Tag: 2nd tier suppliers

OM in the News: Patriot Missiles and Second Tier Suppliers

The newest Patriot surface-to-air missiles can be fired in seconds, but take more than two years to build and cost around $4 million each.  Despite that math, the U.S. and its allies can’t get enough of them, reports The Wall Street Journal (June 10, 2026).

Pentagon officials just reached an agreement with Lockheed Martin to more than triple production of the latest Patriot, the PAC-3, to 2,000 a year. But the weapons maker isn’t expecting to hit that target until the end of 2030. Why is that?

Lockheed is facing a litany of challenges to hit its target. It counts more than 400 companies that provide parts for its missile. More than 80% are at the second tier—the PAC-3 suppliers’ suppliers. But these firms provide components to more than one missile program. That makes it harder to increase production of one type of missile without disrupting the supply chain for another in-demand weapon.

And some missile circuitry is considered commercially obsolete, forcing the U.S. to rely on expensive equipment from foreign suppliers. The “seeker” in the missile’s nose—a vital part that allows the interceptor to lock onto incoming missiles and aircraft—comes from a single Boeing factory.

Boeing said the company has sped up “seeker” production by adding robotic equipment and finding new suppliers to provide parts like circuit cards. L3Harris plans to boost its rocket-motor production capacity as it brings more manufacturers into its supply chain. “You need the whole ecosystem to line up,” L3Harris’ CEO. “If we quadruple a missile, we’ve got to quadruple the cases. We’ve got to quadruple the igniters, valves, the throttles.”

For decades, the military favored lean supply chains and peacetime efficiency. That approach saved money, but under the pressure of conflict its weakness is revealed. Depending on one qualified source for a key missile component is not the answer. Selective redundancy and second-sources for critical components may be.

Classroom discussion questions:

  1. Why are tier 2 suppliers a problem in many supply chains?
  2. Summarize all the issues slowing the production of Patriot missles.

OM in the News: BMW’s Supply Chain Disruption

BMW’s plant in Rosslyn, South Africa.

BMW is halting or slowing production of certain models in response to a shortage of parts caused by delivery problems from first-tier parts supplier, Bosch. “The hiccups show how dependent manufacturers are on a global, smoothly running supply chain,” writes The Wall Street Journal (May 30, 2017). Even small disruptions anywhere along the line can cascade into delays in getting the company’s big money-making products off the assembly line and into showrooms.

In BMW’s case, the culprit is a “Lenkergetriebe,” or steering gear, manufactured by Stuttgart-based auto-parts giant Bosch and used in BMW’s Series-1,2,3, and 4 models. “Our supplier Bosch is not currently able to provide us with a sufficient number of steering gears,” said a BMW exec. Bosch, in turn, said the trouble arose when a 2nd-tier supplier in Italy experienced difficulties in delivering the casing for the steering gears.

As a result of the shortages, production is restricted at several BMW plants in Germany, China, and South Africa. “Automotive value chains are international. An interruption in delivery of parts from a partner in Europe can therefore also have implications in China,” said the BMW exec. “The vehicle is not complete until all parts, most of which are supplied just-in-time, are installed. It is, therefore, understandable how a missing part—even if only a small one, as in this case—can have a major impact.”

Classroom discussion questions:

  1. What can BMW do to prevent such supply chain disruptions in the future?
  2. What are the differences between 1st, 2nd, and 3rd tier suppliers? Provide an example of each in a non-automotive industry.