In supply chain management, what is the meaning of the terms vendor and supplier? Do the terms share a definition? Usually, people involved in the supply chain, procurement, and purchasing work use the terms interchangeably. The reason could be because both the supplier and vendor provide goods and/services. Even though they supply goods, each entity has its uniqueness. So, supplier vs. vendor: What’s the difference? This is what you will learn next. Before this, you should understand the meaning of each.
Who is a vendor?
A vendor is described as somebody who obtains goods from a manufacturer or distributor and then sells them to the consumer at the end of a supply chain. As vendors speak to consumers directly, they easily build great relationships with them. They are retailers.
Who is a supplier?
A supplier can be a business or an individual that brings raw materials to other businesses, including manufacturers. They are usually the first contact in any supply chain. They provide goods in significant amounts and don’t contact the consumers at the end of a supply chain. They are wholesalers.
Differences between a vendor and a supplier
Based on definition alone, you can see one thing that makes the two entities different. While a vendor delivers goods to a consumer at the end of a supply chain, the supplier starts in a supply chain and does not meet the end user.
While a vendor can form business-to-consumer (B2C) and business-to-business (B2B) relationships, the supplier can only form business-to-business relationships.
Another difference is that the vendor lacks a direct link with the manufacturer, whereas the supplier serves the manufacturer directly.
While a vendor can supply any goods or services, a supplier specializes in one raw material they sell in bulk.
Finally, suppliers provide raw materials, meaning that these should be transformed into finished goods before resale. On the other hand, a vendor only buys finished products.
Crucial Things to note
A supplier’s business operations are riskier than those of a vendor. They sell in bulk, while vendors provide an item only if they think it will profit. They can avoid selling a product or service if they estimate that the odds of making a profit are low. Another point to note is that a vendor focuses on offering direct consumption goods while a supplier supplies raw materials for resale. Once the raw materials are turned into ready goods, they will be resold for profits.
As well as having differences, vendors and suppliers have similarities. First of all, they both provide goods or services to those who require them. Next, they can both make profits or losses. Finally, they must develop and foster strong relationships with those they deal with. This is one way of promoting their overall performances and net profits.
Although people use the words supply and vendor interchangeably, they have unique meanings. You have the answer to supplier vs. vendor: What’s the difference question. Without both suppliers and vendors, procurement management would not succeed. While a supplier starts the supply chain, the vendor is at the very end of it.