Supplier definition

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What is a Supplier?

A supplier is an entity that provides goods and services to another organization. This entity is part of the supply chain of a business, which may provide the bulk of the value contained within its products. Some suppliers may even engage in drop shipping, where they ship goods directly to the customers of the buyer.

Types of Suppliers

There are several types of suppliers, which are as follows:

  • Distributors. These suppliers buy goods from multiple manufacturers and sell the goods on to their customers. Distributors may also provide added services to their customers, such as after-market service. They can be an important source of products for smaller retailers.

  • Importers. These suppliers source goods from other countries. In this role, they may be the sole source of certain goods that are only produced in one foreign location.

  • Manufacturers. These suppliers produce goods from raw materials, and may sell direct to consumers and/or through distributors or retailers.

  • Wholesalers. These suppliers buy from manufacturers in volume and then sell the goods on to customers in smaller volumes. These entities specialize in the warehousing and distribution of goods.

You should have a firm understanding of the nature of each type of supplier, in order to source goods most effectively through suppliers.

Example of a Supplier

A shoe manufacturer buys components for its shoes from a group of suppliers. One supplier provides it with rubber heels, while another supplier provides it with tanned leather. A third supplier provides it with the buckles to be used on selected shoe models, while a fourth supplier provides the thread used to stitch shoes together.

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The Difference Between a Supplier and a Distributor

As already noted, a supplier provides goods to another party. A distributor acquires goods from suppliers and then sells them on to retailers. A supplier that manufactures goods earns a profit from the transformation of raw materials into finished goods, while a distributor earns a profit by making goods more readily available to retailers through local warehousing. A supplier can take on the roles of both manufacturing and distribution.

Terms Similar to Supplier

A supplier is also known as a vendor.