A Complete Guide to Original Equipment Manufacturing (OEM)

Manufacturing is a vital part of the U.S. economy. It accounts for more than 11 percent of total output and about 8.5 percent of total jobs.

This also means remaining competitive can be a challenge. Doing so entails producing superior products for your customers.

If you are new to manufacturing or looking for new opportunities for production, assembly, or warehousing, consider original equipment manufacturing (OEM). This alternative can make all the difference in the price you are paying for parts and the quality of the end-product you are offering.

There are many advantages to choosing the OEM option. This original equipment manufacturing guide will give you an idea of what these production methods entail. It also will offer some insights into how your business could benefit from them.

What Is Original Equipment Manufacturing (OEM)?

Original equipment manufacturing (OEM) means that a company makes components for other businesses. These value-added resellers (VAR) then sell the end-product under its own brand.

OEM companies market to other manufacturing retailers, while VARs focus on sales to the public. The computer, electronic, and automotive industries are the most common types of businesses that use OEM.

For example, a computer company will not manufacture all the components in the machine. An OEM will make the processor, disc drive, or other hardware, then the company assembles and sells the completed computer. Similar arrangements are found in automobile manufacturing.

OEMs are distinct from aftermarket parts manufacturers. These companies make parts that look and function like original components. They are generally less expensive, although that is not always the case.

Examples of aftermarket parts include fenders, rims, or cargo racks for vehicles. These are less common in computer manufacturing but are prevalent in the manufacture of a variety of electronic products.

Most aftermarket parts do not function with the same reliability as OEMs. There are exceptions, but it depends on the product. For instance, people might buy tire rims that drive better than generic ones that come with their vehicle.

What are the Advantages of OEMs?

There are many advantages an original equipment manufacturing company can provide. Here are a few significant ones to consider.

Quality

The most obvious advantage of OEMs is that they function as intended. Unlike aftermarket parts, OEM components fill an original, specific function. This means that in most cases, they are more reliable and durable.

A reputable OEM company will have some type of guarantee for the parts they are producing. Warranties differ by company, but you can expect to get the components they promise and that they will perform as intended.

Customization

Another advantage of OEMs is customization. If you are ordering these parts for a specific purpose, you will be starting from scratch with the production company. They will design a process for producing the part with precision.

Besides basic parts production, OEM companies will often offer extra assembly options. They are more likely than other manufacturers to work with you on getting the final combination of components that best suits your production demands.

Support

You can expect a more personal and interactive customer relationship with OEM companies. This is because, from the outset, you must be in conversation with them about components and their function. They are more likely to be in tune with how to meet your product and assembly needs.

OEM companies will send you samples and adjust specifications based on your recommendations. Likewise, they can adjust the production process where necessary. This is something you will not get from many aftermarket manufacturers.

Cost

Aftermarket parts can be cheaper for consumers looking for a quick replacement. But this is not always the case for VARs with larger manufacturing needs. In fact, due to economy-of-scale, OEM companies can keep production costs low and pass those savings along to their clients.

Once OEMs have design and manufacturing processes in place, production is cost-effective. Depending on the size of your order, this is likely to mean cheaper costs to you, especially in the long term.

Planning

OEM companies can estimate the cost of production with precision. This will allow you to budget long-term. It also allows you to eliminate the guesswork of what parts may cost––and how quickly you can get them–months down the road.

This also means you can return to that OEM at a later date and expect to receive the same part. This can translate to huge efficiencies for your business. Since you will not be starting from scratch, you can fill new orders quicker without having to worry about accessing the parts you need to do so.

Warehousing Capabilities

Warehousing is a big part of manufacturing. Another benefit of going with an OEM company is their ability to assist in this endeavor. OEM companies are more likely to offer a variety of third-party logistics (3PL) services, such as repackaging and labeling.

Warehousing is another add-on service that OEM companies are more likely to offer than aftermarket parts businesses. It can be a huge asset for larger orders and shipping efficiency.

Warehousing provides you with greater flexibility for inventory management as well. Prominent OEM companies are likely to offer cloud-based management services. Such programs can make it easier for you to manage your parts on-hand and get them where they need to go.

This can translate to serious cost savings for your business. It helps you manage larger orders and do direct shipping to customers. It also may allow you to reach a broader market base.

Find Original Equipment Manufacturing Near Me

Now that you have an idea of some original equipment manufacturing tips and what OEM entails, you can decide if it is right for your business. Find a reputable company that can meet your specific production needs and provides value-added services that can help you provide a better product and manage delivery processes.

At Shield Works Precision Manufacturing, we provide original equipment manufacturing (OEM) production, assembly, and warehousing solutions to our international clients. We offer quality custom manufacturing at globally competitive speeds and prices. Reach out to us today for a free quote and consultation.