Supplier tiers (tier 1, tier 2, tier 3)
Supplier tiers describe a supplier's position relative to the final manufacturer: tier 1 suppliers sell directly to the OEM, tier 2 suppliers sell to tier 1s, and tier 3 suppliers sell to tier 2s, often providing raw materials. The numbering reflects contractual distance, not importance; a tier 3 resin or chip supplier can halt an OEM's production line.
Examples
Mapping one assembly: An EV startup maps its battery pack. The pack assembler is tier 1, the cell maker tier 2, the cathode-material producer tier 3. The exercise reveals that both competing pack bidders buy cells from the same tier 2 plant, so dual-sourcing the pack adds far less resilience than the org chart implied.
Sub-tier disruption: A fire at a tier 3 specialty resin plant stops a tier 2 molder within three weeks and the OEM's line within six. Without sub-tier visibility, the OEM learns of the fire from a missed delivery, then spends $2.1 million on expedited freight and emergency requalification of an alternate molder.
Tier is positional: A precision machine shop invoices a robotics OEM directly ($3.2 million a year, tier 1) and ships similar parts into an aerospace program through a systems integrator (tier 2). Same shop, two tiers, two different sets of flow-down requirements.
Definition
Tier numbers track invoices, not importance. A vehicle program's seat supplier invoices the OEM directly, so it is tier 1. The frame maker invoicing the seat supplier is tier 2, the steel mill behind the frame maker is tier 3, and the chain runs on down to ore. The map is program-specific: the same company can be tier 1 on one platform and tier 3 on another, and a contract manufacturer sits at tier 1 for a hardware brand that owns no factories.
The structural problem: contracts reach one tier down while risk reaches the bottom. The chip shortage that idled automotive assembly lines starting in 2020 came from parts most OEMs had never bought directly; the silicon entered three or four tiers upstream. Compliance behaves the same way, since conflict-minerals and forced-labor rules attach to the material no matter which tier introduced it. That is why supply chain risk management programs invest in sub-tier mapping, asking tier 1s to disclose their own critical sources and pointing supplier risk assessments at shared chokepoints, like one foundry feeding six competing tier 1s.
Full N-tier mapping is rarely achievable, so good teams map the critical 10-20% of the bill of materials deeply rather than everything thinly. LightSource gives direct-materials teams a structured record of parts, suppliers, and quotes that makes those tier maps easier to build and keep current.
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