What Is A Tiered Supplier in Manufacturing?

    Tiered Supplier

    A tiered supplier is a business or company that specializes in providing supplies and materials to other manufacturers. The tiers are based on the size of the customer’s order, how long they have been doing business with the supplier, and their geographical location.

    Tier 1 suppliers are typically large companies who supply major retailers like Wal-Mart or Target. Tier 2 suppliers usually provide goods for smaller retail stores or wholesalers. 

    Tier 3 suppliers may sell products to consumers at local flea markets or craft fairs.

    A tiered supplier’s tier is based on the size of their customer’s order, how long they have been doing business with them and their geographical location. 

    Tier one suppliers are typically large companies who supply major retailers like Wal-Mart or Target. 

    Tier two suppliers usually provide goods for smaller retail stores or wholesalers while tier three suppliers may sell products to consumers at local flea markets or craft fairs.

    Tier two suppliers are often referred to as “tier zeroes” which means that they don’t get a chance to be in higher tiers due to a lack of growth potential. However there can still be more than just these tiers; some providers also offer so-called ‘supplier’ (or ‘sub-tier) packages, where they provide products to distributors and wholesalers who in turn supply other retailers.

    Automotive Industry Examples of Tiered Suppliers

    – Tier One Supplier: global automotive industry supplier.

    – Tier Two Suppliers: North American, European, and Japanese Automotive Industry suppliers who provide parts to tier-one companies.

    – Tier Three Suppliers: Smaller, local firms that supply OEMs with the cheapest of automotive parts like those found in a car’s engine or seats.

    The tiered supplier concept can also be applied to other kinds of manufacturing and production. Tier one suppliers are typically the largest, well-known companies that supply global brands with raw materials or parts they need for their products.

    A tier two supplier is a company that supplies those same large, known companies but doesn’t have enough growth potential to become a tier-one supplier themselves; this means they don’t get a chance to be in higher tiers due to lack of growth potential.

    However, there can still be more than just these three tiers (or “supplier” packages); some providers also offer so-called ‘sub-tier’ packages where they provide products to distributors and wholesalers who in turn supply other retailers.

    Supply Chain Challenges

    In addition, the term tiered manufacturing is often used when discussing global sourcing as it helps businesses understand how their product gets made from start to finish–from raw materials through production and assembly lines until it’s shipped out to the customer.

    Tier One Supplier: Companies that are vertically integrated (meaning they control their production), have an established track record in terms of quality sourcing, are capable of producing complex products which can be delivered on time every time to meet demand at competitive prices.

    Tier One companies usually purchase raw materials from other providers but will also produce certain components themselves depending on performance needs or efficiency considerations–usually with some form of vertical integration as it relates to how these products get made. A good example would be Apple Inc., where even though its iPhones are manufactured by Foxconn Group Ltd., another company under the Apple Inc. umbrella, Apple is vertically integrated in the sense that it controls all aspects of production from design to manufacturing and distribution.

    Tier Two Supplier: Companies who are at an earlier stage in their development cycle or younger than Tier One companies–in particular, those with no track record for quality sourcing but can produce a narrow range of products that conform to set specifications.

    These suppliers may also be capable of producing complex products (like computers) on time whenever demand is high so as not to disappoint customers and meet deadlines; however, they’re less likely to negotiate prices due to lack of experience doing so yet can still provide competitive pricing by leveraging economies-of-scale generated by volume orders. 

    A good example would be Lenovo Group Ltd ., a Tier Two company that has become the world’s third-largest PC maker.

    Tier Three Supplier: Companies that are established and reliable suppliers but cannot produce large volumes of products (like computers) or quality sourcing expertise necessary for high volume orders; however, they can provide competitive pricing by leveraging economies-of-scale generated from small volume orders. 

    These companies may be better at innovating with new technologies related to production methods than those in lower tiers because their survival isn’t dependent on keeping up with more expensive technology advances so as long as it doesn’t cost too much investment capital. A good example would be Foxconn–a Tier Three supplier who supplies Apple Inc., among other firms–who manufactures iPhones and iPads.