What distinguishes a tier two supplier from a tier one supplier?

A tier two supplier is defined by its role in the supply chain as one that supplies components or materials to tier one suppliers, rather than supplying products directly to original equipment manufacturers (OEMs). This classification is essential in understanding the structure of the supply chain.

Tier one suppliers serve as intermediaries between tier two suppliers and OEMs, taking components from tier two suppliers to assemble or manufacture more complex products for the OEMs. Consequently, tier two suppliers focus on providing specialized parts or materials that are essential for the operations of tier one suppliers.

Understanding this relationship helps to clarify how information, costs, and materials flow through the supply chain. Tier two suppliers often have less direct interaction with the end consumers or OEMs, thereby solidifying their position as a crucial but indirect supplier role. This distinction underpins many procurement strategies and supply chain management practices, indicating how different levels of suppliers interact and contribute to the overall production process.