OEM in automotive industry

Car makers use level one and tier two vendors to build their particular automobiles.

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Producers sometimes refer to companies inside their supply chain as level one and tier two companies. The terms suggest the commercial distance in commitment between your manufacturer and supplier. Although offer tiers can apply to any industry, the terms mostly describe manufacturer and provider relationships within the automotive industry.

OEM

An authentic equipment producer, or OEM, describes an organization that makes your final product the customer market. As an example, Ford and General Motors tend to be OEM businesses that produce vehicles, and Apple is some type of computer OEM.

Tier One

Level one organizations are direct vendors to OEMs. The term is particularly common when you look at the car industry and relates to major suppliers of parts to OEMs. Like, Sensata Technologies is a tier one supplier of exhaust gas detectors to automotive OEMs.

Tier Two

Level two businesses will be the key vendors to tier one suppliers, without providing something directly to OEM organizations. But just one organization is a level one supplier to 1 company and a level two supplier to some other company, or could be a tier one supplier for example product and a tier two provider for another manufacturer product line.

Various Other Tiers

Companies occasionally believe it is convenient to tell apart various other tiers. Level three companies are offer tier two businesses. Tier four organizations are the providers of basic garbage, like steel and cup, to higher-tier companies.

Other Meanings

The terms tier one and tier two are often used with somewhat various meanings or definitions. Including, organizations might use invoicing patterns to determine tiers. Businesses that distribute bills to OEMs are considered level 1 and organizations that distribute invoices to non-OEM companies are tier 2.