What is OEM?

POSTED ON April 10, 2021

If you are going to start your import business, you must soak yourself in knowledge. But the more you learn about the details of importing from China and free on board policies, among other common negotiations involved in this type of activity, the more you increase your chances to be successful. Knowledge is priceless, and that’s why, in today’s post, we will talk in depth about OEM. What are OEM parts, what is OE service? We will find out now.

What does OEM stands for?

There seem to be two meanings of the acronym OEM, therefore the confusion some people have when trying to recall what OEM stands for. The meaning is, essentially, the same, what changes is the type of products the OEM manufactures. An Original Equipment Manufacturer (OEM) produces something according to the guidelines and original design offered by the brand that hires it.

  • First meaning

When people use the acronym OEM, it’s usually related to computers and IT services. What is OEM Windows? What are OEM software and OE hardware? The OEM produces the components of the products sold by another company, following the design given by the hiring company. This company sells complete and final products. OEM’s works closely with big technology brands, like Apple and Dell, making the hardware or software components for the computers these brands display to consumers.

The hiring companies are usually referred to as VAR’s, which stands for Value Added Reseller. They are usually retailers and sell their final product to consumers. One way to differentiate the OEM from the VAR is by paying attention to the channels they use and the clients they direct their efforts to.

  • The retail channel: Who is the retailer’s client?

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The VAR sells to a public that is going to use their product. The public does not need to assemble the product nor make any extra additions to it. The products the retailer trade have a nice packaging with their brand, instructions and specifications printed on it, and it comes with a manual too. There is an extra inversion put into making the exterior of the product more appealing to the final consumer, and that’s why the final good has a major price for the final consumers.

  • The OEM channel: Who is the OEM’s client

The OEM sell to the VAR directly. They wholesale the components to the retailers, who take on the responsibility of the assembly process. The packaging of the components does not need to be appealing nor be branded, after all, the retailers purchase components from OEM’s who can compromise to deliver the exact requirements they have for each order, regardless of how pretty or colorful the packing is. OEM’s don’t need to include instructions neither since the retailer has the know-how to put all the pieces together and create the final product.

  • OEM warranty for IT managers

Just as retailers, OEM’s manage a warranty policy. OEM’s warranty for IT managers regarding hardware can be broken down into three stages.

  • Phase one: Initial warranty period

The initial warranty period is clearly specified when you first purchase the product from an OEM. During the time your guarantee is valid, you can ask for support from the OEM as many times as you need, for free. Even though you could not be 100% satisfied with the warranty, either because your OEM has a not very adequate customer service or because their representatives are not even in your own country and need to give you solutions remotely, you will continue having assistance during this period and can rely on the OEM to correct any problem there might arise.

  • Phase two: Extended warranty

If the hardware your business uses is still useful and it satisfies your company’s needs, then you can ask the OEM to continue delivering assistance to you. It will come with a cost, of course, since your guarantee expired already. In this phase, you can try to search for a third party to get maintenance and support service for less money.

  • Phase three: Obsolete hardware

Once the hardware you use is qualified as EOL, which means it is at the end of its useful life from the OEM’s perspective, then this is a sign you must either refresh your hardware or look for a third party to get assistance from. These two options have their own benefits.

The OEM could offer you better hardware to satisfy your company’s needs and, even though it could be an additional inversion you didn’t plan to make, it could be beneficial in the long term since you won’t need to hire any third party. You would just need to purchase new hardware from the OEM, get their free support during the warranty period and then repeat the cycle when the product becomes an EOL.

On the other hand, if the hardware you have is able to comply with all of your company’s needs and your IT team works with it effectively, then you should search for a third party to get assistance from. It could result in a more economical solution for you if you don’t want to replace all your hardware for a more recent one.

  • Second meaning

The second meaning of OEM associates it to re-branding and private labeling. This other meaning comes from the fact that some OEM’s can also purchase a product that, despite being a component (like zippers, for example), can be the final product as well (like makeup brushes, for example). So, the OEM’s parts, instead of being resold adding value to a bigger and finished product, are resold as the finished product. The retailer puts its own brand on the products and sell them as its own.

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  • What is private labeling?

But what is private labeling? When sourcing from China, many people search for fabrics that can produce something according to the previous design they already have. These fabrics offer OEM services and, when they manufacture what the hiring party has asked them to do, they can also rebrand the products. In simple terms, even though the OEM is the manufacturer of your product, they print your label on it so it will look like it is from your entire authorship.

  • Can you private label your products?

Yes, you can private label your products. You can ask a China sourcing agent to help you find fabrics that can manufacture a product according to your own design and, then, rebrand them. But, by doing this, you become solely responsible for the effects the product could have on the users. So, when hiring a sourcing service, be very aware of the legal framework the category of products you want to import into the United States is inserted into.

Sourcing OEM parts

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Now that you have a better understanding of what OEM stands for, let us explain to you how you can start product sourcing OEM parts.

  • Should you hire a Chinese sourcing agent to source for OEM parts?

It’s a good idea. Even though you can find China Wholesale Suppliers in situ, searching for OEM fabrics is different. When you purchase a large number of products from a manufacturer to resell them, you have no involvement in the process of creating the product. But, when purchasing for OEM parts, you are hiring a fabric to materialize your own and original design, according to your specifications and needs. To find a fabric that will be able to match your standards and save yourself from the trial-and-error process, we recommend you to hire a sourcing agent.

  • Sourcing Captain and OEM Sourcing

Sourcing Captain includes 7 fundamental steps in its sourcing service to guarantee you will import into the United States, or other parts of the world, the goods you purchased without any setbacks. The seven steps are:

  1. Project Evaluation: We assess your project.
  2. Product Search: We find what’s the manufacturing process of the product you want and how many of these products are available in China.
  3. Fabric Search: We map all the fabrics that produce the product you want according to your standards. We get in touch with the fabrics.
  4. Negotiations: We communicate to the fabrics more concrete details about the order you have. We, then, evaluate their answers, availability to supply and price competitiveness.
  5. Sample Request: Once the factories that comply with your needs have been selected, we will place a sample request.
  6. Order Request: Before placing the order request, we will review each of the previous steps to make sure there are no mistakes. Once it is confirmed that the process is flawless, we will place the order request with an advanced payment.
  7. Inspection and Delivery: We will submit the finished product to a final inspection before delivering it to you, to warrant it will meet your expectations.
  8. After-sales guarantee: The process doesn’t finish with the 7 steps. We manage an after-sales policy to assist you in the rare case you aren’t 100% satisfied with your order.

For the specific case of OEMs, we introduce two important clauses. First, once the negotiations have been successful and an exclusive fabric has been chosen, the project will be carried on when the parties involved sign a non-disclosure agreement. This protects the know-how every manufacturer has, that gives them a competitive advantage in the market.

Second, Sourcing Captain compromises to assume the role of a monitor, following closely the completion of each of the seven steps described previously, paying particular attention to the manufacturing process of the fabric selected, to make sure it will manufacture the product as it was planned in your original design.

Ready to import OEM parts? Get in touch with us to start your importing business!

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