Original Equipment Manufacturer (OEM)
Summary: Original Equipment Manufacturers, or OEMs, supply components or assemblies which are incorporated into the final product, or even the complete product. Their name (and any references to it) does not appear on the product.
Original Equipment Manufacturer
In the realm of Digital Command Control Multifunction Decoders, an OEM decoder is one which was sold directly to the manufacturer of a locomotive for installation and programming at the factory. These decoders may lack features or have custom programming or audio files unique to the finished product.
Retail decoders are those sold to a hobby shop for sale to the public. One difference is that the NMRA specifies that retail decoders must default to a Primary Address of 3. OEM decoders do not have to follow that requirement.
Example 1: The Auto Industry
Items like tires, wheels, headlights, etc., are not made by the manufacturer of the car. Replacements can be bought on the aftermarket from a number of suppliers, 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 by a major manufacturer 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
Well-known brands may purchase some or all of their manufactures, such as televisions, from other large well–known manufacturers, 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, 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. Most television and computer monitor manufacturers source their LCD panels from one of the few factories which make them, due to the cost and complexity of the manufacturing process, compared to the older CRT (picture tube) once used.
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 Business Machines. Commodore 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, which assembled the Amiga, later rebranded as the Amiga 1000) the CPU (a Motorola 68000) was purchased from outside suppliers. Apple saw a serious threat to the 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 chip sets for under $20 at their own semiconductor fab. Apple also paid 25% more for their CPUs than Commodore did.
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. Multifunction decoders sold by Wangrow were often an OEM product from a contract manufacturer.
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. ESU has the capability to infinitely customize a decoder thanks to their design.
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 and 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.