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The role of OEMs and Tier suppliers in the automotive industry

03 June 2024

With the development of modern vehicles, the role of Tier suppliers is gradually evolving. Quite often, they no longer produce just simple parts, but entire complex components with intelligent technologies. This requires multi-level cooperation, establishing long-term partnerships and sharing experience in many multifaceted technological areas.

What does OEM stand for?

The abbreviation OEM comes from the term "Original Equipment Manufacturer." OEM companies produce and supply original parts and components, which are then used by automakers to build vehicles. For example, if Bosch manufactures a brake system for a BMW car, then Bosch is the OEM supplier (Tier 1) to BMW. Such outsourcing of production is necessary because a car consists of several thousand parts on average. OEM parts are manufactured according to the precise specifications of car manufacturers, which guarantees a perfect fit for each model and optimal efficiency of the entire system. For this reason, they are considered more reliable and more durable than their aftermarket counterparts.

Who are Tier 2 suppliers and what competencies should they have?

Tier 2 suppliers are companies specialized in their fields that produce various types of parts and components for Tier 1 suppliers working directly with OEMs. Tier 2 suppliers must have advanced technical knowledge and be characterized by innovation. The competence of Tier 2 suppliers should primarily include professional quality management. They must have a well-developed and well-maintained system confirmed by IATF or other relevant certification. Production capacity is also of great importance. Tier 2 companies must ensure that they can deliver parts in specified quantities, to the right standard of workmanship and on time. In this context, it is also important that Tier 2 suppliers not only understand the processes in place at Tier 1 customers, but also make sure that Tier 3 suppliers' processes are carried out at the appropriate level.

Tier 3 suppliers – who are they and what role do they play?

Tier 3 suppliers are entities that provide various types of products and services to Tier 2 companies. They are typically companies that specialize in manufacturing raw materials or components, which are then used by Tier 2 suppliers to produce more complex parts or systems. Their role is fundamental, as they build the foundation of the entire supply chain. Without their participation, production at higher levels would not be possible. They must meet a number of requirements for effective cooperation with Tier 2 and Tier 1 companies, including expectations related to product quality and origin, on-time delivery using efficient logistics solutions, the ability to manufacture products in large quantities, and the ability to flexibly adapt to changing market demands.

Trends in cooperation between OEM companies and Tier suppliers

Today, cooperation between Tier suppliers and OEMs is evolving from simply supplying parts in specific quantities and at a fixed price to more long-term strategic partnerships. This translates into better integration and optimization of manufacturing processes, which in turn contributes to increased efficiency and innovation. Third-, second- and first-tier suppliers are involved from the early stages of original equipment design and development. They often become designers, developers and manufacturers of entire production platforms. Therefore, there is a growing trend of creating larger parts from fewer components, simplifying both the product design and the development process. Tier suppliers are expanding their manufacturing engineering departments and using modern digital tools – both in-house and from third-party suppliers.

Cooperation with Knauf Automotive – modern processes and benefits

Part of the bumper made of EPP.
Part of the bumper made of EPP.

Knauf Automotive is a prime example of a manufacturing partner that offers comprehensive, innovative sustainable plastics processing solutions for the automotive industry. Working with us guarantees access to high-quality EPP and EPS parts and injection molded automotive parts, as well as innovative technologies and solutions to optimize production time and costs. Our products, such as returnable transport packaging, automotive battery cushioning systems and sun visors, are made to the highest industry and quality standards. In addition, we provide technical support at every stage, from design to production, which translates into increased competitiveness in the automotive market. We have state-of-the-art ID Lab research and development facilities and local design offices that offer technological expertise. We draw on more than 20 years of experience in providing solutions to the world's largest original equipment manufacturers (OEMs) and suppliers (Tier 1), so we are a reliable partner who knows the realities of the industry and constantly observes the changes taking place in it. This allows us to anticipate trends and provide innovative solutions even before they become the current standard. Our competence has already been appreciated by many companies, including becoming one of the best Toyota Boshoku suppliers in Europe. We are looking forward to working with you!

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