Vendor vs Suppliers

A vendor refers to an individual or entity purchasing products from manufacturers and then selling them directly to customers. By contrast, a supplier is a person or business that provides raw materials, parts, and machines to manufacturing units. Both of them play a significant role in supply chain management (SCM).

SCM is a mechanism for ensuring the supply of goods and services, with suppliers being the first link and vendors being the last link. Suppliers make primary commodities available to manufacturers in large quantities. On the other hand, vendors sell finished products in small lots. While the former participates in a B2B relationship, the latter can be actively involved in B2B and B2C relationships.

Let us have a quick look at the difference between vendor and supplier:

A vendor is someone selling goods directly to consumers and often manufacturing inventoriable products to sell later. They purchase these products from manufacturers or distributors to sell them to individual or business customers. As the last link in the supply chain, they frequently connect with consumers. Hence, they aspire to maintain good B2B or B2C relationships with them.

Warehouse management or finance system usually keeps track of vendors in a supply chain network. Also, by partnering with vendors, a business or an individual can cut costs and demand improvements in the product design. It becomes possible due to the cordial relationship established between the two parties through direct interaction. Typically, these relationships work best when comparing prices.

Vendors typically sell finished goods to consumers directly, without the involvement of any intermediary distribution channels. For example, big-box retailers have a list of vendors who sell finished products from various manufacturers.

The risk associated with vendors is limited as they buy products in small quantities. So, they are less likely to experience the brunt of the loss if the demand deteriorates. They will only lose the money they spent on distributor purchases.

Example

Let us consider an example where unit A manufactures finished products and sells them to wholesaler B. B then distributes these products to retailers C and D, who then sell them to end-users. These ultimate customers could be businesses or individuals. In this case, A is the vendor for B while B becomes the vendor for C and D. Likewise, C and D act as vendors for customers.

A supplier is an individual or a company that provides essential supplies in bulk to manufacturing businesses. To be more precise, they are more into offering foundational materials to production units. They can sometimes be the producer themselves. Raw materials, tools, etc., they provide, form an integral part of the factors of production and the first link in the supply chain. These entities maintain strong B2B relationships with manufacturers by providing quality products, thus giving them a competitive advantage.

Businesses place orders in bulk as per requirements, which suppliers make readily available to them. Although manufacturers must partner with suppliers, the basis of this relationship should be mutual trust rather than financial transactions. Also, businesses should keep their suppliers informed about their promotional strategies and production processes to make them feel part of the organization.

Suppliers are an integral part of the supply chain network and build the foundation for any manufacturing business. Without primary supplies, there will be no finished products, and if there are no products, it would be hard to satisfy consumers.

The risk associated with suppliers is way more than vendors. Because manufacturing units must manufacture finished products to meet consumer demand, they place orders in bulk. They will suffer significant losses if the order gets canceled at the last minute.

Example

Let us consider a scenario where the demand for a particular soap rises suddenly. It resulted in the sales of available soaps in a few days, although the supply was adequate for a month based on previous sales volume. As a result, vendors placed orders to the manufacturing unit that ordered raw materials at the last moment.

Suppliers tried their best to provide the required essential supplies, given their long-term relationship with the manufacturer. As they worked together, the product reached the market sooner than expected.

It is how a manufacturer-supplier relationship can save the day at the last moment when demand spikes unexpectedly.

A supply chain consists of-

Supplier --> Manufacturer --> Distributor --> Vendor --> Customer

It is clear from the above chain that the supplier makes the first link, and the vendor forms the last link before products reach ultimate customers. Based on the roles of vendor vs supplier in the supply chain, vendors can either be business-to-consumer (B2C) or business-to-business (B2B), or both. On the other hand, suppliers can only participate in B2B offerings. Also, suppliers, unlike sellers, have an indirect relationship with consumers.

Vendors provide a small amount of inventoriable finished goods for use. Conversely, suppliers supply a large number of raw materials to manufacture end products for sale. Vendors do not sell a particular type of goods to customers. They purchase a wide range of products from distributors and sell them to consumers. On the other hand, suppliers deal with a specific type of supply for businesses.

Every company has multiple suppliers for raw materials required to manufacture finished products. Though there are several differences between vendor vs supplier, businesses must share a cordial relationship with both of them.

This has been a guide to Vendor vs Supplier. Here we discuss their top differences between Vendor vs Supplier, along with infographics and a comparison table. You may also have a look at the following articles –

• Vendor Financing
• Mass Customization
• Lead time