If you are in the electronic component manufacturing or buying business, but feel like you are paddling through a sea of abbreviations and technical terms, then this blog post will clear the water for you.
Here are 24 OEM terms, their definitions, and meanings:
OEM stands for Original Equipment Manufacturer. This would be the manufacturer who creates pieces or parts that are sold to another manufacturer for use in the final product. For example, if ABC Manufacturing makes microchips that are sold to the XYZ computer company who uses the microchips in the laptops they make, then ABC Manufacturing is the OEM.
ODM stands for Original Design Manufacturer. This type of manufacturer is similar to an OEM with the exception that an ODM is manufacturing the part according to another company’s design specifications. An OEM is using their own specifications.
A VAR is a value added resaler. The VAR is the company who purchases parts from an OEM or ODM and assembles the parts into a product to sell directly to a consumer.
Subcontractor is the company that is hired to fulfill one part of a larger job for the manufacturing company. In the scenario of the VAR, the manufacturer of the parts is the subcontractor for the manufacturer that is purchasing the parts for use in their final product.
In the marketing world, rebranding is used to describe a company who tries to redefine their company by changing their name, logo, or message in order to reach consumers in a new way. Rebranding can also refer to the branding a company gives to their product once it is purchased from the OEM. For example, lots of electronic components are made in China then purchased by a company who puts their brand name on the component. This especially happens with international manufacturing relationships.
6. Private Label
Private Label products are made by another manufacturer but are labeled for sale with another company’s brand or label. You may be more familiar with this arrangement in the grocery store. This is how we get store brand cereal or canned tomatoes. In the case of electronic components, one company makes the product, but the end consumer buys the product under another company’s name. This helps a brand build name recognition and trust.
7. Intellectual Property
If you or your company have created or designed something new and have taken out a patent on the idea, then the idea is your intellectual property. You own the idea. Taking out a patent protects your investment.
8. Intellectual Property Loss
Intellectual Property Loss happens when your intellectual property is stolen. Since a large majority of intellectual property is digitized, intellectual property theft can be hard to discover and rectify. The fear of Intellectual property loss keeps innovators up at night.
Outsourcing is the type of business that has other companies help them make pieces and parts. If you are an OEM, then you are part of another company’s outsourcing strategy
The EMS or electronic manufacturing service assists the OEM with the design, assembly, testing, and repair services of the OEM’s products.
Electronics contract manufacturing is another term for an EMS.
12. Contract Manufacturing
Contract manufacturing is an agreement between two companies where one company produces components for another. Contract manufacturing is a description of the relationship between an EMS/ECM and an OEM.
13. Secondary Market
Secondary Market. This is the market in which parts are sold for use beyond the original intention of the part’s purpose. Be careful if you are buying on the secondary market that you are not purchasing counterfeit parts. USBid is on the frontline of protecting the supply chain from counterfeit parts.
14. Open Design
A company is making use of an open design when they are creating a product or system with the use of public domain design information.
15. Open-Source Hardware
Open-source hardware are physical pieces of hardware or equipment that have been created using open-source software and designs. Open-source is not just a term, but a whole movement of people who believe that ideas and information should be freely shared without expecting monetary compensation.
16. Contract Packager
Contract packager, also called a co-packer, is a company that labels and packages a manufacturer’s products to prepare them for sale.
17. Economies of Scale
Economies of scale. The cost of a company’s product varies depending on volume of units sold or manufactured and the price of the units. The balance of figuring out the ideal amount of units created and at what price is called the economies of scale.
18. Outsourcing Risks
Outsourcing risks. The extensive web of outsourcing in the electronic component industry carries risks. It’s hard to oversee multiple layers of delegation. There is always a chance that the companies you outsource to will not produce with the quality that you expect. That’s why it’s important to choose your outsourcing partners carefully. USBid has been a great help to companies who prioritize risk mitigation. Our AAA Test lab and our quick and efficient customer service mean we are on your side for mitigating risks.
19. Capacity Constraints
Capacity constraints. When you pour a glass of soda from a two-liter bottle, the narrow neck of the bottle slows down the flow of the soda. Capacity constraints are the factors that are causing your production or business plan to slow down. In other words, the capacity constraints are the bottlenecks.
Protectionism is of great concern to those in the electronic component field since so many electronic components are made overseas. Protectionism is the practice of one country protecting their domestic industries by taxing the imports of the foreign competition.
21. Turnkey Product
When you purchase a new car, you do not need to assemble it. You stick the key in the ignition and off you go! The car is a turnkey product to the car owner. When a manufacturer produces a product that is ready for the consumer to use, the product is a turnkey product.
22. Systems Integrator
Systems integrator is the person in the company responsible for bringing together all the component parts to be sure that the pieces all work together.
23. End Product Producer
End product producer is the company who after putting all the pieces together actually sells the finished product to the consumer.
24. Aftermarket Parts
Aftermarket parts are any parts that are sold from the OEM to the consumer after the the consumer has purchased the product. This can refer to a replacement part or a part that customizes your product with a personalized touch.
If you have any more terms or nuances that you need clarity on, please don’t hesitate to contact us. Our priority at USBid is to equip you with what you need to create a quality product in a timely and cost-effective fashion.
October 26, 2017
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