Vendor vs Supplier: What Are The Difference Between?
Surely when you join any business, you will encounter these two concepts: Vendor and Supplier. Many people often confuse those concepts, so today I will help you differentiate the two concepts above.
Let’s dive into a transparent explaination about What are the Differences between Vendor and Supplier You’ll need to know.
Table of contents
What is a vendor?
The vendor is the individual or organization playing the role of providing goods and services to other individuals and organizations in the supply chain to serve customers’ needs to consume products.
For example, every supermarket like Walmart or convenience stores like 7 Eleven, Family Mart, etc. (business) or grocery store (individual) is considered a Vendor because it sells goods directly to consumers.
In other words, the Vendor is the last link to bring goods from manufacturers to consumers. Normally, the Vendor will import goods from distributors or manufacturers (if the products are not distributed through intermediaries) at wholesale prices. Then, it is sold to individuals or organizations for the purpose of consuming and using the product at a retail price. Therefore, the Vendor is both a buyer and a seller.
Each Vendor can sell products in many forms, such as:
- B2B (Business-to-Business)
- B2C (Business-to-consumer)
- B2G (Business-to-government)
The advantage of the Vendor is that there is no need to go to direct sales, have a good product, find someone to promote it, and give them a percentage of the profit. Although it is an advantage, it also creates many barriers when asking you to have a good product; let others trust your product and bring value to them to promote your product.
What is a supplier?
Supplier today has become very familiar to people who are and will operate in the fields of providing Logistic services - a profession that has development opportunities today.
Supplier is defined as a party (an organization or individual) providing a product or service. In the modern trade services market, there is relatively many Supplier participating in the supply chain.
Supplier plays the role of supplying products to the market. For example, the company will directly manufacture and supply products for the Vendor. The vendor will sell supplier products in partnership with each other.
Supplier’s basic features:
- These sources establish markets to provide inputs to companies, such as the supply of machinery, equipment, raw materials, capital supply, financial services, labor supply, etc.
- The nature of the different supply markets will affect to different degrees on the business of the company.
Competitive markets, imperfect competition, or privilege will affect different degrees of each firm’s procurement and storage and recruitment.
Supplier carries a significant meaning to businesses. Although not under the management scope or directly bringing profits to the company, it affects the business’s operation and revenue. If a long-term supplier suddenly has signs such as an increase in input prices, a decrease in the quality of products or services they provide or fail to meet the businesses’ requirements directly, the business activities will be affected. As a result, business profits will be reduced.
There are also some other situations from suppliers that affect businesses such as:
- A small number of suppliers, even only one monopoly supplier.
- The substitution nature of the inputs is challenging.
- Enterprises buying inputs are not an important customer and a supplier’s priority.
- The importance of inputs to a business buying
- Raw material and material suppliers have a vertical integration strategy
The market volatility is constantly changing; the new requirements are stricter, which requires the relationship between the parties to be closer and more intimate. Research shows that businesses that maintain good relationships with suppliers are more effective than businesses that do not.
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Differences between vendor and supplier
Vendors and Suppliers are both important components in the product supply chain. Although in terms of meaning will not distinguish Vendor and Supplier, when placing them in the supply chain process, you will clearly see the roles and differences of Vendor and Supplier through the following characteristics:
Supply chain process diagrams include:
Supplier -> Manufacturer -> Distributor -> Vendor -> Customer
- The Vendor is located near the end of the supply chain to bring products to consumers, the Supplier takes the first position, to supply raw materials to create products. You can easily see that on Supplier products have not been formed yet, at Vendor, the product has been manufactured and can be used completely.
- To get a perfect product requires manufacturers to buy a variety of materials from the Supplier. But once the finished product is made from these materials, the Vendor only imports one item for sale.
Example: To create a milk box, many ingredients such as milk, sugar, preservatives, paper boxes, etc. are required from the Supplier. However, finished products come to the Vendor to sell only one item of fresh milk to consumers through the production process.
- The Supplier’s goal is to create products, and the Vendor’s goal is to sell products.
- Suppliers can only distribute their raw materials to businesses that have a business license or a production license. However, the Vendor can sell products to any individual or organization wishing to use the product.
- Supplier will be a supplier of raw materials directly to manufacturers; on the contrary, manufacturers can distribute products to the Vendor directly or indirectly through distribution channels.
- Vendor is a vital link to bring products directly to consumers, while the Supplier has no relationship with consumers.
Below is a comparison table to help you distinguish these two concepts:
|Position in the supply chain||Stay at the bottom of the supply chain||Stay at the top of the supply chain|
|Role||Selling goods, products at specific prices to customers||Supply of raw materials to manufacture products|
|Objectives||Selling products||Create products|
|Quantity||Only 1 product can be created||Provide a wide range of materials to make the product|
|Business relations||B2B, B2C, B2G||B2B|
|Relationship with manufacturer||An indirect relationship with a producer||A direct or indirect relationship with a producer|
|Relationship with consumers||Directly selling to consumers||Not related to the consumer|
In short, Vendor and Supplier are two completely different concepts in the supply chain. However, these are two ingredients and an indispensable link to create and bring products to consumers.
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This article takes you through two concepts Vendor and Supplier. Besides, you can easily distinguish them by the precise information and comparison table that I provide. I hope you find this information useful. Stay tuned for more great things by clicking on the new posts below!