An efficient supply chain is integral to running a thriving business, and the best supply chains will always factor in the dynamics at play between their respective links. One of the most important relationships to consider is the one between your vendors and suppliers.
In modern business, it’s fairly common to hear both terms being used interchangeably. There are, however, a few key distinctions that set them apart. Knowing what these differences are is a good starting point for incorporating new processes (perhaps even with the help of a vendor management system), in order to make steady improvements to operational efficiency levels over time.
Vendors vs Suppliers
Whether your supply chain includes a food ingredient supplier that points towards various manufacturing processes or the supplier-vendor connection is slightly simpler, a healthy relationship between both brings about many benefits. But before detailing these, it’s important to know exactly what a supplier and a vendor does in the first place.
What is a supplier?
A supplier is a business or individual that is responsible for sourcing the raw materials ahead of the manufacturing phase. The manufacturer is typically always another business (making supplier-manufacturer relationships exclusively B2B). Deciding which supplier is right for your operations involves weighing up your options, including noting their approach to sustainability, ethics and, naturally, the price point they can offer you.
Understanding the role of a vendor
A vendor refers to a person or business that buys goods directly from the manufacturer in order for it to be sold to the intended user. Vendors have absolutely nothing to do with the raw materials collection phase, typically only offering products that are ready to hit the shelves.
A practical example involving both
Consider any popular beer that is sold at your local pub. The owner buys bulk cases of the specific brand from a vendor, not the supplier, who is solely responsible for sourcing the raw materials (like hops, water and yeast) for it to be created in the first place.
A vendor offers each bottle ‘as is’, whereas a supplier’s raw materials can be repurposed into multiple products during the manufacturing stage. The vendor is typically the second to last link along the supply chain, which moves from the supplier to the manufacturer on to the distributor, vendor and, ultimately, to the customer. Sometimes the end user may even be another business.
The Benefits of Healthy Vendor-Supplier Relationships
A healthy vendor-supplier relationship in your supply chain can make a big difference to the quality of the end product or service. If the supplier provides low quality raw materials to the manufacturer, it is likely that the vendor won’t have a premium product that will eventually get into the hands of your customers.
If both have similar quality standards and a matching work ethic, the entire system will flow better and the end result is a well oiled supply chain. Good communication is vital whether things are going well or poorly and can be enhanced with a VMS system (like the one from Indeed Flex). The end result is likely to create new potential for the improved profitability of your business.
Understanding the difference between vendors and suppliers is the first step towards better management of your supply chain. Directing your relationship with either, as well as the dynamic between them, can be the difference between a poor end result and a situation where consumers direct their hard-earned money to your business. Although it might take some trial and error at first, doing so will leave you head and shoulders above the competition in no time.