A corporation is referred to be an original equipment manufacturer (OEM) if its products are used as components in those of another business that then sells the finished product to customers. Because the second company upgrades or adds features or services that increase the value of the original products, it is known as a value-added reseller (VAR). The OEM and VAR collaborate closely, and the OEM frequently adjusts designs to meet the demands of the VAR company. OEMs and VARs collaborate. OEMs create subassembly components to sell to VARs. Despite the fact that certain OEMs do produce finished goods that a VAR can sell, they typically have little direct control over the final product.
The OEM manufacturing is likely to benefit from having good ties with raw material suppliers and with industry standards throughout their production. Because of the economies of scale that emerge from working with several clients, contract manufacturers frequently have access to lower-cost raw materials.
Businesses outsource their production to OEM manufacturers for a variety of reasons. Since they won't need to purchase a building or the necessary production-related equipment, they can save on capital expenses. They can also lower labor expenses including salaries, benefits, and training. To reduce costs, some businesses may opt to outsource manufacturing to low-cost nations like China or Malaysia.
Contract manufacturing might be a viable option for big businesses looking to expand into new markets without having any immediate plans to develop their own facilities. Small businesses may discover that OEM manufacturing offers an affordable method to launch without incurring significant financial costs for production facilities. On the other side, any advantages OEM manufacturing may have over them will benefit these businesses.
Further information for OEM : https://en.wikipedia.org/wiki/Original_equipment_manufacturer