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Tiers 1, 2 and 3 in Automotive Supply Chains 

There is no question that businesses in the automotive industry rely on their supply chains. Without a well-run supply chain, operations stop, time and money are lost and it can take a lot of work to get it up and running again. For the Automotive industry who depend upon Time Critical services, the supply chain is made up of three tiers of suppliers. 

automotive tier 1

The Automotive industry relies heavily on the manufacture and distribution of components and parts – operate their supply chain on a tier system which puts a lot of importance on Time Critical delivery. This helps to keep things simple for all those involved, from supply chain director to purchasing manager, and ensures parts are delivered in a timely fashion. By employing a tier system, it simplifies and streamlines supply chains at every level, as each tier supplies different elements required by businesses.  

automotive Supply Chains 

In short, the supply chain is broken down into tiers to add a specific structure, which makes it easier for all companies involved. Tier 3, for instance, often supplies raw materials and, while businesses may require components or items made from raw materials, it is tier 2 who will take care of the refining process. Tier 2 will then supply tier 1 with the components made from refining of the raw materials, with tier 1 finishing off a component or part, before then supplying the business itself.  

Although this breakdown of supply chains into tiers makes a supply chain easier to manage and control in the long run, there is a lot of work required along the way to make it so. Distribution processes need to be carefully managed and controlled, with communication between different tiers needing to be efficient and effective. The need for Time Critical delivery is also something which needs to be managed and carefully curated. Logistics, and keeping track of the whole system is crucial, which is why a reliable shipping company who offers Time Critical services is essential as a partner. 

Click here to read the case study of how Royale International delivered urgent semiconductor parts from Penang to Tokyo! 

Royale International has 30+ years of experience working with businesses and their supply chains, as well as a wealth of exper3tise in the automotive sectors, making them an ideal partner to help businesses navigate the complexities of the tier system. They have a wide range of services available, most notably Time Critical logistics, which are a necessity in automotive sectors. Each tier and the companies that operate in it require different levels of management and present their own obstacles. By working with a logisitics company like Royale, downtime can be eliminated, as well as an increase in profits and end-result quality.  

In order to understand the different needs of each tier, it is necessary to look at the role they play, and how a logistics partner can help each tier be more streamlined and successful overall. 

Tier 3 

Everything begins with Tier 3 suppliers. They source and supply raw materials such as steel and plastic, and without their input, the whole system would collapse. Tier 3 companies are the foundation upon which the entire supply chain relies upon, so their importance cannot be overlooked. The raw (or near to raw) materials they provide are crucial for all components and parts automotive industries need; while they may not supply OEMs directly, they supply tier two and their part is critical. 

Royale International would play a huge part for tier 3 suppliers. As the companies are providing the raw materials, both metals and plastics, that tier 2 suppliers need, any logistical breakdown would impact every other section of production. As suppliers of base materials there are two main challenges.  
First of all, they are likely to be supplying countless tier 2 suppliers globally, so it is essential that your business’ tier 2 companies get what they need. Thanks to their years of experience and Time Critical expertise, Royale International is well placed to ensure that tier 2 businesses within your supply chain get what they need, when they need it. 

The second challenge is usually surrounding location; raw material suppliers (depending on what it is they supply) will be wherever that material is available. For example, Titanium is most readily available in Eastern Europe, so the tier 3 suppliers who provide titanium (required in automotive manufacture) will be based in Eastern Europe. Royale’s global presence enables efficient, Time Critical delivery from tier 3 to tier 2 companies, regardless of location. This will ensure that the supply chain avoids hold-ups or breakdowns that could have been caused by geography. 

Tier 2 

Tier 2 suppliers are responsible for the start of creating the final product your business is getting from tier 1 suppliers. Traditionally, tier 2 businesses are not as big as those in tiers 1 or 3, yet the part they play in the supply chain is just as valuable. They acquire the materials from tier 3 companies, refine said materials, and then start the manufacture of the specific product. Tier 2 companies, however, must abide by stringent safety protocols and maintain the highest standards. Any infraction of these standards will cause disruption throughout the whole supply chain. 

As tier 2 companies are often smaller, a reliable logistics partner like Royale International who can provide Time Critical services is needed to make sure that not only do tier 2 companies get the raw materials, but that the products are then passed successfully on to tier 1 suppliers. Smaller companies often do not have their own internal logistics or supply team, and therefore Royale can make the whole system easier for them to manage. Their Time Critical services and experience in the industry, as well as in implementing flexible and agile supply chains, means that they are an ideal fit to keep things running smoothly 

Tier 1 

Of the three supply tiers, tier 1 suppliers are the most technical. Their business is manufacturing and supplying products that are as close to their finished state as possible. Tier 1 companies provide much needed parts to manufacturing companies for the automotive industry and rely heavily on Time Critical logistics. It is traditionally tier 1 businesses that will have expertise in a given industry, and the ability to make and provide the parts or components that the said industry requires. It wouldn’t be uncommon for tier 1 companies to be one of several key suppliers a business relies upon. The relationship between tier 1 and manufacturing companies they supply is important, but equally so is the relationship tier 1 suppliers have with tier 2 companies. This is why Time Critical logistics are imperative for tier 1 companies. 

The difficulty tier 1 has is largely how crucial they are to the businesses they are supplying and how urgently said businesses require the parts. A tier 1 supplier brings together the whole supply chain, and the part played by tiers 2 and 3. They need to maintain good relationships with their 2 suppliers, especially as the number they work with is likely to be high, and they cannot afford to damage these relationships for any reason. They also cannot afford to be the reason a supply chain doesn’t operate efficiently, so they need to employ Time Critical services on a regular basis. Similarly, they need to ensure they are reliable in turn for the businesses they supply. Royale International, thanks to their experience in this sphere and in providing Time Critical services, are well placed to take care of both of these aspects, leaving tier 1 businesses to focus on manufacturing necessary parts. They can guarantee Time Critical delivery for tier 1 suppliers, both incoming (from tier 2) and outgoing (to the business they supply).  

While operating a tier-based supply chain comes with a lot of potential obstacles, when these are able to be successfully navigated, the whole system becomes more streamlined, straightforward and simple. Fortunately for these businesses, Royale International is a reliable and experienced logistics provider, who can ensure the implementation and maintenance of such a system whilst offering Time Critical services to all tiers. Their expertise makes them an ideal logistic partner to both implement and perfect this kind of supply chain structure, learn more: 

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