Original Equipment Manufacturer (OEM) is one of the important factors that has started gaining momentum in the manufacturing industries these days. It is a concept that was brought into practice to assist large organizations, to help them maintain their demand and supply curve. Before, we move ahead let us first briefly understand what OEM means and why is it so important.
Original Equipment Manufacturer (OEM) is referred to as the firm that is responsible for producing byproducts for the parent firm which in turn, assembles those components into one complete finished product and sells it in the market to the end consumers. The parent firm or the second firm that converts those byproducts into finished ones is referred to as Value-added Reseller (VAR), because, it augments those components into the end product and adds value to the base items. The value-added reseller works closely with the original equipment manufacturer to produce these end products.
To better understand the concept of OEM solutions let us look at an example. The age-old firm, which is very close to each one of us, Maruti Suzuki has been outsourcing the manufacturing of most of its automotive parts. This has become a common fact today but, was unknown a few years back. Maruti Suzuki gets the bumpers, exhaust, tailgate, banjo beam and many other parts manufactured by Jay Bharat Maruti (JBM). They have been in a collaboration with one another for forever now, so much so that manufacturing of cars by Maruti Suzuki seems impossible without JBM pitching in.
Similarly, if we look at the computer industry, Hewlett Packard gets all the software from Microsoft and incorporates them into their PCs and laptops before selling the computer in the open market. When we talk about a computer, we find it impossible to even think of it without software or RAM. Had it not been for Microsoft and Intel, we wouldn’t have probably been able to get such high-quality products. In the case of the computer industry, Intel and Microsoft act as the OEMs while HP, Dell, Lenovo and other computer manufacturing brands act as VARs. When the concept of OEMs was introduced, it was thought that the OEMs would support the large industries and work in the backend. Who knew that these OEMs would in themselves become such big famous entities so much so that people these days take into consideration the OEMs as well, before purchasing any product.
The emergence of OEMs has undoubtedly brought in a lot of employment opportunities for people of all hierarchies. They have contributed largely towards the growth and development of the economy, both monetarily and in terms of infrastructure. Apart from employing more and more people, the OEMs have also given hope to the already existing firms. They have been instrumental in their growth and have hence facilitated the growth of the economy in turn. The OEMs have been very promising in terms of cost efficiency, quality, and timeliness. They have helped the bigger companies in meeting their targets in the stipulated time along with greater profits. They have eased their management process and have taken the burden on themselves.
With the growth in the number of consumers and with the growing purchasing power of people, the OEMs have evolved, to support the VARs. There is no doubt in the fact that the OEMs are instrumental in helping the VARs acquire more profits. Also, with the coming of OEMs, the VARs can think of expansion and practice the same with ease. Since the OEMs already have the desired set up for manufacturing the base products, the VARs do not have to spend additionally. All they have to do is hire a suitable and reliable OEM and get their work done. Neither do they have to spend additionally on the additional workforce nor do they have to worry about the timeliness and quality of the byproducts, all of it can be taken care of, by, the OEMs themselves. Also, since the OEMs only deal with manufacturing of a particular component or a range of components, they are the masters in their field and hence undoubtedly complete the work in a lesser time and in a cost-efficient manner. Not only this, the OEMs have lessened the burden of the VARs by manufacturing the spare parts or components of the base product, they have also helped the VARs in providing after sales assistance to their customers. Since the OEMs deal with the manufacturing of the components, the VARs do not have to manufacture the components separately for consumers when they need replacements.
The day when the OEMs will become the backbone of the VARs is not far. The pace at which they have been growing and have created a dependency in such a less time span is commendable. It is because of the OEMs that the VARs have also been growing at a rapid pace and have been able to generate such huge profits. The reason behind the success of VARs is the time they save and the consistent quality they serve under the shadow of the OEMs.