Defining OEM: A Disambiguation
Just what exactly does OEM mean? The term OEM is used in so many ways it has become a great source of miscommunication among supply chain professionals. We've had the privilege of experiencing this ambiguity first hand, so we decided to offer some clarity.
The acronym OEM stands for Original Equipment Manufacturer. The Council of Supply Chain Management Professionals, aka CSCMP, utilize our friend Kate Vitasek's Supply Chain Management Terms and Glossary. Here's Kate's dual definition:
The rebranding of equipment and selling it under another name, or as a component of another product. OEM refers to the company that made the products (the "original" manufacturer), but with the growth of outsourcing, eventually became widely used to refer to the organization that buys the products and resells them. This term has two generally acceptable definitions which are actually opposites of each other and may vary by industry:
1) The OEM reseller is often the designer of the equipment (which is made to order). An example would be a computer manufacturer OEM which includes components built by other manufacturers, and
2) Companies that make products for others to repackage and sell, or to incorporate into a final assembly. An example would be an OEM manufacturing tires for use on automobiles.
Let's use Apple to apply these definitions. By virtue of definition 1, Apple is an OEM. Apple designs its own products and utilizes a vast network of suppliers for the input materials and components needed to create their Original Equipment. Interestingly, Apple does not manufacture anything in-house.
Perhaps most notably, Apple contracts its manufacturing to Hon Hai Precision Industry Co., Ltd., better known under the trade name Foxconn. Here's a list of Apple's production suppliers for 2011. This list, includes such names as Samsung Electronics Co., Ltd., LG Display Co., Ltd., Advanced Micro Devices, Inc., and Intel Corporation. These companies, by virtue of definition 2, are also classified as OEMs.
So, there you have it. OEM has two definitions, which can certainly be cause for confusion.
At HDTS, we avoid the term OEM. Why? Because we frequently encounter Premium Suppliers who offer "OEM" and "Branded" products.
Premium Suppliers offering "OEM" means they offer unbranded products which our Qualified Buyers can sell under their own brands, thereby classifying the Qualified Buyer as the OEM under definition 2.
Premium Suppliers offering "Branded" products are simply, by virtue of definition 1, OEMs.
When in doubt, do what we do at HDTS and avoid the term OEM...or accept the ambiguity!
