The intra and inter-firm transactions and forms of coordination that link company subsidiaries, affiliates and joint ventures with subcontractors, suppliers, service providers and partners in strategic alliances that establish stratification among firms and tiered specialization.
In tiered production, the buying company deals primarily with the top-tier suppliers, while lower-tier suppliers are managed by those above them in the pyramid. A tiered production system reduces the need for a single company to manage the entire supply chain.