Supply Chain Structure
The automotive industry has a ‘tiered’ supply chain structure, which is best illustrated by way of the diagram shown below. Upstream from the car manufacturer or OEM are the Tier 1 suppliers. These companies will typically supply some of the largest components or sub-systems for the cars, such as a suspension assembly or gearbox. Moving upstream, the Tier 2 suppliers typically provide components to the Tier 1 suppliers and these could be pump units, electric motors or bearing assemblies. Then further upstream you have the Tier 3-x suppliers who will provide the Tier 2 suppliers with anything from brackets, seals through to machined components etc.
As the Tier1 suppliers are the most important to the car manufacturers they will typically have a plant close to the car manufacturers to support Just-In-Time type production processes. Tier2 – x suppliers could be based anywhere in the world and many companies in this particular sector have established a manufacturing presence in low cost countries around the world, for example China and India. In addition to the tiered suppliers, there are also raw material providers, such as the steel manufacturers who will provide sheet products directly to the car manufacturers.
Downstream from the OEMs the third party logistics (3PL) providers will distribute finished vehicles to storage compounds and vehicle distribution hubs located around the world. These will then get shipped to the dealer networks as and when required.
