There’s a long list of benefits that come with a relationship with an original equipment manufacturer, also known as an OEM supplier. The resources provided by OEM suppliers allow you to grow your revenue while assisting with risk mitigation throughout the supply chain.
When searching for an OEM supplier, you can’t stop at the quality of the product that you have outsourced; that’s only part of the picture. Instead, determining the quality of the product encompasses cost savings, the value of the component, a variety of services outside of manufacturing, supplier relationships and more.
Read on to learn more about the benefits of working with an original equipment manufacturer.
What Is an OEM supplier?
Over the years, original equipment manufacturers have served companies in numerous ways. In the past, original equipment manufacturers commonly created entire products for companies that would put their brand name on the product. More recently, original equipment manufacturers are increasingly working as suppliers of individual components that are to be used in a final product.
What drove this change? Two key things:
Customization requirements provide more accurate dimensions compared to aftermarket products. Purchasing companies get high-quality components that are specific to the final product.
There are cost benefits to producing high-volume components from countries with lower costs of production. Purchasing company overall costs — including labor, raw materials and production — are less expensive than in-house production.
Across industries, the global OEM supplier market is projected to grow. According to Data Bridge Market Research, the automotive OEM market is expected to grow by 3.4 percent from 2021 to 2028. This forecast is owed to:
Rapid innovation of technologies and advancements in product offerings
The rise in need for lightweight, fuel-efficient parts due to stringent regulations for fuel efficiency and vehicle emissions
Government incentives to produce more fuel-efficient vehicles
Availability of the raw materials needed to produce new technology, such as microchips
Increase in automotive production from emerging markets and countries
Besides the benefits that come with working in a market with a strong outlook, read on to learn how else working with an OEM supplier benefits you.
The Top 4 Benefits of Working With an Original Equipment Manufacturer
It requires a lot of trust to hand over blueprints to an OEM supplier. To build a long-term relationship, identify the following qualities to ensure your expectations will be met:
1. High Quality and Value
The majority of OEM suppliers can produce components for a variety of products and industries. Over time, many specialize in a handful of manufacturing processes to provide the highest-quality components.
Providing value is what keeps your clients coming back, which means all of your components need to meet the same standard that your product does. An OEM supplier can make this happen with a process that includes:
Precision automation machining that ensures the products meet hyper-specific requirements
Pre-production testing to ensure the chemical composition of the alloys does not drop beneath a specified threshold
Post-production testing to ensure the dimensions and tolerances are held to a high standard
Ongoing inspection of internal processes to ensure quality assurance
State-of-the-art machinery and technology
2. Competitive Pricing
Partnering with an OEM supplier provides more competitive pricing compared to in-house production. There are two scenarios in which this is true:
A manufacturer without the machinery or skilled professionals involved is looking at a massive amount of capital investment. Although these are just startup costs, maintenance, repairs and more can be expected. By outsourcing, you are working with lower-cost productions from a company that already specializes in the component you’re looking for.
A manufacturer with the machinery and skilled professional pool has the opportunity to reorient their business processes when the current process is no longer economical. The company can utilize economies of scale and receive bulk goods of the desired component for less.
Although the most economical option in an outsourcing scenario is an aftermarket item supplier, certain OEM components bought in bulk can match the aftermarket price point. Plus, with better quality and customized parts, you’ll save more on after-purchase costs, such as cost of replacement or repair.
3. Variety of Services
The services provided by an OEM supplier often surpass components production to encompass multiple services to support customers throughout the project. From the time the project is imagined to the final delivery, OEM suppliers can assist with:
Design services that can provide insight and recommendations to ensure a component is of the highest quality it can be.
Sourcing services that find cost-efficient procurement opportunities.
Manufacturing services that include a range of procedures and machinery to ensure that no project falls out of scope.
Management services that ensure project management remains consistent with the agreed-upon contract and all tasks are completed efficiently.
4. Supplier Relations
Because of the inevitability of fluctuating material costs, it is highly advantageous for companies in every sector of manufacturing to develop relationships that are more than just “arms-length” relationships. In other words, they need relationships where both parties can exchange their expertise for expertise they do not possess. These close relationships can result in better deals, more market intelligence, higher lead times and more.
Improve the Quality of Your Products With VPIC Group
VPIC Group is dedicated to quality precision component manufacturing that provides you with high-quality components at a price that’s competitive with aftermarket sellers and in-house production.
From the time we receive the blueprints to when the product is ready to ship, we will provide consultation on each step. On top of that, we work to ensure that our supplier relationships are beneficial to each party involved so we can pass down the financial benefits to our customers.
Find out if you should outsource a component by going through our checklist “Should I Outsource This Component?”