OEM

OEM is the abbreviation of Original Equipment Manufacturer in English, also known as fixed-point production, commonly known as OEM (production). The basic meaning is that brand producers do not directly produce products, but are responsible for designing and developing new products using their key core technologies. Control sales channels.

The specific processing tasks of the original equipment manufacturer entrust other manufacturers of similar products to produce through contract orders, and then buy out the ordered products at a low price, and directly affix their own brand trademarks. This cooperative method of entrusting others to produce is referred to as OEM. The manufacturer that undertakes the processing task is called OEM, and the products it produces are called OEM products. It can be seen that fixed-point production belongs to the “OEM production” method in processing trade, and it is the export of labor services based on commodities as the carrier in international trade.

oem
oem

OEM (Original Equipment Manufacturer) is the entrusted manufacturer according to the needs and authorization of the sample manufacturer, and produces according to the manufacturer’s specific conditions. All design drawings, etc., are manufactured and processed completely in accordance with the design of the sample manufacturer.

OEM is the abbreviation of Original Equipment Manufacturer in English. According to the literal meaning, it should be translated as original equipment manufacturer. It means that a manufacturer produces products and product accessories for another manufacturer according to the requirements of another manufacturer. It is also called OEM production or authorized OEM production. . It can represent processing by outsourcing or subcontract processing. Domestically, it is called cooperative production and Sanlai processing, commonly known as processing trade. First popular in developed countries such as Europe and the United States, it is a game rule for large international companies to find their respective comparative advantages, which can reduce production costs and increase brand added value. This kind of production method is more popular in the domestic appliance industry. For example, TCL ordered the production of washing machines in Suzhou Samsung, and Changhong produced washing machines in Ningbo Disheng.

Specifically, OEM (Original Equipment Manufacturer) is the original equipment manufacturer, ODM (Original Design Manufacturer) is the original design manufacturer, and OBM (Original Brand Manufacturer) is the original brand manufacturer. Party A favors Party B’s production capacity and asks Party B to produce products designed by Party A, using Party A’s trademark. For Party B, this is called OEM; Party A’s technology and design are favored by Party B, and Party B introduces production and affixes Party B’s label. For party A, this is called ODM; A creates brand A by itself, and B produces and sells products with brand A. For A, it is called OBM.
The original factory commissioned design ODM is in the product design and development activities, through high-efficiency product development speed and competitive manufacturing efficiency, to meet the needs of buyers. The technical ability is enough to improve the design ability in the future, and then can start to accept the case and deal with the related affairs of design and development.

Explain In detail

  1. OEM is the abbreviation of Original Equipment Manufacture. It refers to a “foundry production” method, which means that the producer does not directly produce the product, but uses the “key core technology” that he has mastered. , Is responsible for designing and developing, controlling the sales “channels”, and entrusting the specific processing tasks to other companies. This method is a universal phenomenon that gradually emerged in the world after the electronics industry has developed in a large amount. Major international companies such as Microsoft and IBM all adopt this method.
  2. The term OEM is simply too common in computer hardware products, such as OEM optical drives, OEM monitors, and OEM mice. Some people even think it is a quality-assured brand. So, how much do you know about OEM? Does it mean that a product is OEM?

In fact, OEM has a close relationship with modern industrial society. Some well-known brand-name commodity manufacturers often turn to other manufacturers for help because their factories cannot meet the requirements for mass production, or they need certain parts. These vendors who lend a hand are called OEMs. If it is extended to the IT field, it means those manufacturers that carry out foundry. For example, CPU fans are not produced by Intel or AMD. They usually find professional motor manufacturers like Sanyo Corporation for fan OEM production.

Development History

OEM is an inevitable way under the trend of large-scale social production and large-scale collaboration. It is also one of the effective ways to rationalize resources and is the result of large-scale social production. In Europe, OEM industry associations have been established as early as the 1960s. In 1998, OEM production and trade reached 350 billion euros, accounting for more than 14% of the total industrial output value in Europe. OEM production has become an important component of modern industrial production. section. With the further acceleration of economic globalization, OEM demanders may choose OEM suppliers on a larger scale, especially to countries and regions with low processing and manufacturing costs.

In Asia, in order to quickly occupy the market and reduce production costs, Japanese companies first adopted the international OEM production and trade form. The take-off of the “Four Asian Dragons” is also inextricably linked to OEM. Among them, Taiwan has long become the world’s largest OEM base for PCs, and India has also become the world’s largest exporter of computer software through OEMs. In the IT industry, from technology to components to software functional modules, who is the all-rounder? When talking about this issue, Compaq President Feifer said: “Make money in the most direct way!” and publicly stated that he would save the burden of so-called assets (plants, equipment, office buildings, etc.). Some people even claim: OEM creates the entire IT industry! The American Nike company, with its annual sales revenue of up to 2 billion US dollars, does not have a production plant of its own, and only focuses on research, design and marketing. All products adopt OEM methods and become a successful model of OEM operations in the world.

In an environment of strong demand created by global economic expansion, my country’s advantages in human resources and large-scale production are gradually being reflected. Since the reform and opening up, processing trade has been developing in full swing on China’s land, and its share in foreign trade has always been more than 50%, becoming the most important contributor to the trade surplus. This momentum will continue to grow in the short term.

The Advantages

The OEM method is widely used in the manufacturing industry, especially in the rapidly developing information industry. For example, according to statistics from the world’s authoritative statistical agency IDG (International Data Group), more than 95% of the hard drives used by global personal computer manufacturers are provided by three major hard drive suppliers, Seagate, Quantum, and Western Digital, in the form of OEMs. The reason why it can be widely used is that he has adapted to the needs of the new competitive situation brought about by the rapid development of global science and technology after entering the 1990s. The OEM method adapts to the development of this new situation with its flexible and effective management characteristics, so it can be widely used.

Adapt to technological development

The rapid development of science and technology has led to the shortening of product life cycles. The company’s competitive strategy is shifting from a production-oriented approach that focuses on expanding production scale and reducing production costs to a market-oriented approach that focuses on the application of new technologies and quickly launches new products. According to IDG data, in the 1950s and 1960s, the life cycle of electronic products averaged 10-12 years, and this value dropped to 6-18 months in the 1990s. In the era of electronic information where new technologies are constantly emerging, business operators have rushed to increase their huge investment in research and development of new products in order to gain competitive advantages. In order to convert research results into commodities as soon as possible to occupy the market, many large companies have used key components Produce by yourself, and contract out the auxiliary parts by OEM for other companies to produce. This can not only ensure that the production cycle is shortened, but also the large amount of funds saved for production equipment can be used for research and development, so that the company can respond to the market quickly. Maintaining a virtuous circle, companies can also adjust the scale of production in a timely manner in accordance with changes in the market situation, so that it is possible to maintain a flexible and flexible production mechanism that adapts to the dynamics of market development.

From another perspective, the product life cycle is shortened, and the mental wear and tear of enterprises for investment in production equipment will inevitably increase. In order to reduce opportunity costs, a large number of OEM methods are used for production. “Arrow” strategy.

Brand Development

Economic competition is increasingly spreading on a global scale. Brands and channels are increasingly showing an important role in the final value of actual products. The original manufacturer’s mark in the OEM method illustrates the importance of this.

In the economic competition, people are increasingly aware of the importance of the brand, because only by establishing a good image among consumers can we win the support of more marketing channel partners, and can we make the products popular through the joint efforts with channel partners. Penetration of wider consumer groups. For this reason, many multinational companies with good business performance have been focusing on the construction of brand image and marketing channels. Therefore, make full use of OEM methods to push mature products or products with production advantages of other companies into their own marketing channels, and use their own advantages in value-added services to win a wider range of consumers. This can also be called ” A good strategy for “borrowing chickens to lay eggs”.

Information Management Development

With the development of science and technology, computer integrated production system (CIMS) has gradually been widely used in the production process, and quality has gradually become a controllable factor in the production process, which enables OEMs to provide consumers with products produced on behalf of consumers. Material guarantee. This is one of the reasons why the OEM method is so popular in the information industry with a high degree of production automation. This is also the reason why multinational companies like IBM and HP with only more than 100,000 employees are driving tens of billions of dollars in sales. One. Investing limited resources in channel construction also provides a fundamental guarantee for companies to increase market response speed.

Customer solutions

In the era of information economy, the division of labor in the industry is becoming more and more detailed, new products are emerging one after another, and the content of high-tech is gradually increasing. It is impossible for consumers to judge their applicability based on the technological content of products, because what they need is a full range of solutions. Service. In a sense, modern enterprise competition is to assess the ability of enterprises to discover consumer needs and provide comprehensive solutions for them. The importance of a single product is gradually decreasing. The real problem is how to meet the increasingly complex and personalized consumer demand.

The OEM approach proposes a good way: that is, the company uses its own proprietary technology as the basis to melt into other products produced by OEM, so as to provide customers with solutions that suit their needs, which not only promotes the development of the company’s own technology, but also strengthens In addition to the influence of its own brand, customers can get more comprehensive, timely and thoughtful services from the comprehensive solutions. From another perspective, OEM companies have also developed under the drive of the company, which fully embodies the principle of rational allocation of resources. In addition, operating in an OEM manner can more effectively allocate the limited internal resources of the enterprise, minimize the level of management, and improve the efficiency of operation and management.

Build a competitive advantage

The development of modern economy has changed people’s views on pure competition. Competition and cooperation have become the two major driving forces for the development of modern enterprises. In terms of products that have their own advantages, the use of competitors’ OEM products makes their advantages more prominent. At the same time, competitors have new room for development, and competition has become cooperation. At the same time, with the rapid development of science and technology today, it is difficult for an enterprise to master all the patented technologies of a product at a time, and the integrity of intellectual property rights can be guaranteed by providing products in an OEM manner between each other. In order to avoid disputes or waste of resources caused by repeated development, it can also promote the market influence of a certain technology and make it a new industrial standard or a group alliance standard, making disorderly competition relatively orderly. .