The supply of aftermarket parts is a $400 billion business that covers everything from replacement toner cartridges to cruise ship engines (Exhibit 1). Sales of such items are an important source of profit for companies that sell durable equipment. Indeed, many of those in the Fortune 100 rely on the aftermarket for up to 40 percent of their profits.

But these profits are under attack. Competitors—particularly the low-cost Asian companies known as will-fitters—copy and sell aftermarket parts at prices that original-equipment manufacturers often can't match. Meanwhile, customers are reducing the amount of inventory they hold, buying non-OEM and used parts, refurbishing instead of replacing parts, and, in some cases, creating their own. These developments are undermining the traditional OEM formula for success: discounting the price of original equipment and recovering lost profits by selling parts and services at higher margins in the aftermarket.

Many OEM executives underestimate the size of the prize available to well-run aftermarket businesses. Moreover, they don't grasp that their companies might already be in an excellent position to compete with lower-cost producers. Compared with such rivals, OEMs often have much stronger relationships...