Vendor vs. Supplier

Vendor and supplier are often used interchangeably to refer to any company that supplies buyers goods or services. Yet, there is a clear distinction between the two terms. Suppliers typically source raw materials for manufacturing, and vendors sell finished products or services to the end users. There are times when these terms sometimes overlap, so make sure you can understand the differences by reading more.

What is a Supplier?

The supplier typically provides the raw materials to manufacturers who need to create parts for a product. Their services are entirely business-to-business (B2B) and do not sell to the end user. Suppliers may specialize in obtaining one material for multiple manufacturers or source a variety of materials for a single manufacturing partner. They rely on supplier relationship management software or SRM to communicate clearly with manufacturers, distributors, and retailers.

For example, suppliers might:

• Source cotton for multiple clothing manufacturers
• Find cocoa and sugar for a single candy manufacturer
• Sell raw materials in bulk to wholesalers

Suppliers sometimes act as the connection between the source of raw materials and manufacturers. For instance, they might have contracts with multiple farms to grow specific crops for a food and beverage partner. In other cases, they might select new sources year to year to find the best materials at lower costs.

Types of Suppliers

• Material Suppliers: They supply raw materials needed to produce the final product. These include metals, chemicals, and plastics.
• Packaging Suppliers: This type of supplier provides packaging materials such as boxes, corrugated cardboard, paper, and bags, which are used to protect and present the final product.
• Logistics Suppliers: These suppliers provide transportation and warehousing services to ensure products are delivered.

What is a Vendor?

The vendor distributes finished goods directly to buyers, whether that’s other businesses or the final consumers. As such, vendors can be B2B or B2C. In fact, plenty of vendors are both, selling some products direct to consumers and distributing others to third-party wholesalers.

Vendors can:

• Sell and ship finished goods to a single customer from a physical store or an eCommerce platform (B2C)
• Sell a variety of products to a third-party retailer in-person or online (B2B)

Some vendors work with a single manufacturing partner and specialize in the sale of only their products. Others might represent multiple manufacturers within a certain field.

Types of Vendors

• Machinery and Equipment Vendors: These vendors provide necessary tools and machinery for product production. Ranging from entire manufacturing lines to simple items like hammers, shop towels, or other tools.
• Retail Vendors: Retail vendors supply finished goods directly to retail distributors who then sell directly to consumers
• IT Vendors: These vendors offer managed IT services and software solutions to support business operations.

Key Differences Between Suppliers and Vendors

A supplier is an entity that partners with businesses to source raw materials for the organization, typically manufacturers or distributors. They have a solely business-to-business (B2B) relationship and do not sell to end users. Suppliers are focused on sourcing raw materials used for the actual production of finished goods. Their goal is to provide materials and supplies to manufacturers in timely and cost-effective manner.

A vendor sells finished products to businesses or directly to consumers (B2C). Vendors are more focused on the sales side of the business and find potential customers to sell their finished products to. The rise in eCommerce capabilities has allowed more vendors to sell goods directly to consumers anywhere in the world. Their goal is individual customer satisfaction.

The key difference between both terms is that vendors and suppliers are on opposite ends of the supply chain. The supplier sources the raw materials for the manufacturer, who then creates finished products which get sold by the vendor. In some cases, there may be a distributor or third-party retailer in the mix. Another key difference is suppliers are solely B2B while vendors may be B2B, B2C, or both.

Similarities to Consider

Despite all the differences, there is some undeniable overlap between vendors and suppliers. To start, both are selling something to others. Suppliers and vendors are both vital parts of the supply chain, as they are the ones sourcing goods for either manufacturers or end-users. As such, they both play a pivotal role in the procurement of products and services.

It’s understandable why consumers refer to vendors and suppliers interchangeably. Further complicating things is the fact that some vendors may be considered suppliers when they are selling to other businesses instead of end users. For example, a vendor might sell designer clothing online directly to consumers. They become a supplier when they sell the same products in bulk to boutique retailers.

Vendors and suppliers both have to work with distributors to move around goods, whether those are raw materials or finished products. Some vendors might handle shipping themselves, though this may depend on if they have a local storefront or are selling through an eCommerce platform.

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