Vendors vs. Suppliers (What They Are and When to Use Them)
Updated September 30, 2022
Vendors and suppliers provide companies and consumers with goods and products. Whether you choose a vendor or supplier depends on the type of inventory you require. By knowing more about suppliers and vendors, you can accomplish inventory goals. In this article, we discuss the differences between vendors and suppliers, explore when to use a vendor or a supplier, and learn how to choose a supplier.
Vendors vs. suppliers
If you require supplies or materials, you may want to know about the features of vendors vs. suppliers. Vendors are companies that sell a small number of goods or services to another organization or individual consumers. Vendors typically have a broad range of products that they provide to buyers. The buyers then resell or use the goods. Suppliers differ from vendors because they sell large quantities of goods to other companies. They can either manufacture their own goods or buy them from other companies to resell. Here are some other primary differences between vendors and suppliers:
Vendors and suppliers typically have different clienteles with varying goals. Vendors can be business-to-consumer (B2C) or business-to-business (B2B) sellers. This means that vendors sell products directly to their consumers for either personal use or the distribution of goods. Suppliers differ from vendors because they typically only sell B2B rather than B2C. Suppliers often specialize in specific goods like t-shirts or children's toys. They can sell these goods to retailers, who then sell them to their consumers.
Number of products sold
Organizations have different sales goals and buy various products from suppliers and vendors. Vendors typically have numerous items in stock and sell their items in smaller quantities than suppliers. Businesses buy from vendors when they require fewer goods than they typically buy from a supplier. This can be useful if the business sells many different items and only requires a few of each.
Level in the supply chain
The supply chain is how a product moves from manufacturers to consumers. Vendors are further along the supply chain than suppliers because they provide goods directly to consumers after obtaining them from suppliers. This feature of vendors vs. suppliers affects their profit margin. This is because vendors typically sell products for specific prices after buying them from a supplier or manufacturer, so they can maintain a fixed profit margin when selling the goods.
Suppliers differ because they're at the first stage of the supply chain and often consider the work required to produce goods when selling them to companies. Goods can require different amounts of work depending on factors like resource availability and equipment failures during manufacturing.
When to use vendors
You can use vendors to purchase products as an individual customer or on behalf of a business. Customers buy from vendors when they want the product for themselves rather than to resell. Businesses buy from vendors when they only want a small number of goods to resell to customers. Because vendors typically charge businesses a service fee for sourcing goods that they sell in smaller quantities, it's beneficial to consider your budget when deciding how many products you require.
When to use suppliers
You may want to consider purchasing from a supplier if you want to buy goods in bulk or source items to resell to other businesses on behalf of a vendor. Suppliers are useful for vendors with a specific focus or specialization because they sell goods in bulk for lower prices. This means you can make large purchases and still resell for profit.
Tips for managing relationships with vendors and suppliers
Here's a list of tips that you can use to help manage your relationships with vendors and suppliers:
Discuss obstacles and issues
It's essential to be open with vendors and suppliers when challenges arise. This requires effective communication skills to help ensure that you resolve issues efficiently. When developing relationships with vendors and suppliers, you can expect problems to arise occasionally, and it's good to discuss them. This enables vendors and suppliers to fix any supply chain problems quickly.
When discussing matters with your vendors and suppliers, it's beneficial to be clear with them about your requirements. They can only provide the best supply experience if they know what you expect from them. You may want to discuss any problems you experience to establish trust and improve performance. You can also ask them questions, attend regular meetings, and remain direct to foster openness between you and your vendors and suppliers.
Treat them like partners
Retail businesses are symbiotic, which means vendors and suppliers rely on each other for success. When customers excel, their vendors and suppliers also succeed. Treating your vendors and suppliers like partners shows them you value them, their time, and their products. A good relationship with vendors and suppliers helps a business' procurement process run smoothly and establish and maintain its reputation.
Focus on quality over price
It's beneficial to consider the quality of the materials supplied and the goods produced when managing relationships with vendors and suppliers. This helps you discuss prices with a vendor or supplier because you can typically negotiate prices to reflect quality. A strong business relationship depends on the commitment of your vendor or supplier and your commitment to buying and selling exceptional products.
Think about the consumers
Consumers are one of the most critical variables to consider when evaluating your vendor and supplier relationships. Because customers fund the business, their opinions about products can affect your decisions when considering the product source. It's beneficial to share your consumers' opinions with your vendors and suppliers to help ensure they know how to improve their products and decide the direction of new developments. Progress for your vendors and suppliers benefits you and improves your relationship with them.
How to choose a supplier
Here's a step-by-step guide to help you choose a supplier:
1. Create criteria
You may want to consider creating performance criteria for your vendor or supplier to establish accountability and standards. Being honest about these criteria determines your expectations and allows you to measure progress against a certain standard. This helps ensure suppliers and vendors understand your expectations and attempt to fulfil them. It's beneficial to list your criteria, which you can then provide to the supplier. Here's an example of some criteria to include in your list:
Ideal lead time: This refers to the time you're prepared to wait between purchasing and receiving goods.
Maximum and minimum quantity order: These are the parameters you can provide to the supplier to establish realistic expectations for how much you plan to order each time.
Drop-shipping: This refers to the supplier's ability to deliver products directly to your clientele.
Quality assurance processes: Quality assurance refers to the strategies used by the supplier to confirm that the goods they've produced are of high quality.
Payment terms and conditions: The payment terms and conditions refer to the payment methods you use to pay for your goods.
Return policy: It's a good idea to discuss your return policy with the supplier because it helps you determine whether you can return products to the supplier if you or your customers report any problems.
Communication standards: The communication standards establish several guidelines for communication between you and the supplier. This is important to promote respect and to solve potential language barriers.
2. Review industry and products
It's beneficial to consider your industry and the types of products you want to buy to expand the company. You can then browse the potential suppliers available to you. Here's a list of the qualities to review when choosing a supplier:
Reputation: You may want to consider the reputation of suppliers before buying products. To do this, you can communicate with other companies within your industry to learn about the reputability of different suppliers.
Business type: The type of supplier you choose depends on your business model. This determines your choice between a wholesale supplier, drop-shipping supplier, or private label manufacturer.
Security: You may want to review the security policies of suppliers to see whether they can provide you with insurance and fraud protection.
3. Ask for quotes
You can ask suppliers for quotes to obtain more information about the prices you can expect to pay when buying products from them. It's also beneficial to ask suppliers for their processes and policies while reviewing the financials involved with potential orders. You can use this process to identify suppliers' communication skills and transparency.
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