Vendor and supplier are often used interchangeably to refer to any company which supplies goods or services to buyers. Yet there is a clear distinction between the terms. Suppliers are the ones sourcing raw materials for manufacturing, and vendors are the ones selling finished goods to end-consumers. There are times where these terms sometimes overlap, so read more to learn when to use each correctly.
A supplier sources raw materials for the manufacturer or wholesalers. They are solely business-to-business (B2B). Suppliers are focused on the actual production of raw materials and distribution to the manufacturers.
A vendor sells finished products to businesses or directly to consumers (B2C). Vendors are more focused on the sales side of things, finding potential customers for finished products. 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 difference between these two terms is clear: 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.
The supplier usually provides the raw materials manufacturers need to create parts for a product. Their services are entirely B2B, and may include select services. They may specialize in obtaining one material for multiple manufacturers or source a variety of materials for a single manufacturing partner. And they rely on supplier relationship management software or SRM to maintain clear communication with manufacturers, distributors, and retailers.
For example, suppliers might:
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.
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.
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.
Despite all the differences, there is some undeniable overlap between vendors and suppliers. To start, both are selling something to others. Both are a vital part of the supply chain, as they are the ones sourcing goods for end-users. As such, they both play a pivotal role in procurement.
It’s understandable why consumers refer to vendors and suppliers interchangeably. Further complicating things is the fact that some vendors may be categorized as suppliers when they are selling to other businesses. 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.