Tier 1 & Tier 2 Construction Companies – What’s The Difference?

Businesses in the construction industry follow a very specific rating system known as “tiers”. Companies are rated based on their capacity to take on different sized projects, with tier 1 taking on bigger, more expensive projects. There can be multiple tiers in a supply chain. Each tier in the supply chain plays a vital role in manufacturing, and the entire chain is only as strong as the weakest tier. 

 

The Supply Chain

 

The supply chain is the entire process it takes to create a product (in our case, construction equipment) and get it to the end-user. It includes every stage from the supply of raw materials to the manufacturing of products and the distribution of the final product to consumers.

 

The benefit of the supply chain is that it makes the manufacturing of large products far more cost-effective. Instead of one company creating a motor car from scratch, for example, several businesses in the supply chain participate in the building of each vehicle.

 

Tier 1 vs Tier 2

 

Where do the different tiers fall in the overall supply chain? And what determines which tier a company should be labeled? Each tier in the supply chain goes through rigorous quality assurance testing, and they must be in compliance with federal business standards. Some industries have multiple tiers, but in this post, we’ll focus on the two major ones.

 

Tier 1

Tier 1 companies are generally larger and are able to take on more expensive projects. They offer the most advanced products in the supply chain, and they directly supply the original equipment manufacturers (OEM) who are responsible for distributing the product to consumers.

 

Tier 2

Tier 2 companies supply tier 1 companies with “raw materials.” The operations of tier 2 companies are often less technical and less extensive, as they are usually limited in what they can produce. They are at the beginning of the supply chain, and they play a vital role in getting the final product started.

 

In some instances, depending on the product being manufactured, you might find that each tier has its own supply chain with even more tiers within. But the principle remains the same: the smaller number is the tier closest to the finished product.

 

ProContractor Supply has been a supplier for the construction industry since 1995 and has formed partnerships with most of the major equipment manufacturers. We supply construction equipment and accessories, as well as replacement parts for a wide range of construction equipment.

Call us today to learn more about how we can help you build your construction business.