What You Don’t Know About Vendor vs. Supplier

 

The way you hear terms like vendor and supplier thrown around, you’d think they mean the same thing. However, this isn’t the case at all.

To be fair, they both sell things and they are related, which might explain the confusion. Vendors and suppliers are part of a process called the supply chain. Nonetheless, they play distinct roles in it.

So, vendor vs supplier, what’s the difference?

To put it briefly, a vendor sells products to customers while a supplier provides businesses with products to sell.

The difference might seem subtle, but this article’s here to shed light on it. Read on to learn more about it.

What Vendor Means

A vendor can be anyone who provides a company or individuals with goods or services.

Vendors often create manufactured items that are inventoried before selling them to customers. They are usually tracked with a warehouse management system, or a finance system.

Vendors will also buy finished products from distributors or manufacturers and sell them to their clients. Vendors interact frequently with their customers and can keep close relationships with them.

They are the last party involved when it comes to manufacturing and selling goods. As such, they are the final link in the supply chain. The products they sell are ready to be consumed or used as they are.

Vendors will generally sell to their clients in small quantities. For instance, the retailer that you get groceries from is a vendor. Or if you purchase software from Quickbooks Enterprise for your company, you’re buying from a vendor.

In a nutshell, a vendor sells finished items to its customers. Those items are meant to be used as they are rather than resold.

What Supplier Means

A supplier is a business entity or person that renders goods or services available to another entity. The supplier provides this entity with what it needs to conduct its business.

The supplier is an essential source of inputs such as tools. It also provides the manufacturers with the raw materials they need, that the manufacturers then transforms into more refined products.

Given its role, the supplier sells its goods or services in large quantities. What’s more, it’s not uncommon for the supplier to also be the manufacturer.

It can also act as vendor in cases where it directly sells goods to the client. For instance, if you pick up wood, make a piece of furniture out of it, then sell it to someone, you’re serving as your own supplier, manufacturer, and vendor.

While the vendor is the last link of the supply chain (apart from the customer), the supplier is the first and only deals with businesses.

Vendor vs Supplier: Comparison and Key Differences

Now that we’ve seen the definitions of vendor and supplier, let’s compare them and take a look at the main differences between the two.

While they both can be an individual or entity, the vendor’s purpose is to sell goods or services to the customers. On the other hand, the supplier provides a good or service required by a business.

In business terms, a vendor can be either B2C, that is business-to-consumer, or B2B, i.e. business-to-business. A supplier, however, only has B2B relationships.

The vendor sells its items for customers to use directly, while the supplier sells its goods to businesses for the purpose of resale.

The vendor also has a wide variety of products for sale, which the end users generally buy in small quantities. Conversely, the supplier typically sells a specific type of goods in bulk quantities.

In the supply chain, the vendor is the last link whereas the supplier is the first link.

What’s a Supply Chain?

Vendor and supplier are both key components of the supply chain. But what’s a supply chain exactly?

Supply chain is the name given to the entire process that consists in creating a product or service to deliver it to its end users. It starts with the sourcing of the raw materials and ends when the product is purchased by a customer.

The supply chain outlines every aspect of the production process.

It includes the actions undertaken at each stage, the information communicated, the raw materials that are transformed into refined products, the human resources, and any other component playing a role into the finished product or service.

Generally, the raw materials are obtained by the supplier. The supplier sells them to the manufacturer, who then transforms it and sells it to the distributor.

The distributor provides the retailer with the product. Finally, the retailer sells it to the consumer.

The supply chain involves all activities involved in processing and filling a customer request. These activities also include product development, marketing, operations, distribution, finance, and customer service.

Supply chain management is meant to oversee supply chain activities. It involves managing the design, planning, execution, and control of the supply chain, with the aim of improving the process and making it more profitable.

What’s more, the supply chain wouldn’t exist without the value chain.

The Value Chain

While the supply chain comes from an operational management perspective, the value chain derives from a business management point of view.

The idea behind the value chain is that value needs to be created in order for the supply chain to make sense.

Thus, value chain management is meant to add value to the company. And the value created should be superior to the cost of creating it.

The value chain is a process which has five steps. The value chain management’s goal is to be as efficient as possible in any one of those five steps to gain a competitive advantage.

These five steps are inbound logistics, operations, outbound logistics, marketing and sales, and service.

Vendor and Supplier Aren’t the Same

Now you know the difference when it comes to vendor vs supplier.

The supplier exclusively deals with businesses and sells its goods in bulk. Conversely, the vendor sells finished products to customers in smaller quantities.

They both belong to the supply chain of businesses, which is the process by which a product is created from start to finish. Suppliers are the first link of this chain, while vendors are the last one.

Finally, the supply chain is intimately linked to the value chain, whose purpose is to make sure enough value is created for the company and customer.

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