Tier-2 suppliers · Automotive and auto components
What each tier-1 customer costs you in schedule changes, inventory and late payment
A tier-2 supplier carries the swings of the whole supply chain above it, with less negotiating power than anyone else in it. We measure what each tier-1 customer costs you in inventory, idle capacity, free-issue material and payment delay. Price and terms conversations then start from your numbers rather than theirs.
In one paragraph
Tier-2 suppliers take their schedule, price and material from tier-1 component makers, which pass on pressure from the vehicle maker. They include machining, pressing, rubber, plastic, wiring and sub-assembly units. Most turn over ₹10–250 crore, with two or three customers taking most of the output. The owner or managing director usually leads the work.
Owner or managing director
The economics
How the money moves in this trade
A tier-2 supplier receives schedules from its tier-1 customers that change frequently and at short notice. Changes often come after raw material has been bought and parts made. Price-downs agreed between the OEM and the tier-1 are passed down, sometimes in full. Raw-material indexation, if any, arrives later and less completely. Tier-1s often supply steel, castings or components free of charge for conversion. Consumption norms and scrap returns must then be accounted for at both ends.
Payment from tier-1s may run long, even where the supplier is a micro or small enterprise with statutory protection on payment terms. One customer's schedule cut can idle a line, and one disputed debit can stretch cash for a month. The numbers that matter most are rarely in the books. They are the cost of schedule changes, customer-wise working capital and free-issue material balances.
The problem
Where the numbers usually break down
Schedule changes leave stranded inventory
Parts and material bought against a schedule that was later cut sit in stock without being attributed to the customer that changed it.
Free-issue material balances are unreconciled
Steel or components received from the tier-1 for conversion are not reconciled against output, consumption norms and scrap returned.
Passed-down price-downs are untested
Price reductions are accepted because the OEM imposed them on the tier-1, without checking whether the part still covers its cost.
Payment-term rights are not used
Delayed payments from larger buyers are tolerated even where the supplier is registered as a micro or small enterprise and entitled to statutory protection.
One customer's risk is the whole company's
Concentration is known informally but never measured in contribution, working capital and capacity terms.
What we do
The work, and the result each part produces
Schedule-variance costing
Firm and forecast schedules compared with actual call-offs, and the stock, overtime and idle capacity caused by changes costed by customer.
The cost of a volatile customer is quantified.
Free-issue material reconciliation
Material received, consumed at agreed norms, returned as parts and scrap, and held in stock reconciled per customer and per part.
Customer material agrees with their records and yours.
Part cost against passed-down prices
Part-level cost compared with each revised price, with the parts that no longer cover cost flagged.
You know which price-downs you can absorb.
Customer-wise working capital
Receivables, inventory and free-issue balances by customer, against their actual payment behaviour.
Each customer's true cash demand is visible.
MSME payment-term tracking
Invoices to buyers covered by the statutory payment-term rules tracked against the due date, with overdue amounts reported.
Overdue dues are followed up with the right basis.
Concentration and capacity view
Contribution, capacity and working capital per customer, reported together.
Diversification decisions rest on a number.
Where we start
The first steps of an engagement
Schedules, challans and Udyam registration
We ask for customer schedules and actual call-offs, free-issue material challans and returns, the price-revision history, the receivables ageing and your Udyam registration details.
Free-issue balance per customer
Material received is reconciled against output at agreed norms, scrap returned and stock held, for each customer and part.
Due dates on covered invoices
Invoices to buyers covered by the statutory payment-term rules are tagged with their due date, and stock bought against later-cut schedules is attributed to the customer.
A customer cost and cash report
The first report shows working capital tied up per customer, the cost of schedule changes, free-issue differences and covered invoices past their due date.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Schedule adherence and cost of changes, by customer
- Free-issue material reconciled, by customer
- Parts below cost after price revisions
- Working capital tied up per customer
- MSME-covered receivables beyond the statutory due date
- Share of contribution from the largest customer
Who it suits
Written for, and not the right fit for
- You supply vehicle makers directly under their supplier codes — our tier-1 page is the closer fit.
- You need delayed-payment disputes taken to a facilitation council or court — that work sits with your legal advisers.
- Machining, pressing, rubber, plastic and sub-assembly units supplying tier-1 component makers.
- Owner-run suppliers dependent on two or three customers for most of their output.
- Suppliers that convert customer-issued material and must account for it.
Services
Services this work draws on
Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗GST, TDS and tax compliance
GST, TDS and income-tax prepared from reconciled data, not a working file.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
Can a tier-2 supplier charge for schedule changes?
Sometimes the agreement allows it and sometimes it doesn't. Either way, knowing the cost of each customer's changes lets you price it into the next quotation or raise it at the annual review.
Does MSME registration help a supplier collect late payments?
The law limits how long a buyer can take to pay a micro or small enterprise, and adds interest when it pays late. Larger buyers have their own reasons to pay on time too. We track which invoices are covered and how overdue they are; how you pursue them is your decision.
How do we reconcile free-issue steel?
Material in, multiplied by the agreed consumption norm, should equal parts out plus scrap returned plus stock held. We build that reconciliation per customer and part, and the differences tell you where to look.
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