If you are confused when you hear OEM, you are not the only one.

One of the more confusing terms you hear when you start to source in China is OEM. OEM stands for Original Equipment Manufacturer. It was first used widely in the computer and automotive industries where component parts (numbering in the thousands) were supplied by many different manufacturers and these manufacturers were referred to as OEM suppliers. OEM was simply a term coined to designate the manufacturer of the component part as opposed to the manufacturer of the  product as a whole. Apple Computers for example, manufactures computers made up of thousands of parts. Although Apple may manufacture some parts themselves e.g. computer cases,  most parts, for example. motherboard components are provided to Apple by outside companies which specialize in the manufacture of these parts. These then are known as OEM suppliers.

These days however OEM pretty much refers to any supplier in China, whether they are selling parts or finished goods, In fact most companies you see on Alibaba advertise themselves as OEM suppliers, even those that are really no more than trading companies. So that is one change: Whereas OEM used to refer strictly to a parts it now refers to a part or a finished product if that product is going to be rebranded or sold under private label.

Another change in the meaning of OEM is that it now as often refers to a buyer as it refers to a supplier. If, for example, I buy some toys from China and resell them under my brand in the US I am engaged in the OEM business. In fact, the term OEM, it seems, has really come to be synomous with sourcing in China.

In short, OEM is at once so widely used and yet so confusing that I do my best to ignore it whenever possible. If you are confused then do as I do and pay no attention to OEM.  Using the term adds nothing to your conversation with your supplier and often just comes across as jargon.

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