Original Equipment Manufacturer (OEM)

An original equipment manufacturer (OEM) traditionally is defined as a company whose goods are used as components in the products of another company, which then sells the finished item to users.OEM companies, competing with aftermarket businesses, increasingly innovate supply chains and product lines to deliver a superior product at competitive pricing. Both OEM and aftermarket companies are actively using technologies such as 3D printing to efficiently create on-demand parts and make their supply chains more flexible. Rapid changes in product demand may be costly for traditional production to respond to and may require companies to maintain higher inventory levels. On-demand production is providing auto parts manufacturers with additional production options.

Value-Added Resale An OEM is different from a value-added reseller (VAR), which is a company that purchases the original or component product from the OEM and then adds to its value by adding features or services to the product, or by incorporating it into a larger product, before finally reselling it, most commonly to end users.

OEMs most commonly sell their products business to business, while VARs most commonly sell to consumers or other end users. One of the most basic examples of the relationship between original equipment manufacturers and VARs is the relationship between an auto manufacturer and makers of auto parts. Various parts needed for the assembly of a car, such as exhaust systems or brake cylinders, are manufactured by a wide variety of OEMs. The OEM parts are then sold to an auto manufacturer, which adds value to the original product by making it part of an automotive vehicle. The automotive vehicle is then sold to individual consumers or other end users.It’s also possible for a company to be considered a VAR of the products of a company that is itself already considered a VAR. This most commonly occurs with companies that primarily provide services rather than goods.