Supplier, Manufacturer, Vendor, and Distributor: Definitions & Differences

Posted 9 months ago by Max Komonov

Running an online store requires many moving parts and involves more parties than you may realize. If you’re just getting started with a new business venture selling products online, there’s a lot to learn!

Whether you’re creating products from scratch or purchasing from a supplier or manufacturer, building relationships with these entities will help you grow and scale your business exponentially.

Here’s a breakdown of some of the critical entities of ecommerce that you need to know when operating an ecommerce shop.

What is a Supplier?

In the supply chain model, the supplier is the organization (or individual entity) that produces materials, goods, or products, for other organizations to use to make the goods that they sell to their customers. Suppliers typically sell their raw materials to distributors or wholesalers, who, in turn, sell the goods at a marked-up price to businesses.

Suppliers tend to sell materials and goods in large volumes, so their pricing is fairly competitive. Some suppliers also act as manufacturers, which we’ll go into more detail about later in this post.

A reliable supplier will provide the following to a business:

Competitive pricing
High-quality products
Transparency and communication
Accessibility

Not sure how to contact a supplier if you’re new to the ecommerce world? Explore the art of contacting a supplier in this post!

Supplier Example

Say you’re selling jewelry like bracelets, necklaces, and earrings in an online shop. If you make these pieces yourself, you’ll use a supplier to purchase large amounts of beads, gems, and other materials to create your unique jewelry. The company you purchase the jewels from is your supplier.

What is a Manufacturer?

The manufacturer is the entity in the supply chain model that produces goods from raw materials to sell to retailers, wholesalers, distributors, consumers, and other manufacturers.

There are three types of manufacturers that you should know about as you start selling products. These include the following:

Make to Stock (MTS), which produces and stores goods to sell at a later date. The goods are manufactured based on historical data and forecasted industry demand, so the manufacturer is predicting how much of the product they will need to meet the demands of their customers.
Make to Order (MTO) is a model used by many manufacturers who only produce products and goods as they receive orders from customers. This model removes the need to forecast consumer or organizational demand and greatly mitigates risk for the manufacturer. It also offers more customization for customers who want something unique or specific.
Make to Assemble (MTA) is a model where the manufacturer creates the initial elements of a product and is handed off to another manufacturer to finalize the item. Another version of this model is the manufacturer creates all the pieces of the product but does not finalize it until a customer places an order.

Manufacturer Examples

An example of Make to Stock manufacturing is a toy manufacturer that makes a certain number of toys per season, based on forecasted trends and consumer demand.

An example of Make to Order manufacturing is when a shoe brand like Nike offers consumers the ability to create custom shoes through a campaign called Nike By You. When a Nike customer creates a custom shoe design, the order is sent to the manufacturer who creates the shoes in real-time based on the shopper’s preferences and specifications.

Finally, an example of Make to Assemble manufacturing is table manufacturing. The company creates all the necessary pieces for the table but does not assemble and complete the table until an order is placed. At that time, they gather the pieces, assemble the table, and then ship it out.

What is a Vendor?

Often used synonymously with supplier, a vendor is a more general term used to refer to a business or individual who buys goods or services from distributors and then sells them to other companies or consumers.

In the retail and ecommerce setting, a vendor is a company like Target or Macy’s that purchases finished goods from suppliers and then sells them to consumers. Some manufacturers are considered vendors as well, depending on who they sell to. Vendors most often operate in B2B and B2C settings.

Suppliers are typically the first step in the supply chain and often sell products and goods to vendors. Vendors sometimes offer better pricing options than suppliers, which is why they are more commonly seen throughout the supply chain model of buying and selling goods.

Vendor Example

A food wholesaler sells meat, produce, and dry goods to retailers. This wholesaler buys the food products from various manufacturers and then sells them to retailers at a discounted price. The retailer then sells the products to their consumers.

An ecommerce example of a vendor would be buying handmade clothing and jewelry from individual artisans and then selling it directly to consumers on your online shop.

What is a Distributor?

Distributors are critical in the supply chain because they’re responsible for getting the products on retailers’ shelves or to consumers directly. Distributors purchase finished goods from manufacturers, and many have partnerships with these manufacturers to store the finished goods before they sell.

The main role of the distributor is to get the manufacturer’s products into the hands of the consumer, regardless of how many steps in between. Distributors have to establish trust in any industry they operate in – that’s how they build their reputation as a reliable entity to do business with.

Whether you’re new to ecommerce or you’re a seasoned pro, a distributor can help take your business to the next level for sales and exposure. Curious about how to find a distributor for your product? Trade shows, social media, and online directories are a great place to start!

Distributor Example

Distributors aren’t commonly known to the public unless you work in supply chain management or for the buying office of a retailer.

A common distributor you may recognize is Sysco, a wholesale restaurant food distributor. Sysco partners with food manufacturers to sell the correct amount of food to their restaurant customers, and restaurants to ensure they can meet the demands of their clientele.

Key Differences Between Suppliers and Vendors

These two terms are often used interchangeably, but there are key differences to understand about suppliers and vendors as you navigate the ecommerce landscape.

Suppliers are the first entity in the supply chain business, offering goods and raw materials to businesses for manufacturing or selling. Suppliers often sell large volumes of one item at low prices so their customers (other businesses) can maintain a profit margin when the product is complete.

Vendors, on the other hand, are on the other end of the supply chain process. They’re focused on selling finished goods to retailers, wholesalers, and consumers directly. Vendors also strive to offer a variety of products that they can sell to large retail clients like Target.

Key Differences Between Distributors and Vendors

A vendor exists to purchase products from manufacturers, distributors, and suppliers to sell directly to consumers.

Distributors, on the other hand, focus primarily on delivering products to retailers, who then sell to consumers.

Distributors rarely, if ever, interact with consumers at all, while consumer relationships are often the bread and butter of a vendor’s business model.

In the supply chain model, distributors fall somewhere in the middle of the pack, working alongside manufacturers to get their goods sold and delivered to retailers and other businesses.

Vendors fall towards the end of the process, selling the products they purchased from distributors to consumers directly.

FAQ

Get all your questions answered about the supply chain process here.

What are the five types of vendors?

In different settings, vendors can be manufacturers, wholesalers, retailers, service and maintenance providers, and independent vendors.

Some retailers are referred to as vendors because they sell directly to consumers but don’t create the products themselves.

Wholesalers, like Costco, buy large quantities of products and goods from a manufacturer, store them, and sell them at discounted prices directly to consumers.

Do vendors sell directly to consumers?

Yes! While some vendors sell products to retailers (like Target), the primary function of a vendor is to sell directly to consumers.

Who do manufacturers sell to?

Manufacturers sell their finished products to wholesalers and distributors, who sell those goods to retailers, vendors, and other entities that sell to consumers. In some models, manufacturers also sell directly to retailers.

Power Up Your Online Shop With Ecwid

Now that you know all the details about the various steps of the supply chain, you can plan accordingly. It’s certainly no easy feat to launch a business, create an online store, and build relationships with manufacturers and suppliers, but it’s important to take it one step at a time.

You’re in it for the long haul, building a dream! Do your research, and compare costs within the various steps to ensure you’re partnering with the right businesses.

When it’s time to create a captivating, easy-to-use ecommerce shop, Ecwid can help. Get started today with our simplified website builder and start selling ASAP.

About The Author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.