What Is a Vendor?
In any supply chain, there is a middleman, a vendor, who contributes various services or products to the overall result. Generally, in a large supply chain, there is a single vendor who supplies stock items to the other links in the chain. The term today often refers to a distributor of any product or service. However, in smaller businesses, the vendor is sometimes referred to as a third party or sometimes as an agent.
Some people mistakenly think that what is a vendor is the company who sells goods and products to the customer directly. In fact, most vendors are corporations with a retail store or facility, where they sell goods and services to customers. What is a manufacturer is another common misnomer. A manufacturer is the actual person or entity that manufactures a product or produces a solution.
Vendors have an agenda for their business relationship with customers. Often, this means that the vendors own product lifecycles, including sales, marketing, and distribution. These lifecycles can influence the types of activities a vendor can engage in with each customer. For example, if a product has limited distribution in a particular geographic area, the vendor may opt not to enter into a direct relationship with the customer and instead work through a distribution company. This allows the vendor to establish its own profit margins and to control expenses.
Another area of confusion relates to what is a vendor and what is a contract manufacturer. Often, when consumers purchase a product or service, they are typically being contracted to purchase the item either through the original manufacturer or via a distribution company such as Costco. When these products are sold, the consumer retains the rights to use, inspect, and return the item. Often, however, consumers will receive an invoice from a distribution company or a contract manufacturer who owns the product.
The product lifecycle is also the key concept in what is a vendor and what is a contract manufacturer. A vendor is responsible for the products they sell and the lifecycle of those products. A contract manufacturer is responsible for producing the product, processing the order, and then shipping the final product to end users. In the supply chain diagram, the vendor is the link between buyers and producers. If a product cannot be manufactured by a vendor and then purchased from a contract manufacturer, then the products would be sold to wholesalers. In some cases, when a company wishes to outsource manufacturing, it can engage in what is a vendor-manufacturer partnership.
One other area of confusion centers on what is a vendor and what is a contract manufacturer. A vendor is a person that works with a provider to provide products. A contract manufacturer is a person, usually a corporation, that manufactures products for other companies. In the supply chain diagram, the relationship between the two people (the vendor and the contract manufacturer) is what is a vendor. In most cases, when a company does not have the time, resources, or expertise needed to create, produce, and deliver its own products, it outsource these services and capabilities.
What is a vendor is an important consideration for many companies, but what is a contract manufacturer is particularly important. A contract manufacturer is the middle man in a supply chain process. It functions as a distributor between manufacturers and wholesalers. When a manufacturer needs or wants to distribute a product, it turns to a contract manufacturer for assistance. A distributor will typically sell its products to wholesalers.
The supply chain process includes three main players: the manufacturer, the wholesaler, and the distributor. Each one of these needs to be able to sell goods and make a profit. If any one of these vendors do not meet these requirements, then the business will fail.