What is a first tier supplier?
Tier 1 supplier: Definition and examples
In a modern supply chain like the ones used in the automotive industry, suppliers are organized in sequential levels called tiers. The car manufacturer (OEM) relies on module and system suppliers (tier 1), who in turn must rely on component manufacturers (tier 2), who themselves depend on parts suppliers (tier 3).
Supplier pyramid in procurement logistics
The organization resembles a pyramid: at the top is the OEM, which stands for Original Equipment Manufacturer. Directly below is the tier 1 supplier, who provides the manufacturer with prefabricated components for its product. In the case of the automotive industry, this could be brake systems, car seats or infotainment consoles. These components must be available at the right time, in the right place and in the right quantity to meet modern Just In Time production requirements. The infotainment console needs a screen, some computer chips and other electronics. This is where the second tier component manufacturers come in to supply the first tier supplier. The screen manufacturer, one of the second tier suppliers, will also need parts and materials to build a touchscreen-enabled screen for a car. He will get that from the tier 3 supplier, who specializes in that market. If there are bottlenecks in this third tier supplier’s supply chain, such as a shortage in computer chips, it can lead quickly to a production shutdown at the OEM.
Automotive logistics with time:matters
The interlocking between OEMs and the different supplier levels results in major challenges when it comes to the smooth functioning of all processes such as logistics. The growing number of suppliers spread across the globe increases the need for fast, customized logistics. If bottlenecks occur, an OEM may need to quickly switch to another tier 3/2/1 supplier to prevent the assembly line shutdown. This usually requires mastering new logistics challenges. Here, time:matters is an experienced partner both in emergency logistics and in establishing new, permanent supply chains for the automotive industry.