Simply put, an Original Equipment Manufacturer is a company that manufactures products that are then marketed by other companies, brands, distributors or manufacturers. For example, mobile and personal computing market leader Apple works with Foxconn in China to have several of their products manufactured. In this case, Foxconn is referred to as an Original Equipment Manufacturer or OEM for short.
There are several reasons why brands, distributors and manufacturers choose to have other manufacturers produce their products, for example – to reduce costs of manufacturing, to allow focus of efforts and resources on sales and marketing, to leverage trade tariffs and government subsidies, or to enable the production of specific products without the need to buy and invest in complex manufacturing equipment and facilities. Ultimately, many of these reasons tie back to driving down the cost of production by leveraging economies of scale that the original equipment manufacturer is able to achieve.
Original Equipment Manufacturing is a form of Contract Manufacturing. This is where the hiring firm, or in our case the brand, distributor or manufacturer approaches the manufacturer or OEM with a pre-established design or prototype. The contract manufacturer then quotes the hiring firm for the manufacturing costs associated to manufacture their product. These costs may include additional design, tooling, raw material and labour costs. Contract manufacturers will then typically package and ship products in either a finished or semi-finished state to the desired destination.
There are further advantages for brands, distributors and manufacturers to work in this way – especially in countries where the costs of hiring skilled labour and training them is high. Hiring firms can leverage the advanced skills, quality and focus of the contract manufacturer to improve and innovate their products while keeping costs down.
Delware are an OEM Hardware Manufacturer providing cost effective, high quality manufacturing solutions for Brass, Aluminium & Steel die cast and forged hardware products. With over 30 years experience developing custom engineering solutions and serving as a contract manufacturer for leading hardware brands globally across multiple industries, Delware are today recognised as a leading precision components manufacturer and hardware manufacturer in India.