February 24, 2021

All you need to know about Original Equipment Manufacturers (OEM)

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An Original Equipment Manufacturer (OEM) is an enterprise that sells and manufactures components and goods for another business.  It is a B2B link where the OEM’s clients either sell these parts further or use them for in-house production. OEM parts are more common in single-use component products such as auto and computer hardware industries.

The company that buys OEM products is called a Value-Added Reseller (VAR) because they add value to the original item by combining it with other features or products. In some sense, OEMs produce the first step for most companies, which allows them to manufacture a complete product.

Characteristics of an Original Equipment Manufacturer

  • Licensing: When selling their products, OEMs also produce licenses for their value-added resellers to use and build another one. Hardware manufacturing companies ship their products with Microsoft Windows OS to take advantage of the volume licensing deals. Here, the OEM license comes with a catch; the OEM product key is tied to the motherboard on which the software is installed first, which cannot transfer to another computer.
  • Hardware: Hardware is usually shipped to complete machines. Parts include adapters and cables necessary for operating and installing hardware onto devices. Generally, video cards, hard drives, optical drives, and expansion cards are sold as OEM products. For instance, when you purchase an OEM processor, you will have to purchase the processor fans separately. It is comparable to paying business loan interest rates along with the principal amount.
  • Software: Basic software and its license key is given to value-added retailers. Microsoft is a classic example of OEM software. When shipping the Windows operating system, the company issues OEM licenses to hardware manufacturing companies such as Dell, Toshiba, and HP. The price of these licenses is lower than the retail software.

Benefits of an Original Equipment Manufacturer

  • Lifespan: When you know the materials that go in the making, they always work better than their counterparts; just like credible business loan eligibility.
  • Quality: You can be confident of the top quality of OEM products. It is the same product as the original producer. The price of an OEM will always reflect the quality.
  • Durability: OEM products ensure durability and are far better than an aftermarket one. It is because of the top-grade materials used in the manufacturing process.
  • Price: They significantly reduce the final costs of any merchandise they form. Moreover, the company can use them without running their factories.

The relationship between an OEM and a VAR is indistinguishable. However, the defining difference comes down to the customer. A buyer will hold the VAR accountable for any malfunctions. Therefore, OEMs must provide a solid warranty for all the parts supplied and quality customer service before things go awry.

If you are trying to raise funds for making a big OEM purchase, consider availing a business loan. Whether you are a start-up or a conglomerate, there are various business finance options available in the market today to choose from.

What’s more, to promote growth, various lending institutions also offer said loans at attractive business loan interest rates. When applying for business finance, make sure to ask your lender about repayment terms, documents required, and additional charges.

Lastly, given how certain lending institutions these days offer a relatively relaxed business loan eligibility criteria, this is the right to apply for business finance.

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