Published On: October 14, 2022Categories: articleTags: ,

Let’s create a stylized but very common multi-tier supply chain disruption example where a “single truth without single source” data architecture comes in handy.

Imagine a tier 5 type supplier (a small specialized manufacturer of common components) goes down and you first hear about it in the trade news.

At this point, you, the OEM, the original equipment manufacturer (“tier 0”), a brand name, high-volume manufacturer of hi-tech products, have no idea if this small company out in the middle of nowhere produces anything that could end up in any of your own products, all assembled from some 10,000 components sourced from all over the globe.

It could be.

The tier 5 ’s manufacturers products end up as components in a few of tier 4 suppliers’ products, which should be listed in tier 4’s bill of materials, after which all of tier 5’s part numbers disappear.

Tier 5 is under no legal or contractual obligation to give you production volumes, stock, or customer list. Neither is tier 4. Or tier 3.

Typically you don’t have a contractual relationship with any supplier beyond tier 1 or tier 2. Tier 5 might not even know if their parts end up in your product.

And if they have a monopoly on their production process, which is common, they are in a pretty good bargaining position. Your efforts to find a quick replacement aren’t going anywhere.

Regardless, there is a pretty good chance that the tier 5 supplier should be producing some 50,000 4-dollar parts that end up somewhere in your products, but sometime in the near future won’t. Because tier 5 is down.

And the production stoppage will explode through your supply network like it does in the MIT beer distribution game.

If you don’t have the means to investigate and fix this supply stoppage before it happens, there is a good chance you’ll end up with 50,000 high-priced half-finished brand-name products you cannot assemble because there is a $200,000-shaped hole in your supply chain inbound.

And 50,000 very unhappy soon-to-be ex-customers.

And the only way to fix this hole is to get every single tier to agree to share their production, warehousing, and quality control data with you and ideally among each other.

That’s the mutuality problem in the supply chain.