By Nicole LaMarco Updated January 31, 2019
In reference to business, the terms Tier 1 and Tier 2 usually refer to the manufacturing industry. The relationship between the original equipment manufacturer (OEM) and its tiers is crucial to the goal of creating, and in some cases, selling its products. There can be multiple tiers, and all are connected in a supply chain of command to the OEM – from the largest to the smallest number in the chain.
In other words, Tier 2 companies supply Tier 1 companies with the products needed. Every step of each company must go through rigorous quality assurance tests, as well as compliance with federal and company-based business standards.
Why the Supply Chain?
It is far more cost effective for several companies to specialize in making certain components than for one company to generate and market products end-to-end. With Tier 1 or Tier 2 companies zeroing in on one aspect, they can make sure to get the best experts and equipment for that job. Government regulations also exist that mandate using tiers – in the sense that each company is sanctioned for the product it produces and knows best how to adhere to federal or local regulations for it.
What Is Tier 2?
Tier 2 companies are the suppliers who, although no less vital to the supply chain, are usually limited in what they can produce. These companies are usually smaller and have less technical advantages than Tier 1 companies. If they are the first link in the supply chain, they start the ball rolling for the OEM’s final product, which means they really are vital to the speed of production. Tier 2 companies also must be rigorous in safety and standards compliance, because if something isn’t right, then it cannot go on to Tier 1.
What Is Tier 1?
Typically, Tier 1 companies offer the most advanced processes in the supply chain. This is the final step before the product reaches the OEM who may complete the product or simply get it ready for distribution by organizing shipment, marketing the products, or whatever is needed to get the product to the end user.
A Tier 1 company eliminates the middleman for the OEM. Such companies have the strongest credibility with the OEM, as they companies must have proven themselves to be a company that can generate reliable components on time and with strict adherence to safety and standards procedures.
An OEM may have many more tiers than this, but the relationship between Tier 1 and Tier 2 companies shows how all of them operate – Tier 2 generates and supplies Tier 1 with the products it needs to generate and supply the OEM with what is needed for the final products. The supply chain is only as strong as its weakest company link, so having healthy business practices is important for every tier to keep in operation.
FAQs
Tier 2 companies are the suppliers who, although no less vital to the supply chain, are usually limited in what they can produce. These companies are usually smaller and have less technical advantages than Tier 1 companies.
What is the difference between Tier 1 and Tier 2? ›
Tier 1 Suppliers: These are direct suppliers of the final product. Tier 2 suppliers: These are suppliers or subcontractors for your tier 1 suppliers. Tier 3 suppliers: These are suppliers or subcontractors for your tier 2 suppliers. These tiers can extend longer than three.
What is the difference between Tier 1 and Tier 2 interventions? ›
Tier 1: Primary—efforts applied universally across all students to create optimal learning outcomes. Tier 2: Secondary—efforts applied for selected students in a targeted manner to reduce or eliminate learning difficulties as soon as they are identified.
What defines a Tier 1 company? ›
Tier one companies are generally the largest or the most technically-capable companies in the supply chain. They have the skills and resources to supply the critical components that OEMs need and they have established processes for managing suppliers in the tiers below them.
Is a Tier 1 supplier always more important than a Tier 2 supplier? ›
Tier 1 suppliers are arguably the most important of all the tier suppliers for any business, as tier 1 suppliers are the only suppliers that a business will directly communicate with. This isn't to say that the other tier suppliers aren't important – any part of a supply chain is essential to manufacturing any product.
What is Tier 2 examples? ›
Tier 2 interventions can include: Academic interventions that provide students with explicit instruction on missing academic skills with multiple examples. Behavioral interventions that provide structure, encouragement, and feedback, such as Check In-Check Out.
What is an example of a Tier 2 supplier? ›
It's simplest to identify Tier 2 suppliers as the sources where your Tier 1 suppliers get their materials. Again, using the apparel company example: That t-shirt factory receives its materials from a fabric mill. That mill is a Tier 2 supplier to the apparel company.
Why is Tier 2 a strong Tier 1? ›
Foundational Systems. Tier 2 practices stem from a strong foundation of Tier 1 support. With school-wide systems in place, schools are able to identify which students need additional support.
What are some examples of Tier 1 interventions? ›
Here are five easy-to-implement Tier 1 PBIS intervention strategies educators can use to promote positive behavior in and out of the classroom:
- Behavior-Specific Praise.
- Visual Aids.
- Positive Home Contact.
- Take a Break.
- Social Contract.
Tier 2 behavior interventions offer support for students who are not successful with Tier 1 supports alone. Tier 2 targets students who are deemed at risk of developing more serious behavior problems and challenges – with the goal of preventing it.
Tier-I cities are those with a population of 1 lakh and more as per 2001 census, according to the Reserve Bank of India's (RBI) classification. These are cities with well-developed real estate markets and civic and social amenities, along with established businesses.
What does Tier 2 mean? ›
Tier 2 is designated as the second or supplementary layer of a bank's capital and is composed of items such as revaluation reserves, hybrid instruments, and subordinated term debt. It is considered less secure than Tier 1 capital—the other form of a bank's capital—because it's more difficult to liquidate.
What is Tier 1 and Tier 2 support? ›
Tier 1: This is the organization's “first line of defense,”. Tier 1 support staff are usually solving basic issues like password resets or user problems. Tier 2: When a customer issue is beyond the skill of the Tier 1 staff to resolve, the issue escalates to Tier 2.
Can a company be both a Tier 1 supplier and a Tier 2 supplier? ›
The difference, then, is that a Tier 2 supplier supplies products to a Tier 1 supplier (who then supplies the parts to an OEM). In some cases a parts manufacturer can be BOTH a Tier 1 and Tier 2 supplier depending on who they are supplying parts to.
What are the 3 categories of suppliers? ›
The three types of suppliers to consider when sourcing your products are manufacturers, distributors, and wholesalers. Manufacturers are the producers of the product, meaning they design, manufacture, and package the product. Distributors purchase products from manufacturers and resell them to retailers.
Why multiple suppliers is better than single supplier? ›
Multi-sourcing can offer many advantages, such as increased competition, bargaining power, reduced dependency and risk, and enhanced innovation and flexibility. By having multiple suppliers, you can leverage their prices, quality, and delivery times to get the best deal.
What does Tier 1 and Tier 2 mean in healthcare? ›
Tier 1 is the highest benefit level and most cost-effective level for the member, as it is tied to a narrow network of designated providers. Tier 2 benefits offer members the option to select a provider from the broader network of contracted PPO providers, but at a higher out-of-pocket expense.
What does Tier II mean? ›
What is a Tier II Report? Tier II Chemical Reports give information about the facility, hazardous chemicals, and emergency contacts. Facilities must keep their most current Tier II Report until they file a new report, which then becomes the most current.
What is Tier 2 in the US? ›
These Universities are highly competitive to get into but less competitive than Tier 1 Universities. Popular Tier 2 Universities in the USA include Boston University and Washington University in St. Louis. Tier 3 universities are comparatively less competitive to get in.
