For asset-heavy industries like fleet management, leaders need to decide between original equipment manufacturer (OEM) vs aftermarket parts for maintenance and repairs. By carefully weighing the pros and cons, you can find the balance that helps maximize performance and reliability while also cutting costs. The key is understanding how the value of an asset changes over its useful life.
Making cost-effective fleet decisions on replacement parts starts with good working definitions. Then, it helps to understand all the related pros and cons to weigh the differences within the replacement parts market. It’s either OEM or the aftermarket. Our strategies are applicable to any asset-heavy industry including manufacturing, construction, government, and agriculture.
What are original equipment manufacturer (OEM) parts?
OEM stands for original equipment manufacturer, and OEM parts are the components, both on and inside a vehicle, that came from the company that first produced them when the vehicle was new.
In the past, auto manufacturers produced all the parts that went into their products, so they were the source of all OEM parts. But, because of the complexities of car design and intricacies of business it’s common for automakers to contract out production of some parts. In those cases, the source of OEM parts is not the car company. It’s the company that produced the part.
Why OEM parts are better for fleet management
When you go with OEM parts, you’re taking important unknowns out of the equation.
You never have to ask yourself if the replacement part:
- Comes in the right size and fit
- Meets the same level of quality
- Delivers the same performance
- Includes a good warranty
Because OEM parts are made by the same company that made the originals, you don’t have to worry about the specs. That replacement hose is the exact right length and diameter. The new alternator lines up perfectly with the brackets and the cables are located to make it easier to hook up everything without your maintenance techs and maintenance software relying on on-the-spot workarounds. You also don’t have to worry about the level of quality.
The new part is an exact twin of the one you’re replacing, so you know you’re getting the same level of performance you saw when the vehicle was new. And OEM parts generally come with better warranties backed by the companies that produced the vehicle.
The benefits of OEM parts are only going to grow, explains Todd Shakespeare, director of parts marketing for Volvo Trucks North America. As vehicles become more complex, OEM parts become even more important for your fleet’s performance.
“Engineers are working diligently to ensure the parts spec’d for the vehicle maximize fuel efficiency, aerodynamics, uptime, and more,” Shakespeare tells “Work Truck” magazine. “When we offer those parts in the aftermarket, we are selling the same part your vehicle was built with. You know, at the time of purchase, when you replace that part, it will perform exactly as the original part did when the truck rolled off the assembly line… With OEM, you know exactly what you’re getting.”
Why OEM parts are not always better for fleet management
But OEM parts also come with their own set of drawbacks.
As a manager in an asset-heavy industry, you’re always looking for ways to control costs, and OEM parts cost more upfront. Only looking at the price tag, a part by the original manufacturer costs more than a similar aftermarket part. But you might be paying more in other ways, too. Generally, OEM parts take more time to track down, if you can find them at all — especially for older vehicles. In fleet, time is money. The longer a vehicle is sitting in the garage waiting on parts, the more money you’re losing.
And it’s not just the vehicle’s time that’s valuable. It’s also yours.
With aftermarket, you are more likely to find one or two vendors who carry all the parts you need. With OEM, you need to develop and maintain a larger network of contacts to track down parts. The time you spend making phone calls and writing emails adds up.
There’s a counterargument here, though, which is that OEM parts, with their claims on better fit and quality, are more expensive only at first. Looking at total cost of ownership (TCO), though, the aftermarket prices that are easier to find and cheaper to buy end up costing you more with long-term hits to performance and reliability. The idea here is you get what you pay for.
What are aftermarket parts?
Once you know about OEM parts, it’s easy to understand aftermarket parts. Aftermarket parts are manufactured by companies that are not the original manufacturer. They’re the opposite of OEM parts.
In many cases, aftermarket companies design their parts to fit a variety of makes and models. So, an automaker might manufacture an OEM windshield wiper blade for a specific make, model, and year. An aftermarket company, though, has a blade that works with that specific vehicle but also many other makes, models, and years.
Why aftermarket parts are better than OEM
Aftermarket parts cost less money than OEM parts. Why is OEM more expensive? How can aftermarket part manufacturers sell for less?
When an automaker develops a new part, they invest a lot into design and testing for durability and safety. Those costs are reflected in the pricing. But the aftermarket is a narrower investment. It only makes specific, reverse-engineered parts spread across a wider number of makes and models. There’s less for the aftermarket to recoup and more scale toward individual parts.
Aftermarket parts are not just cheaper. Sometimes, they’re better. In fact, there are times where the aftermarket is faster at addressing design flaws found in original parts.
In an article for Utility Fleet Professional on aftermarket vs OEM parts, OG&E fleet manager Paul Jefferson, explains how “Aa few years back we had some pickups that had fuel gauge problems because of how the fuel sending unit was designed. I read an article about how the aftermarket had already identified [the problem] and so we switched.”
In the same article, the fleet services supervisor for Virginia-based Fairfax Water, Dale Collins, CAFM, explains that although he uses OEM for critical components, he has solved specific problems with aftermarket solutions. “Oftentimes the aftermarket tends to do a better job at re-engineering a weak area in an OEM part,” says Collins said. “Years ago, we went through a lot of belt tensioners. The bearing itself wasn’t sufficient to support the load, so the aftermarket responded and put in a more robust bearing, which solved a lot of the problems.,” he explains.
Why aftermarket parts might not be right for your fleet
Aftermarket parts cost less, but with that lower price you often deal with:
- Less compatibility
- Shorter life spans
- More restrictive warranties
Instead of getting something purpose built for your specific vehicle, you settle for a part with a ‘universal’ fit, which means the difference between a tailor-made suit that fits you – and only you – perfectly, and something bought off the rack. Because the quality of materials and workmanship is lower, the part may not last as long. And unlike an OEM part, aftermarket parts have less generous warranties – if they have them at all.
How should you decide between OEM and aftermarket parts?
Instead of locking yourself into one or the other, you best control costs by setting up a system to help you decide case by case. Sometimes, OEM makes more sense. Other times, aftermarket is the best use of your budget.
To decide between OEM and aftermarket, you should look at the:
- Warranty and insurance
- Component criticality
- Vehicle age
OEM with warranties and insurance
Before trying to decide, check to see if someone has already made the decision for you. In some cases, your existing warranties and insurance dictate which type of parts are possible for any given repair.
For example, if a vehicle is still under warranty with the OEM, they’re going to use OEM parts. If the repairs are part of an insurance claim, the policy might have requirements for parts.
OEM for critical components
You can choose between OEM and aftermarket based on how critical the part is to the vehicle’s reliable and safe operation. So, if you need to replace the floor mats in a truck, you can go with an aftermarket solution. But for the radiator, it makes more sense to use OEM parts. That’s an extreme example, but you can apply the same method to any part.
Remember, OEM costs more at first, but you save money in the long run because of better performance and reliability. For non-critical parts, that’s never going to be much of an issue. But for the parts that keep your fleet on the road, TCO is often lower with OEM.
Aftermarket for older vehicles
As your fleet ages, it makes more and more sense to switch to aftermarket parts.
One of the advantages of OEM parts is that you trust them to return your vehicles to like-new performance. In theory, your replacement fuel pump has that part of the engine working just like it did when it was fresh off the assembly line. But is it worth the cost when the rest of the engine is already showing its age?
Even if you could see a real boost in performance from that old engine, it’s not going to be around for long. Why put in a new part that comes with a five-year warranty when the vehicle has only two more years of useful life left in it?
In the end, even if you decided it was worth the money to use OEM on older vehicles, the market might make it impossible. The older your fleet gets, the harder it is to find OEM parts, and even when you do, the time it takes to find and ship them means a lot of expensive downtime.
Summary
Across asset-heavy industries, including manufacturing and fleet, managers and maintenance teams need reliable methods to decide between OEM and aftermarket parts. OEM stands for original equipment manufacturer, and are parts produced by the companies that first made them when the asset was new.
Aftermarket parts are basically the opposite: parts made by a third party, not the original manufacturer. Both come with their own sets of pros and cons. With OEM, you remove a lot of the unknowns in terms of fit, quality, and performance. However, OEM parts are more expensive and can sometimes be harder to find, especially for older equipment and vehicles. With aftermarket parts, the lower prices often come with drops in quality and life span.
That said, there are times when aftermarket parts incorporate fixes to known design flaws still present in OEM parts. When deciding between OEM and aftermarket parts, you should look at existing warranties and insurance, the criticality of the component, and the age of the equipment.
In many cases, your insurance dictates which type of part you can use. When it comes to critical parts, it makes sense to go with OEM because of the higher quality and better fit. But, with older vehicles, aftermarket might make more sense.
You don’t want to pay more for a new OEM part guaranteed to last five years only to install it in a car with only a few years of useful life left.
