Vendor vs Supplier

What is the Difference Between a Vendor and a Supplier?

The terms ‘vendor‘ and ‘supplier’ are often used interchangeably, but they can refer to different roles in the supply chain. Technically, a supplier works in a B2B (business-to-business) context while a vendor works in a B2C (business-to-consumer) context.

However, despite this technical difference, the two terms are still used interchangeably, and it would not be incorrect to do so. A business entity may still refer to their supplier as a vendor and vice versa. There is also little to no difference between how one would manage vendor and supplier relationships.

What is a Supplier?

A supplier is an individual or a company that provides goods or services to another entity, typically as part of the supply chain. Suppliers can be manufacturers who produce goods, wholesalers who sell products in bulk, or service providers. The key characteristics of a supplier include the following.

Upstream Position

Suppliers hold an upstream position in the supply chain. To have an ‘upstream position’ means they are closer to the source of essential raw materials or service professionals. This position means that suppliers provide raw materials or labor that other companies need to start their own production processes.

Long-Term Relationships

Suppliers often work with purchasing businesses for an extended period. Good relationships help companies proactively plan their business operations. Effective supplier management is crucial because businesses depend on their suppliers to meet ongoing consumer demands.

Strategic Partnerships

Companies frequently form strategic supplier relationships to help themselves maintain a steady supply chain. This collaboration helps both parties understand each other’s needs. Mutual understanding means that both business entities can contribute to each other’s long-term goals.

What is a Vendor?

Generally, vendors sell goods or services directly to the final customer or end consumers. However, many vendors will sell to the individual or business customers. In either case, vendors are usually the last supply chain link. Characteristics of a vendor include the following:

Point of Sale Interactions

Vendors directly engage with customers during sales transactions. Therefore, the vendor is often seen as the face of the product or service. During these interactions, the primary goal is to provide a high-quality customer service experience to the end user.

Transactional Relationship

Vendor relationships are often short-term and transactional, sometimes as short as single purchases from individual consumers, such as in retail stores. In these cases, the vendor aims to provide quality products immediately without providing long-term support.

Diverse Customer Base

Vendors sell goods and services to a broad range of clientele. This range may include either individual or business entity, or a combination of both. B2B vendors and suppliers are generally where the terms are used interchangeably. Offering services directly to both helps vendors stay flexible in the face of evolving market dynamics.

Example to Illustrate the Difference

Consider manufacturing businesses that create and sell computers. The difference between a supplier and a vendor who could both be described as computer manufacturers would look like this.

• The supplier would be a company that provides essential components for the production process such as graphics cards or batteries to other businesses.
• The vendor would be the retail store or online marketplace that sells the finished products to individual end customers.

Vendor vs. Supplier: Key Differences

Supply Chain Roles

Suppliers operate at the beginning of the supply chain, while vendors work at the final step in the supply chain process. This difference defines their respective roles in delivering products or services.

Type of Relationship

Suppliers and purchasers often develop long-term, strategic business relationships that benefit both sides. By contrast, vendor relationships tend to be more transactional. However, the nature of these relationships can vary depending on the business objectives of each party.

Direct Interaction

Vendors typically deal directly with the end consumers. Suppliers usually have indirect interactions with individual consumers. Instead, suppliers focus on providing services or essential resources directly to other businesses who may or may not sell to the final consumer.

Focus of Offering

Suppliers often provide raw materials in bulk quantities needed for production. A vendor will usually only sell finished products that are ready for use by the consumer. Although, some vendors will also sell finished products to other companies to help them perform their business operations.

Order Size

Suppliers deal with large quantities to sell to businesses that need a steady supply of materials. Vendors usually process smaller orders more frequently as they generally cater to individual customers or smaller businesses.

Contractual Obligations

Suppliers usually work under formal contracts that outline specific terms, like timely delivery schedules or order quantity minimums. Vendors often operate under more flexible agreements. Contractual flexibility helps the vendor adapt to the changing business landscape.

FAQs on Vendors and Suppliers

Can a company be both a supplier and a vendor?

A company can function as both a supplier and a vendor, depending on the context and the nature of the transaction. For example, a business might supply raw materials to manufacturers while also selling finished products directly to the final consumer.

Is the relationship with a supplier more important than with a vendor?

The importance of the relationship can vary based on the business model and strategy. For businesses focused on production, strong supplier relationships offer quality control and consistency. However, companies that rely on end-user sales may prioritize vendor relationships.

What are dropshipping vendors?

Dropshipping vendors are businesses or individuals that sell products without keeping them in stock. Instead, when a customer places an order, the dropshipping vendor forwards the order to a third-party supplier who then ships the product directly to the customer.