What Are Some Common Vendor Services?
In a supply chain, a vendor is a business that brings goods and services to the agent who will sell them. In general, the supply chain vendor produces inventory/stock goods and then sells them to another link in the chain, usually the end-user. For example, if a hardware manufacturer produces a computer, then they would have a main office and manufacturing plant. Other manufacturing plants would be set up for the assembly or testing of those goods. End users would be contract manufacturing centers where the final products are made.
The actual vendor does not deal directly with end users. The vendor merely facilitates the buying process by selling raw materials to the supplier at a wholesale price. The manufacturer or supplier, then, takes those raw materials and turns them into finished products. Now, for an electronic product like a computer, this is where the term vendor comes in.
The process goes something like this: First, the manufacturer receives U.S. based parts from the vendor and ships them to distributors around the world. Those distributors ship the components to end-users who may be in Europe, Asia, South America, or Australia. When the end user makes a purchase, they are getting the product via the manufacturer’s distributor in either the form of an appliance or a handheld computer. This whole chain can take years to complete, but the entire process only takes a few weeks for an electronics vendor. Some examples of the types of electronic products vendors supply include cellular phones and digital camera cartridges.
Not all vendors work in this fashion. Some, such as hospitals and public utilities, work with long-term relationships with a supplier. Instead of an appliance being purchased twice, it’s bought once, with the second sale coming from a separate retailer. The second vendor, in turn, pays the hospital for the appliance and then sells it to a retail store where people make purchases on the basis of a contract. For public utilities, this means a fixed monthly rate is set by the utility company, and the retailer is paid by the customer for their purchases.
In this case, the supply chain doesn’t break down the way it would if the vendor and retailer were working separately. In this case, the order goes through the vendor and then into the hands of the retailer. However, there is still some friction between the two parties. For instance, the vendor may sell goods that aren’t in stock at the retail store, and the retailer won’t receive the money they’re owed by the vendor until the supply chain breaks down the order. Even then, it could take a while for the vendor to get their hands on the goods needed by the customer, such as an LCD screen.
Perhaps another example of an independent vendor example happens when a business has customers calling in with products that are out of stock. This is a situation where the business owner contacts a supplier or manufacturer who can get the items in production quickly, which saves them time and money and allows the business to move on with the rest of their agenda. Of course, it doesn’t always happen this way, as some suppliers don’t have the luxury of having factories in every town and city. In those cases, businesses can often have to find a middleman to help them get products to the consumers who want them. This is where a maintenance provider example comes into play.
A maintenance provider describes someone who can act as the go-between for the business and the supplier. In many cases, the business owner doesn’t know everything they need to do to keep track of the goods, so they contact the supplier to help them keep track of the inventory, goods in process and so forth. The supplier will then charge an up front fee, usually a percentage of the gross sale, and keep the business informed about when their services will end and when they’ll be billing the business again. The service varies from one vendor to another, but the end result is typically the same: the business owner is charged less for the goods than they would have paid if they had purchased the good themselves. Most businesses really like this arrangement, because they benefit from the added cost structure without incurring too much additional debt.
Another example of a vendor who can benefit from a supplier that provides data management services is the importer. An importer wants to expand their product line and streamline their warehouse capabilities, but they aren’t sure how to go about doing so. The vendor they hire could provide the expertise they need in terms of warehousing and logistics and also help them develop a process to handle their foreign shipping needs. The supplier could also provide data management services in terms of providing their warehouse facilities and records so the importer can make better use of their facilities and records, reducing the risk of lost shipments and lower logistics costs. This type of service could also save the importer thousands of dollars per year on buying materials and having to compensate for a labor force that will be involved in physically loading and unloading shipments.
