A tier 1 supplier is a company that provides a manufacturer with prefabricated components for its product. They are the direct suppliers of the final product and are often the most technically capable out of the other supply tiers. For example, a clothing company that makes t-shirts would deem a factory that produces their clothing as a tier 1 supplier. In the automotive industry, a tier 1 supplier is a company that is a direct supplier for an OEM, providing independent parts such as motors, car seats, brakes, etc. Tier 2 suppliers are the sources where Tier 1 suppliers get their materials, while Tier 3 suppliers supply raw or close-to-raw materials such as steel and plastic. The tiers extend as much as needed for hiring companies, depending on how many levels of suppliers or subcontractors are needed in the supply chain to create the product or service. The purpose of having various tiers in a supply chain is to enable companies to specialize in one area and contract out the rest, which can help improve businesses efficiency.