilities and performance as their retail counterparts. However, there are many other product offerings in limited quantities. In addition, you don’t get any other components that support what you are buying. For example, you will not get a computer fan when buying a computer processor.

While software products are when a software company licenses its software to another company. The licensee will embed software into their application or enterprise system. Furthermore, the system will improve by adding new functionality. Examples of OEM software are ERP system licenses and Supply Chain Management System. HashMicro’s best ERP software can be your consideration to improve your productivity, functionality, and smooth running of operations.

Also read: The Best Business Accounting Software


Traditionally, an original equipment manufacturer meaning as a company whose products will be used by other companies. They will use OEM’s products as components in their products. The inherent characteristic in OEMs is selling incomplete licenses and parts. Buying an OEM product can provide tremendous benefits, such as high quality, long durability, and longer life.


You can use the Hash Manufacturing System to support your business processes in one integrated system. HashMicro provides the best solution for you to increase the productivity and profitability of your manufacturing business with the complete manufacturing system.

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HashMicro is a software development and enterprise resource planning (ERP) company. Consequently, we often provide articles about ERP and other systems that all businesses need.

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