What Is Tier 1 Tier 2 And Tier 3?
Home Blog What is the difference between Tier 1, 2, and 3 suppliers and why do they matter?
Avetta x Sustain.Life Partnership This blog post has been adapted from Sustain.Life’s original, Within a supply chain, there are multiple tiers of suppliers, based on an organization’s closeness to the client organization or the final product. Having various tiers in a supply chain sounds complicated and can be, but it also enables companies to specialize in one area and contract out the rest.
Often, organizations focus on tier 1 suppliers but tend to overlook their tier 2 and 3 suppliers. Although further removed from an organization, tier 2 and 3 suppliers are still connected to the client organization, meaning these suppliers can still bring with them risk and liability which can affect the hiring organization in a variety of ways, from reputation damage to costly litigation.
Although not all organizations create physical materials, we will illustrate the different tiers with a physical product example: Tier 3- raw material: cotton from a cotton plant farm (Tier 3 is not necessarily a raw material every time. We’re just pointing out that this example is a raw material.) Tier 2- cotton fabric mill (The cotton fabric is made from the cotton plants.) Tier 1- final product: a company that creates cotton t-shirts (The t-shirt is made from cotton fabric.) Tier 1 Suppliers: These are direct suppliers of the final product. Tier 2 suppliers: These are suppliers or subcontractors for your tier 1 suppliers.
- Tier 3 suppliers: These are suppliers or subcontractors for your tier 2 suppliers.
- These tiers can extend longer than three.
- The tiers extend as much as needed for hiring companies, depending on how many levels of suppliers or subcontractors are needed in the supply chain to create the product or service.
Why should I know my suppliers? Knowing your suppliers can be useful for a variety of reasons:
Quality control — The further removed a supplier is from your organization, the harder it is to maintain quality if you don’t have the right controls in place. Ethics concerns — Do you know if your suppliers are involved with inhumane working conditions, human trafficking, or other unethical behaviors? Legal ramifications —Did you know you could be held liable for your contractors if they aren’t compliant with current labor laws? Social Responsibility — Are your suppliers sustainable, socially responsible, diverse, and inclusive? Do you know their ESG Index? How are your scope 3 emissions? Cybersecurity — Your company could have the strictest of digital security protocols, but if an insecure third party accesses your system, a breach is very possible.
At Avetta, we know how complicated it can be to manage a supply chain. With our supply chain management software, you can enjoy the peace of mind of greater compliance and decreased liability and risk. We can pinpoint ways to improve your suppliers’ compliance (or help you find better ones) through our prequalification process, training, audits, and real-time insights.
What is Tier 1 and Tier 2 and Tier 3 in business?
What are tier 1, 2, and 3 suppliers? – Suppliers can be broken down into three tiers:
Tier 1 Suppliers are your direct suppliers. Tier 2 suppliers are your suppliers’ suppliers or companies that subcontract to your direct suppliers. Tier 3 suppliers are the suppliers or subcontractors of your tier 2 suppliers.
Supplier tiering means organizing suppliers into tiers based on their importance and relation to your supply chain. The concept of supplier tiering started in the automotive industry to identify how far away elements of the supply chain are from the production of the final product.
What are Tier 1 2 and 3?
Tier 1 = Universal or core instruction. Tier 2 = Targeted or strategic instruction/intervention. Tier 3 = Intensive instruction/intervention.
Is tier 1 or 3 better?
Recruit with Confidences and connecting 25000 Tech Leaders, growing – Published Aug 14, 2017 In Ning’s layman terms; Every industry has a ‘classification’ or a ‘rating’ system. Sometimes these labels are official; other times they’re just unofficial ways to describe a company’s size and abilities.
For example, small companies often call themselves ‘boutique’, while larger ones make their ‘significant’ size known. While these general labels are helpful, the IT and Telecommunication industry has a very specific rating system. ICT firms are classified as ‘tier 1′, ‘tier 2′, or ‘tier 3′, and since that doesn’t really give much information away, I thought I will explain what those terms mean.
What’s the difference? The tier system isn’t a difficult one to wrap your head around – it’s actually quite logical. Basically, the telecom companies are rated according to their capacity to take certain projects. The size, resources, experience, and of course, money a company has determined the kind of projects they are able to take on, and therefore what ‘tier’ group they fall in to.
In layman’s terms, tier 1 companies are the big guns, and the tier 3 ones are the more modest firms. Over time, companies can move up the tiers if they fit the criteria. Now, let’s explore the different tiers a little more. Tier 1 Tier 1 firms are the largest, wealthiest, and most experienced in the industry.
This tier is so exclusive, in fact, that there are only a few main telco players! Here’s the breakdown: These companies take on major commercial projects such as motorways, railways, hospitals, universities, office towers, shopping centers and the like.
- They have the expertise, resources, and finances to take on such large-scale projects.
- Tier one contracts are usually in the hundreds of millions and even billions price range.
- Tier 2 Mid-tier companies are still key players in the ICT industry.
- As the name suggests, they are somewhere in between tier 1 and 3.
As a general rule, tier 2 companies are more likely to take on commercial (rather than residential) projects. NCS, Citic is a tier 2 company (Singtel is both tier 1 and 2, Ask Ning Why), education, heritage, retail, and industrial projects. Sometimes the lines can be blurred for a company between tier 1 and 2.
- But they can be tier 1 with tier 2 salary.
- Tier 3 Now that you know a little bit about the tier ratings, you can probably guess that tier 3 companies take on the smaller projects.
- There are a lot more of them around, and they have plenty of work to keep them busy.
- Tier 3 firms usually take on projects around the million-dollar range to 15,000 USD; sometimes a little more, sometimes a little less.
The types of projects they take on are:
Sizeable residential jobs, including smaller enterprise network installation and stores. Small-scale commercial work, such as building or petrol stations, supermarkets, offices, and places like McDonald’s.
These companies are essential to the industry, and they build up their portfolio with this type of work. They then have the opportunity to start moving up the tier ladder.
Is tier 1 higher than Tier 3?
Is tier 1 the best or Tier 3? – Tier 1 Credit is the highest tier of credit, while Tier 3 is the lowest. If you have a credit score that has made it into Tier 1, this ranking means you will only need to provide minimal information if applying for a loan.
What is the difference between Tier 3 and Tier 4?
Data Center Tier Ratings Explained – The four data center tiers certified by the Uptime Institute are:
Tier 1: A data center with a single path for power and cooling, and no backup components. This tier has an expected uptime of 99.671% per year. Tier 2: A data center with a single path for power and cooling, and some redundant and backup components. This tier offers an expected uptime of 99.741% per year. Tier 3: A data center with multiple paths for power and cooling, and redundant systems that allow the staff to work on the setup without taking it offline. This tier has an expected uptime of 99.982% per year. Tier 4: A completely fault-tolerant data center with redundancy for every component. This tier comes with an expected uptime of 99.995% per year.
The four data center tiers are progressive. Data centers can move up and down the ratings, and each level includes the requirements of the lower rankings. While reliability goes up with higher levels, tier 4 is not always a better option than a data center with a lower rating. Each tier fits different business needs, so tiers 3 or 4 (the most expensive options) are often an over-investment.