Do you know who your tier 1, 2, and 3 suppliers are? If not, you are not alone. According to a recent survey, only 6% of U.S. companies have clear visibility of their entire supply chain. This can lead to serious risks and inefficiencies for your business and your final product. In this blog post, we will explain what tier 1, 2, and 3 suppliers are, why they matter for your supply chain, and how you can manage them effectively with Certainty.
The Benefits of Having Familiarity With Your Different Tier Suppliers
Oftentimes, tier-1 suppliers take precedence over a business’s focus on its lower-tiered suppliers. However, having a clear understanding of your complete supply chain and the different tiers is essential for the finished product. A clear vision of your tier 1, 2, and 3 suppliers can:
- Ensure continuity of supply
- Improve resiliency
- Reduce costs
- Improve your customer’s experience
- Support your sustainability and social responsibility goals
- Improve quality control
- Maintain government regulation compliance (i.e., the German Supply Chain Act)
What are Tier 1 Suppliers and Why Are They Important?
Tier 1 suppliers are the direct suppliers of the final product. They have the closest connection and relationship with the companies that produce the end products. This tier of supplier is responsible for delivering high-quality goods on time and meeting the specifications and standards of the end-product companies. They also need to comply with various regulations and requirements related to safety, quality, environmental, and social aspects.
An example of a tier 1 supplier could be a factory that assembles cotton t-shirts for a clothing company. The factory needs to ensure that the t-shirts are made with durable and comfortable fabric, that they have the right size and color, and that they are free from defects or damages. The factory also needs to follow ethical and sustainable practices in terms of labor, waste management, energy consumption, and emissions.
How Tier 2 Suppliers Support Tier 1 Suppliers in the Supply Chain
Tier 2 suppliers are suppliers or subcontractors that provide goods or services to Tier 1 suppliers. They are responsible for ensuring that their goods or services meet the quality and quantity requirements of the tier 1 suppliers. They also need to comply with various regulations and standards related to safety, quality, environmental, and social aspects.
An example of a tier 2 supplier could be a fabric mill that produces cotton fabric for a factory that assembles t-shirts for a clothing company. The fabric mill needs to ensure that the fabric is made with high-quality cotton, that it has the right texture and weight, and that it is free from contaminants or defects. The fabric mill also needs to follow ethical and sustainable practices in terms of sourcing, processing, waste management, energy consumption, and emissions.
Where Tier 3 Suppliers Fit in the Supply Chain and What They Provide
Tier 3 suppliers are suppliers or subcontractors that produce the raw materials necessary for tier 2 suppliers to manufacture their goods or services. They are responsible for ensuring that their raw materials meet the quality and quantity requirements of the tier 2 suppliers. They also need to comply with various regulations and standards related to safety, quality, environmental, and social aspects.
An example of a tier 3 supplier could be a cotton farm that grows and harvests cotton for a fabric mill that produces cotton fabric for a factory that assembles t-shirts for a clothing company. The cotton farm needs to ensure that the cotton is grown with high-quality seeds, that it is harvested at the right time and condition, and that it is free from pests or diseases. The cotton farm also needs to follow ethical and sustainable practices in terms of land use, water use, fertilizer use, pesticide use, and labor rights.
How to Collect and Manage Performance and Compliance Data for Your Suppliers
Collecting performance and compliance data for any tier supplier can be a complicated task. Certainty’s Supplier Social and Environmental Compliance Checklist can help improve your supply chain management and reduce supply chain risk. This free-to-download checklist is an excellent starting point for improving your supply chain visibility and sustainability.
Managing your supplier’s compliance can be challenging when operating multi-site locations and extensive supply chain configurations. Where you may have a relationship with your tier 1 suppliers and managing is feasible, the same may not be said for your second or third-tier suppliers.
Using Certainty, you unlock greater control and visibility of your entire supply chain network. We’re seeing now that compliance of tier-1 suppliers is no longer enough as new legislation such as the GSCA will place supplier compliance responsibility on you to manage all your supplier tiers. With Certainty’s multilingual enterprise-level reporting, action delegation, inspection scheduling, data integration APIs, and much more, you can manage your supply chain with greater confidence.
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