Supply chains of the manufacturing industry are mostly longer than 5-10 steps (Alicke p. 179)2). If a manufacturer takes all the steps into account you speak about a multi-tier supply chain:
[Supplier Tier n…] (relation) [Supplier Tier 2] (relation) [Supplier Tier 1] (relation) [Customer]
As it is not clear at the beginning, which supplier has to sell which components to which buyers to get a most effective and efficient way of collaboration, there are some processes to determine that. First of all it is defined, that some of the partners are suppliers and buyers at the same time. This means, such partner can receive order proposals from buyers (downstream) and supply proposals from suppliers (upstream) concurrently. These relations are splitted to single transactions what is called interface-to-interface planning process (Dudek, p. 113)3). If two partners agree on a solution, the buyer did ensure that it is possible to serve the demand from his buyer. So the whole supply chain can be build upstream. As one negotiation only affects the next one, which has to deal with given results before, it might be to get a very inefficient chain. A scenario technique overcomes this problem by not fixing the best solution in an agreement but determining what would bring with the x-best solution in the following supply chain steps. After that the agreement will be fixed by choosing the most efficient way.
In order to deal with the challenges of time for synchronization and complexity in information distribution a multi-tier supply chain management system can be established. It helps to steer the collaboration between all involved parties by establishing a central collaboration platform. Mostly this platform is initiated by the Original Equipment Manufacturer (OEM) and covers several suppliers in a partnership. One distinguished chain member has to drive the collaboration process and platform by defining processes, rules and standards (Stadler, Kilger, p.270)4). It helps to get transparency for all partners in the value chain about demands, capacities and stock data.
The OEM derives the own demands and publishes it on the multi-tier collaboration platform. All involved suppliers do have access there and can see the changes immediately. They derive their actual stocks, free capacities and schedules. This data will be published on the platform too. The material requirement program (MRP) can now calculate the whole demand planning. This is not binding data but helps the suppliers to steer their resources. The real relations (sourcing and purchasing) will be adjusted afterwards along the whole chain.
Multi-tier visibility and collaboration may bring a lot of benefits: fast and seamless product launches and changes, reduced planning cycles, higher supplier performance or less risk in supply chains (Becks, pars. 1)5). But it also costs a lot of effort for dealing with complexity. It needs a lot of skill and time to establish and it depends on the technical capabilities of suppliers. If any partner is not able to take part in the central multi-tier collaboration platform, the whole supply chain struggles (Sourcing Innovation, pars. 1)6). Manufacturers have to trade of the promised advantages against the needed efforts to build up and manage multi-tier supply chains.