An original equipment manufacturer (OEM) is a company that supplies components that are used in the production of goods by other manufacturers. OEM procurement for manufacturers comes with a range of benefits such as cost savings as well as freeing up resources to look into areas that require deep involvement.
For example, an automaker when manufacturing a car requires a long list of components. One such important part is the electronic control unit (ECU), for which the manufacturer can just set the specifications — which the OEM can build and supply per specifications, freeing up valuable time for the automaker to look into the program parameters for the ECU. For example, Foxconn manufactures iPhones for Apple Inc, which creates a win-win situation for both the companies.
OEM partnerships, however, go deeper than manufacturing of components to areas such as design development, management services and many other unique solutions and services that can boost revenue.