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.