Understanding the Industrial Tier System
While it sounds simple, understanding what each Tier of manufacturing can be confusing. For example, manufacturers are typically referred to as original equipment manufacturers (OEMs), but that is not exactly accurate. After all, while these manufacturers might produce cars, appliances, or other products, they get parts from Tier 1, 2, and 3 suppliers. Also, OEM companies will have to get raw materials from either Tier 1, Tier 2, or Tier 3 organizations.
The wealthiest and largest firms, Tier 1 contractors are the most exclusive and supply systems or parts to the OEMs directly. Tier 1 contracts tend to be in the price range of millions, or even billions of dollars. Tier 1 companies have the resources, finances, and expertise to work with OEMs in multiple industries if that is their company's business plan. However, many of these manufacturers focus and specialize in one industry, such as transportation.
Tier 2 companies are also significant players and tend to be experts in their specific field. These types of manufacturing companies produce parts, electronic components, and specific systems for integration into the final product.
Tier 3 companies take on small projects. Tier 3 companies are suppliers of plastic, metal, and other raw or nearly raw materials. Tier 3 companies use this kind of work to build their portfolio and move up the tier ladder.