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Supplier vs vendor: what's the difference?

Posted by Elizabeth Allcock on June 16, 2020 09:30:05

In the supply chain and the rebate world, you will often hear the terms supplier and vendor used interchangeably when supply chain roles and duties are discussed. Even here at Enable we sometimes call supplier rebates, vendor rebates. They both supply goods and services, but there are certain attributes that make each one a distinct term in the supply chain world, which we will discuss in more detail below.

Definition of vendor

A vendor is someone who purchases products from manufacturers or distributors and sells them to the end user - the customer who is at the very end of the supply chain. Although they can participate in B2B or B2C relationships. Being the last link, they have frequent interaction with their clients and can maintain a good relationship with them.

Definition of supplier 

The supplier is defined as a business or person that make goods available to another business or service. Suppliers are known as the first link in the supply chain, forming only B2B relationships and providing goods to manufacturers, in rather large quantities.

In today’s competitive market, suppliers are essential to almost every business as they help them get the most out of their product by sourcing raw materials and finding better options for raw materials as the market starts becoming saturated. Many manufacturers are focusing on their suppliers as a way to achieve long-term competitive advantage.

Forming a positive relationship with your suppliers and vendors

When you think of a supply chain it should go something like this, Supplier > Manufacturer > Distributor >Vendor > Customer. Therefore, the supplier is the first link of the supply chain whereas the vendor is the penultimate part of the supply chain. But whatever order they come in you should try and select good suppliers and vendors as part of your growth plan and form a positive relationship, otherwise you're likely to regret it.

One of the many reasons to collaborate more effectively with your suppliers is because they can become important sources of information, helping you evaluate the potential of new products, track competitors' actions and identify potential opportunities.

You should look at your supplier relationship as a partnership that should not only be based on financial transactions, but also on mutual trust and loyalty. Make your suppliers feel like they are a part of your business by informing them about your processes, such as releases of new products and promotions, and listen to their concerns.

Vendors can also turn into partners, helping you cut costs, improve product designs and even fund new marketing efforts.  Believe it or not having a fewer number of vendors can be better than having many vendors because of the administrative costs and you can form closer relationships with fewer vendors, allowing you to work together to control your costs.

Consider both your suppliers and vendors as part of the team. Communicate often and openly especially when it comes to contracts and deals. Using a collaboration platform like ours can avoid supplier and vendor conflicts by making sure rebates are paid on time or at least honestly addressing late payment issues and talking with your supplier or vendor about it. Be upfront and transparent with suppliers and vendors. Make sure they understand your needs and expectations at all times. In the long run, having a win-win relationship with your suppliers and vendors will give your business a competitive advantage.

Main differences of suppliers vs vendors

We have already learnt that both suppliers and vendors supply goods or services, but suppliers distribute goods and services to those businesses that are in need whereas a vendor is not involved in the distribution of products. Another main difference is that the term vendor can be used for both B2C and B2B relationships, whereas the term supplier is normally only used for B2B relationships.

The vendor also has a wide variety of products for sale, which the end user generally buys in small quantities. Equally, the supplier typically sells a specific type of goods in bulk quantities. A vendor does not have a direct connect with the manufacturer whereas suppliers have a direct connection. On the other side of the spectrum a vendor has a direct and close relationship with customers unlike suppliers.

Another difference is that vendors typically provide items that are ready to go, while suppliers deal more in raw materials that will be turned into something else. Therefore, vendor relationships are usually focused on price comparisons, while supplier relationships are more about how the supplier can influence the quality of the product.

Supplier vs vendor comparison

 

Supplier

Vendor

Meaning

Provides the goods or services required by the business.

Sells goods and services direct to the customers.

Business relationship

B2B

B2C / B2B

Supply chain link

First

Penultimate

Objectives

To make the goods available to the people who need them.

 

To sell the goods to the final consumer.

 

Purpose of sale

Resale

Consumption

Quantity provided

Bulk

Small amounts

Risks

High

Minimal

Relation to the Manufacturer

 

Direct

Indirect


A common need for suppliers and vendors: rebate management software

Regardless of whether you are a vendor or supplier (or both), companies need an easy way to track their rebate deals and collaborate with each other to form a strong relationship going forward. Having a cloud-based rebate management system in place to track and evaluate your suppliers and vendor trading agreements is essential to the smooth operation and profitability of your company. 

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Topics: Supplier collaboration, vendor rebates, Supply chain