Vendor:
A vendor is a party in the supply chain that makes goods and services available to companies or consumers. If, for example, the human resources department of a large company plans a holiday party for its employees, it seeks to hire outside vendors to supply goods and services for the event. Manufacturers and retailers try to eliminate as much of the supply chain as possible, as they know that the final cost of a product increases with each link in the supply chain. Large retailers, like Target, rely on many different vendors to supply products, which it buys at wholesale prices and sells at higher retail prices. Large retail store chains such as Target, for example, generally have a list of vendors from which they purchase goods at wholesale prices that they then sell at retail prices to their customers.
What Is a Vendor?
A vendor is a party in the supply chain that makes goods and services available to companies or consumers. The term "vendor" is typically used to describe the entity that is paid for goods that are provided, rather than the manufacturer of the goods itself. However, it is possible for a vendor to operate as both a supplier (or seller) of goods and a manufacturer.
How Vendors Work
A vendor, also known as a supplier, is a person or a business entity that sells something. Large retail store chains such as Target, for example, generally have a list of vendors from which they purchase goods at wholesale prices that they then sell at retail prices to their customers.
Some vendors also can sell directly to the customer, as seen with street vendors and food trucks. In addition, a vendor can act as a business-to-business (B2B) sales organization that provides parts of a product to another business to make an end product.
Examples of Vendors
A manufacturer that turns raw material into a finished good is a vendor to wholesalers and retailers that sell the product to a consumer. In turn, retailers are a vendor for the end customer. For example, Target is a vendor for a person looking for home appliances or other products.
Large corporate events are also good examples of times when vendors are needed. If, for example, the human resources department of a large company plans a holiday party for its employees, it seeks to hire outside vendors to supply goods and services for the event. First, the department must choose a location, in which case the owner of the event space itself becomes a vendor when the date is reserved and the contract signed.
After that, the human resources department reaches out to decorators, which become vendors when they are hired to transform the event space into a themed party. After the theme is implemented, a catering company is contracted to provide food and beverages for the party. When the company delivers its service, it becomes a vendor to the company hosting the party.
Special Considerations
Vendors are found throughout the supply chain, which is the sum of all individuals, organizations, resources, activities, and technologies used in the manufacturing and selling of a product or service. The supply chain starts with the production and delivery of raw source material. It ends with the sale and final delivery of the product.
Manufacturers and retailers try to eliminate as much of the supply chain as possible, as they know that the final cost of a product increases with each link in the supply chain. Typically, the supply chain consists of three parts: a manufacturer, a seller, and a reseller or, as they are more commonly known, a retailer.
Related terms:
Business-to-Business (B2B) & Example
Business to business is a type of commerce transaction that exists between businesses, such as those involving a manufacturer and wholesaler or retailer. read more
Disintermediation
Disintermediation is the removal of a middleman in the supply chain to allow producers to sell directly to their customers. read more
Human Resources (HR)
Human resources (HR) is the company department charged with finding, screening, recruiting, and training job applicants, as well as administering benefits. read more
Inventory Management
Inventory management is the process of ordering, storing and using a company's inventory: raw materials, components, and finished products. read more
Inventory :
Inventory is the term for merchandise or raw materials that a company has on hand. read more
Manufacturing
Manufacturing is the processing of raw materials into finished goods using tools and processes. read more
Mergers and Acquisitions (M&A)
Mergers and acquisitions (M&A) refers to the consolidation of companies or assets through various types of financial transactions. read more
Supply Chain Management (SCM)
Supply chain management (SCM) is the management of the flow of goods and services as well as overseeing the processes of converting original materials into final products. read more
Sell
The term sell is the process of liquidating an asset in exchange for cash. It generally refers to the act of exiting a long position in an asset or security. read more
Supply Chain
A supply chain is a network of entities and people that work directly and indirectly to move a good or service from production to the final consumer. read more