Originals are best when replacing parts

Dr. Marilyn M. Helms, January 06, 2002

Many companies and consumers, when choosing replacement parts for their products or equipment, prefer to have parts manufactured by the original equipment manufacturer or OEM. The view is that components and other processed items may operate better or fit better if they are from the OEM and meet the original standards, tooling, and product specifications established for the product and originally met by the OEM. OEM parts can be contrasted to other replacement parts that may be referred to as “universal fit,” “functionally equivalent,” or of “like kind and quality.”

OEM’s Today

Today components are becoming branded and as such their names are more well-known by consumers. These components, in the past, were processed from raw materials and became part of a finished product and the consumer typically did not know who made the component and probably did not care. However, contrast this past view with today. Today consumers upgrading their computer, for example, may specify a new processor made by an OEM company they respect and may request the processing power of their latest release like Intel’s Pentium P-4. Component parts, including a computer’s processor, include items that go into the assembly of final product. Other examples include CD-ROM drives included in personal computers, automobile air bags, and motors for appliances. Like the component parts, consumers are also becoming interested in the component materials specifications and manufactures of such items as wire, paper, textiles, or cement.

In another example, General Motors recommends their GoodWrench parts for repairs of their products. GMs web site announces, “GM parts are the highest-quality products for your GM vehicle and the only ones specifically designed, made, and tested to keep it running at peak performance and appearance. Heck, they're the same ones it was born with. So, whether you’re restoring an old favorite or personalizing your newest baby, you can count on GM parts to provide genuine dependability.” To stress the exact standards of OEM parts, they also include in their commitment, “ It's reassuring to know you have a partner like GM Parts behind you. We offer a full line of products, all designed and manufactured to exacting standards specifically for your GM vehicle. So you know whenever you use GM parts, the feeling is genuine.” They even reassure customers with their official repairperson, Mr. GoodWrench.

Manufacturers must determine the quality and specify standards for components that go into their products. Some assembled products are not manufactured but put together from a variety of purchased component parts, like Dell computers. While some components may be custom made requiring much teamwork between the engineering of both buyer and seller organizations as well as management involvement in negotiating prices and other terms.

Setting Standards

Components are produced to accepted standards or specifications. Production personnel in purchasing may specify quality. Because components become a part of an organization’s own product, quality is extremely important. The buyer's own name and entire marketing mix are at stake. Thus a buyer prefers purchainsg from sources that help ensure a good product. In such a situation, a buyer may even find it attractive to develop a close partnership with a single supplier who is dedicated to the same objectives as the buyer and use this partner as a sole source supplier. As an example, Ford Motor Company has taken some responsibility for problems and deaths that have resulted in some of their sports utility vehicles using Firestone tires.

If the co-branding and awareness of OEM manufacturers continues, more profitable replacement markets may develop for producers. Since component parts go into finished products, a replacement market often develops on its own. This after-market can be both large and very profitable. Car tires and batteries are two examples of components originally sold in the OEM market that become consumer products in the after market, but because the target markets are different, different marketing and overall strategies may be necessary for selling OEM parts to customers other than the original equipment manufacturers.

Dr. Marilyn M. Helms is the Sesquicentennial Endowed Chair and Professor of Management at Dalton State College and welcomes your comments at mhelms@em.daltonstate.edu.