OEMs (or original equipment manufacturers) rely on a chain of suppliers to deliver consumer products we all use in our day-to-day lives. To help you learn more about the differences between a tier 1 supplier, a tier 2 supplier, and a tier 3 supplier, Sisler Companies has created this guide.
The Structure of a Supply Chain
In industries that rely on the manufacturing and distribution of parts and materials such as automotive manufacturing and aerospace, components are supplied by different companies across several tiers. For example, tier 3 suppliers often provide raw materials to tier 2 suppliers who then refine the raw materials into more usable components for tier 1 suppliers. Tier 1 supply companies then help ensure a product is close to being finished or is ready for distribution before shipping out the product to OEMs.
As you can imagine, there are a lot of steps involved in making the distribution process between different tiers and OEMs smooth and efficient. Each company that’s part of the supply chain must adhere to stringent quality control and business standards.
Additionally, while you might think that it would be more efficient for one company to produce products end-to-end, in reality, each company on the supply chain specializes in their products and is more aware of the local and federal regulations that surround these products. This helps eliminate downtime in the long-run, and ensures higher quality end results.
OEMs are the companies whose brand and name are on the final package of a product. Companies such as Ford, BMW, and Chevrolet are all examples of OEMs in the automotive industry.
While OEMs may not produce much of a product’s parts or extensively alter what they receive from their tier 1 supplier, OEMs handle the design of a product, the branding, as well as the scope of the project. A product, once completed and distributed by the OEM, is associated with the OEM company.
Tier 1 Supplier
A tier 1 supply business is often the most technically capable out of the other supply tiers. They manufacture and supply OEM companies with components and typically get a product close to its final state before distributing it to an OEM.
Tier 1 supply companies eliminate the need for a middleman for OEMs in that tier 1 suppliers directly supply OEMs with needed parts and devices an OEM needs to complete a product. Tier 1 supply businesses are known for their expertise in an industry, their ability to take on large-scale contracts, and often have long-term relationships with both OEMs and tier 2 suppliers.
Tier 2 Supplier
Tier 2 suppliers provide materials to tier 1 supply companies and are typically responsible for getting the ball rolling on the final OEM product. While tier 2 suppliers are usually smaller businesses than tier 1 suppliers, they are a crucial part of the supply chain and help ensure the chain is moving efficiently.
Tier 2 suppliers must remain compliant with rigorous safety standards and protocols or risk causing disruption throughout the whole chain.
Tier 3 Supplier
Tier 3 suppliers supply raw or close-to-raw materials such as steel and plastic. Tier 3 suppliers provide the foundation for tier 2 and tier 1 supply companies, and may sometimes act as a manufacturer.
Although Sisler Companies is a tier 1 supplier, we also provide component management services. This means that we not only offer the fundamental receiving and storage services you typically expect from a supplier, but we provide solutions for the sub-assembling of components as well.
We are capable of purchasing components on our clients’ behalf, assembling these components, and then packaging and shipping them as needed.
Sisler Companies: A Tier 1 Supplier Providing Expert Services
At Sisler Companies, we specialize in domestic appliances and electric motor manufacturing. If you’d like to learn more about our component management solutions, get in touch with us today.