OEM

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Short Definition

Short for Original Equipment Manufacturer.

Summary: In many industries, Original Equipment Manfacturers or OEMs supply components or assemblies which are incorporated into the final product, or even the complete product. Their name (and no references to it) does not appear on the product.

Original Equipment Manufacturer

Example 1: The Auto Industry

The auto industry is a good example. Items like tires, wheels, headlights, etc., are not made by the manufacturer of the car. The tires and headlights can also be bought on the aftermarket, from a number of well known companies, many being the same items found on a new car. Mechanical components may be made by (for example) TRW, but can be made by others too. Some parts, although sourced from an OEM, can only be purchased from the car dealer. Items like tires, headlights, filters, etc., with store brand names are usually made (OEMed) by a major maker of those products, to the buyer's specifications and price.

This gives the manufacturer the ability to purchase parts, from bearings to complete dashboard assemblies, from several sources.

Example 2: Electronics

Other companies may purchase their manufactures, such as televisions, from another large well-known manufacturer, with some cosmetic changes and their brand applied. Companies such as RCA did not make their branded VHS machines, they bought them from companies such as Panasonic. Large manufacturers in many industries manufacture products not only for their own brands, but as OEMs other companies and retail chains.

At the component level, as a rule manufacturers prefer at least three sources. This allows them to buy as needed at the best price and isolates their production from shortages. This can be crucial with volatile parts, such as memory, which can experience shortages at times. One factory going off line can cause serious supply disruptions in the IC business.

Computers

OEM products are quite common in the computer industry. Many computer sellers purchase a computer designed and built by one of a few suppliers, with their case and branding applied at the factory.

A not so well known example in the computer industry was that Apple, Atari, and others purchased their CPUs from the biggest computer maker in the world, Commodore. Commodore Business Machines owned their own semiconductor company (MOS Technology, later CBM Semiconductor), manufacturing the CPU and other integrated circuits used in their famous VIC-20 and C64 computers, which used the same CPU as the Apple II and Atari computers.

When Commodore began selling the Amiga, (OEM: Sanyo) the CPU (a Motorola 68000) was purchased from outside suppliers. Apple saw a serious threat to their poorly selling Mac, which used the same 68000 CPU, and did an engineering review of an Amiga. They estimated CBM was not making any money on the Amiga, as the trio of custom chips which powered it must cost hundreds of dollars. Their cost estimates for the custom chips per Amiga were overestimated, CBM manufactured those chips for under $20 a set at their own semiconductor fab.

Digital Command Control

In DCC, the same is true. Some of the DCC systems out there are either rebranded or customized versions bought from an OEM, such as Roco. They could also include components supplied by others. NCE started out supplying components, and software which would be incorporated into a finished product. The Wangrow System One was designed by NCE and manufactured by contractors working for Wangrow Electronics.

There are OEM decoders, which are stripped down or customized versions, sold exclusively to another manufacturer. QSI and Soundtraxx supply decoders for Atlas, Athearn, BLI and others. Another well known supplier of decoders on an OEM basis was MRC. ESU also offers OEM decoders. In some instances older decoders which are no longer sold at retail are still manufactured for OEM sales to model locomotive manufacturers.

The recently released Rapido FP9A employs a custom Soundtraxx Tsunami decoder with prototype sounds. See a video of the recording process on YouTube. Later models would employ customized ESU decoders.

OCM / ODM

Another term is Original Contract Manufacturer or Original Design Manufacturer. While not a common practice in the DCC world, in the electronics industry it is. The OCM manufactures your design to your specifications. An ODM designs and manufactures the product.

Some manufactures, such as 95% of laptops, are made by a few ODMs. Multiple brands, while cosmetically different, are internally identical, made at the same factory. The ODM designs the device to set specifications and cost targets, other companies then buy them with some cosmetic differences and their brands applied. The same would also apply to televisions, DVD players, and other electronic devices. There are many companies which do not design or manufacture anything, they deal with ODMs for their branded products. Some companies don't even sell the products with their brands, they simply licence their brands and trademarks to others. (The opposite is also true, some companies refuse to sell their products with another brand on them.)