What Is an Original Equipment Manufacturer (OEM)?
September 7, 2022
Original Equipment Manufacturers (OEMs) are critical to the supply chain, producing the manufactured parts, machinery, tools, and finished equipment to keep businesses running smoothly.
Your company may already have existing relationships with Original Equipment Manufacturers, especially if you operate in the B2B (business-to-business) sector. Along with resellers and distributors, Original Equipment Manufacturers may form the bulk of the supply chain for many industrial and manufacturing companies.
But how does an Original Equipment Manufacturer differ from any other supplier?
In short, an OEM represents the source of a part, machine, or tool. The item may be available to purchase through other channels, such as distributors or resellers. However, the OEM manufactured the original product.
How Do OEMs Add Value to the Supply Chain?
In the case of spare parts, an Original Equipment Manufacturer will often produce specific OEM replacement parts that complement its own equipment.
Original Equipment Manufacturer Examples
Industrial Equipment OEMs
A company can purchase a Caterpillar skid steer loader in its entirety from the OEM, in this case, Caterpillar, the original manufacturer. When replacing the air filter, this OEM part can be sourced from the manufacturer. And although other brands sell compatible filters, there is only one genuine OEM part.
Technology OEMs
PCs are built under a brand name, such as Lenovo or Dell. However, the computer manufacturer uses many other OEM products to build the computer. For example, a Lenovo PC may include an OEM operating system from Microsoft, an OEM processor from Intel, and OEM computer software from Adobe.
Automotive OEMs
The auto industry is perhaps the simplest example of an end product built from a network of Original Equipment Manufacturer relationships. Your average Ford pickup may have hundreds of OEM auto parts that come together to form the final product. Everything from the GPS to the air conditioning compressor is likely produced by individual original equipment manufacturers.
With these examples, it’s easy to see how OEM parts and equipment power many of the products around us every day.
OEMs vs. Resellers vs. Distributors
To buy Original Equipment Manufacturer parts or components, companies can buy parts from the Original Equipment Manufacturers, value-added resellers, and aftermarket product distributors.
Successful businesses know it’s advantageous to develop working relationships with different suppliers to maintain supply-chain continuity. These relationships ensure diversity and resilience in the supply chain, especially if a vital part isn’t available from the usual source.
Differences between Types of Suppliers
Original Equipment Manufacturers
- Usually at the forefront of research and development and first to market new features, upgrades, or add-ons.
- Often hold the IP (intellectual property) patents and trademarks and produce the documentation on how to use, maintain, and service the equipment or part.
- Often OEMs work by encouraging businesses to use their specific original parts to avoid risking voiding the warranty on their equipment.
OE Manufacturers (OE)
- OE means Original Equipment and differs from OEM parts. A different company manufactures OE parts using approved specifications from the Original Equipment Manufacturer.
- OE parts tend to be slightly less expensive.
Value-Added Resellers (VAR)
- VAR takes the OEM part and re-works it to add different functions or features.
- VAR serves particular industry niches where customizing, altering, or redesigning an OEM part delivers substantial value to the end user.
- May have robust agreements or partnerships with OEMs to ensure one business complements the other without encroaching on each other’s turf.
Distributors and Wholesalers
- Typically directed by the Original Equipment Manufacturer in terms of how they can promote, use, and sell the part.
- Often buy in bulk from the Original Equipment Manufacturer and then offer customers economies of scale for large part orders.
- May sell different SKUs that do the same job. For example, they may sell a branded OEM part, a cheaper OE or aftermarket part, or an imported own-brand part.
The Role of OEMs in Maintenance
With increasingly complex products and equipment, in-house maintenance teams need deeper levels of understanding to successfully maintain mission-critical equipment.
Suppose you’re a food processing business, and your industrial mixer fails unexpectedly. Your maintenance crew needs to be able to access new parts to get the mixer back into service to reduce costly downtime.
The best Original Equipment Manufacturers provide support to help maintenance techs troubleshoot and maintain their equipment. However, it’s not just repair and maintenance crews that benefit.
Equipment operating manuals help procurement teams make better decisions when first purchasing an asset. In addition, training materials help operators and machinists understand how to use the equipment correctly. Likewise, system integrators and engineers benefit from 3D-product designs created by OEMs, which can be dropped into more extensive system drawings and blueprints.
Original Equipment Manufacturers strive to be the brand of choice for their customers. Therefore, delivering the best support and value to the MRO supply chain will continue for at least as long as they produce their original equipment.
OEM Maintenance: Stay on Top of Your Equipment Upkeep
When purchasing a piece of equipment from an OEM, a substantial amount of information and documentation is attached. From periodic maintenance recommendations to guidance on planned shutdown procedures, much of this information can be sourced from your OEM partners.
However, organizing this information for easy access–especially if you have hundreds of pieces of equipment–can be a real challenge.
Finding and referencing the correct information when needed is critical to ensuring maintenance crews can do their jobs efficiently. If you have all the information but it is not accessible can seriously impact your maintenance crew’s productivity, slowing down the time to repair.
Consider using a CMMS, a computerized maintenance management system, to provide a framework for a standardized approach to maintenance.
“The digitization of the supply chain, procurement included, creates a “digital loop,” a continuous flow of data, information, goods, and services between the physical and digital worlds.”
DELOITTE
A CMMS like MaintainX can function as a repository for all the documentation, plans, schedules, and manuals related to your OEM equipment. MaintainX, for example, even helps you analyze the root cause if something goes wrong with your new OEM machinery.
MaintainX is an ideal solution to store documentation, create SOPs, and streamline communication between technicians, team leaders, and management. Contact us to book a tour of our platform.
