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Tier 2 automotive supplier: the advantages of a SME

by Vera Agostini June 24, 2019

In this article, after briefly depicting the hierarchical structure of the automotive industry and the reference standard for the Tiers of different levels, we analyze the special partnership that exists between a Tier 2 automotive supplier and its customers, specifically examining the relationship of trust that can be established between a Tier 1 and a SME (Small and Medium Enterprises) Tier 2 automotive supplier.  

Tier 2 automotive supplier


Reference standard for Automotive Tier 1 and 2 

A car consists of thousands of components. The automotive industry is therefore characterized by great complexity that occurs also in the different levels of the supply chain. In fact, the OEM (Original Equipement Manufacturer) is the last link in the production chain that goes from Tier 3, the nearest to raw materials, through Tier 2, suppliers of components, to Tier 1, suppliers of assembled parts. 


To control this complexity and to ensure continuative quality to the components of the vehicles some regulations have been introduced, in order to standardize products and producers. The most important standard on the matter is IATF 16949:2016, developed by the International Automotive Task Force in 2016. This standard has replaced the previous ISO/TS 16949 and it stands alongside ISO 9001. IATF 16949:2016 has been created by the main OEM with the purpose of making it possible for Tier 1 and Tier 2 automotive suppliers to obtain reliable results for mass production, which are compliant with the high qualitative standards of the automotive industry.

IATF 16949:2016 is applied not only during production but also during the design phase and throughout the relationship with the customer. In fact the regulation contains, besides the parameters that have to be respected, also instructions on how to formulate offers, undertake feasibility studies and guarantee results from an economic, design and productive point of view, thus helping the customer to find appropriate solutions. In short, it makes it possible to work with every customer transversally, establishing rules that are universally valid in the automotive industry. 


Even though IATF introduced uniformity among the requirements demanded to automotive suppliers, the complexity of the processes are still a typical trait of automotive industry. Just like Tier 1 works with different customers, on every level of the hierarchy, also Tier 2 and Tier 3 receive products from different suppliers and supply different customers. Every customer has its own particular requirements, called CSR, Customer Specific Requirements, that are, in short, a list of the specific needs of every customer. Hence, the skill of a Tier 2 or Tier 3, is to take CSR and IATF and to complement them with its own and with the customer’s productive process.  

In order to meet CSR of different customers it is necessary to be compliant with their own standards and objectives. In the case of Tier 2 automotive supplier it means to have different control steps in every phase of the productive process, to monitor the development of the production from design to delivery and to verify norms and qualitative parameters compliance in every step.  

Obviously, the compliance with the customer’s requirements must be incorporated to production in order to remain in a central position of the “time-scope-quality project triangle”:  depending on the characteristics of the customer the supplier must be able to move into the triangle without losing sight of what is priority.


Tier 2 automotive supplier: advantages of a SME

Not only industrial giants contribute to automotive production. Very different entities take part in the construction process of a car: they can be giant or big companies, such as OEM, or small and medium-sized enterprises.  

It is exactly a SME, as Tier2 automotive supplier, that can prove to be more competitive than a bigger company. In fact a SME, thanks to its dimensions, is able to create a special relationship with its customer, which is expressed in terms of cooperation, flexibility, speed and trust.


Cooperation is not only about design and production but also about the intermediate phase of prototyping. The process that leads to the creation of a component is a development process that ends with the phase of ramp up, the phase in which volumes increase from pre-series to mass production. A SME that is structured to work with the automotive industry is able to cooperate with the customer in every phase of the productive process.

During the concept phase the supplier cooperates with the customer in devising the project for the component. In prototyping phase technical solutions are tested, evaluated and refined with short-run temporary tools.  With the pre-series stage the product is realized in short-run but with all the methods and  tools of mass production, in order to check the compliance of the production process of the component. Finally, in the last phase, the production one, the component is mass produced. 

For further insights about simulation as a way to increase effectiveness and efficiency of production process in the automotive industry read the article Simulation for HPDC: surface aesthetical quality in automotive.

Flexibility, speed, trust 

A SME Tier 2 is able to guarantee to the customer great speed of response times. In the case of a corporate giant response times, due to the large size of the company can become longer. In the case of a SME, on the contrary, this does not happen. In fact, the moment the customer contacts the supplier, thanks to vertical and direct relationships, the SME Tier 2 is able to quickly react to requests.

Besides speed SME Tier 2 is also able to guarantee flexibility, both in terms of time and product. Even in the event of urgencies a SME is able to organize its production in order to meet the customer’s requests. It is also able to flexibly realize the different typologies of products, such as safety, functional or aesthetical products, meeting their own specific regulations. 

The relationship of trust and transparency between customer and supplier is a further added value given by a SME. Business partners, in a SME, are people that know each other with whom it is possible to talk promptly about any possible difficulties in order to cooperate and to find solutions. The larger a company  gets, the easier it is for this relationship to get lost, together with the already mentioned speed, flexibility and trust.

A Tier 2 automotive supplier that is also a SME is thus an entity able to combine compliance to the strict productive and qualitative regulations of the automotive industry with flexibility, speed and trust. Moreover, as said, it is able to create a personal relationship with customers and to directly cooperate with them in order to define the most appropriate, safe and favorable solutions.

If you wish to deepen the topic advantages of zinc alloys for the automotive industry you can read the article The importance of zinc die casting in automotive industry.

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