When we talk about the topic of suppliers, I think we as suppliers of shelves may also have a certain right to speak. So this time, let us as practitioners talk about what is the supplier, what types of suppliers and how to choose suppliers and other topics!
What is a Supplier?
Simply put, the upstream business that provides goods or services to your business can be defined as being your supplier. Typically, a supplier is a business, but it could also be an individual or an organization.
As an example, imagine you want to open a coffee shop, but you need coffee beans, milk, cups and straws, etc. The companies or individuals who provide you with these things (e.g. coffee wholesalers, packaging plants) are your “suppliers”. They act as your “logistic unit” so that you can focus on selling coffee.
Suppliers in the Supply Chain
Suppliers in the Supply Chain play an important role in ensuring the smooth flow of products from raw materials to the final consumer. We can understand the role of suppliers by the process “Raw Material → Production → Distribution”:
Raw material suppliers
These suppliers provide the basic materials, such as steel, plastics, wood or chemicals, needed to manufacture a product.
For example, a paper mill needs to buy wood pulp from a wood supplier as a raw material for production.
Manufacturing suppliers (producers)
These suppliers are responsible for processing raw materials into final products or components.
For example, an automobile manufacturer will purchase parts such as tires, engines, glass, etc. from various suppliers and then assemble them into cars.
Distribution Suppliers
These suppliers are responsible for delivering products from manufacturers to wholesalers, retailers, or directly to customers.
For example, a food brand may sell its products through supermarkets, convenience stores or e-commerce platforms.
Importance of suppliers:
Ensure stability of supply: without suppliers, manufacturers would not be able to obtain raw materials and the entire supply chain would be disrupted.
Improve efficiency: Specialized suppliers can provide better quality and lower cost raw materials or components, helping companies to reduce costs.
Support market demand: Timely supply from suppliers can ensure that products can flow smoothly into the market to meet consumer demand.
Supplier vs. Vendor vs. Manufacturer
It’s a common question that many people confuse Supplier, Vendor and Manufacturer. They do have similarities, but their roles in the supply chain are different. We can differentiate them in a simple way:
Supplier
- A supplier is a broad concept that refers to any person or company that provides goods or services to a business.
- A supplier can be a raw material supplier (e.g., a steel mill), a component supplier (e.g., an electronic component company), a manufacturer or a distributor.
- For example, a furniture manufacturing company might purchase boards from a lumber supplier and paint from a paint supplier.
Key point: The supplier is the party that supplies the product, not necessarily producing it themselves.
Manufacturer
- A manufacturer is a company that produces its own goods; they usually take raw materials from suppliers and then process and manufacture them into products.
- For example, Apple purchases parts from screen and chip suppliers and then produces the iPhone in its own factory.
- Once the production is complete, the manufacturer usually does not sell directly to the final consumer, but sells the product through wholesalers, retailers or e-commerce platforms.
Key point: The manufacturer is the party that actually produces the product, and they can be a type of supplier.
Vendor
- A Vendor is primarily a selling party, usually a company that sells products directly to consumers or businesses.
- They don’t necessarily make the product themselves, but instead purchase the product from a manufacturer or supplier and then sell it.
- For example, Walmart (Walmart) buys goods from different manufacturers and then sells them to customers.
KEY POINT: Vendor is more oriented towards selling and distributing, while Supplier is more oriented towards providing goods.
Types of Suppliers
There are many types of suppliers and the role of suppliers varies from industry to industry. Below are a few common types of suppliers and I will use industry-specific examples:
Raw Material Suppliers
- Provide raw materials or basic resources for manufacturers to produce their products.
- Applicable to: Manufacturing, Construction, Chemical, etc.
- Example:
- Automotive: Steel mills provide steel to automobile manufacturers.
- Electronics industry: TSMC supplies silicon wafers for chip manufacturing
- Construction industry: Cement plants supply cement to construction companies
Wholesale Suppliers
- Sourcing goods on a large scale and reselling them to retailers or online sellers
- Suitable for: retail, e-commerce, B2B wholesale marketplaces
- Example:
- E-commerce industry: Alibaba, AliExpress wholesalers supplying Amazon, eBay sellers
- Apparel industry: fashion brands purchase clothes from wholesale markets in Guangzhou and Yiwu and then sell them
- Food industry: large food wholesalers supplying supermarkets with vegetables, fruits, frozen foods
OEM/Contract Manufacturers (Original Equipment Manufacturers/Contract Manufacturers)
- Accept orders from brand companies and manufacture products according to brand requirements
- Applicable to: consumer electronics, automotive, home appliances and other industries
- Example:
Distributors
- Connecting manufacturers and retailers, responsible for the sales and logistics of goods.
- Applicable to: all industries, especially FMCG, pharmaceuticals, electronics
- Example:
- Electronics industry: Digi-Key, Arrow Electronics distributing electronic components
- Pharmaceuticals: Simplot (Cardinal Health) distributes medicines to hospitals and pharmacies.
- Food industry: Coca-Cola authorizes local distributors to distribute beverages.
Dropshipping Suppliers
- Specialized in providing inventory management and direct shipping services for e-commerce platforms.
- Suitable for: cross-border e-commerce, DTC (Direct-to-Consumer) brands
- Example:
- E-commerce: CJ Dropshipping, Oberlo for Shopify sellers
- Apparel industry: Printful provides Print-on-Demand services.
Service Providers
- Provide services such as logistics, IT, finance, marketing, etc., rather than physical goods.
- Applies to: all industries
- Examples:
- Logistics industry: DHL, UPS provide delivery services for cross-border e-commerce companies
- IT industry: AWS, Google Cloud provide cloud computing services.
- Financial industry: PayPal, Stripe provide online payment solutions.
Why Are Suppliers Important?
Ensure Stable Supply and Avoid Production Interruptions
- Suppliers are the key sources through which businesses obtain raw materials, components, or products.
- Without stable suppliers, companies may face shortages of raw materials, production delays, and even disruptions in final delivery.
- Example: In the automotive industry, if there is a shortage of chip supply (such as the global chip shortage in 2021), vehicle production may be forced to halt.
Reduce Costs and Improve Profitability
- High-quality suppliers can offer more competitive pricing, helping businesses lower procurement and production costs.
- Bulk purchasing often allows companies to obtain lower wholesale prices and optimize their cost structure.
- Example: Walmart sources low-cost products from global suppliers to maintain its low-price strategy and increase profit margins.
Provide Better Product Quality and Innovation Support
- Suppliers are not just “sellers”; they are also partners who can provide higher-quality materials and innovative solutions.
- Reliable suppliers ensure product consistency, reduce defect rates, and enhance market competitiveness.
- Example: Apple collaborates with TSMC to consistently access cutting-edge chip technology, keeping the iPhone ahead in the market.
Improve Supply Chain Efficiency and Accelerate Market Responsiveness
- Effective supplier management can optimize inventory levels, reduce stockpiling, and lower capital occupancy.
- Efficient suppliers can deliver faster, enabling businesses to respond more flexibly to market changes.
- Example: Fast fashion brand Zara collaborates with global suppliers to achieve a “design-to-shelf” cycle of just 2–4 weeks, allowing it to quickly follow market trends.
Share Risks and Strengthen Supply Chain Resilience
- Relying on a single supplier increases risk; a multi-supplier strategy helps diversify supply chain risks.
- In the face of unexpected events (such as natural disasters, trade restrictions, or pandemics), businesses can quickly adjust their supply chains to avoid disruptions.
- Example: Tesla has established a global network of battery suppliers (such as CATL, Panasonic, and LG) to reduce the production risks associated with relying on a single supplier.
How to Choose the Right Supplier?
Define Your Requirements
- Clarify procurement needs: Are you sourcing raw materials, components, or finished products? Is it for long-term cooperation or short-term purchasing?
- Set procurement criteria: Include factors such as quality, delivery time, price, and service support.
- Examples:
- A clothing brand looking for fabric suppliers requires high-quality materials, fast delivery, and sustainable production.
- An electronics company sourcing chips needs technical compatibility, stable supply, and reasonable pricing.
Supplier Search and Research
Identify potential suppliers through:
- Online platforms: Alibaba, Global Sources, ThomasNet, industry forums, Google
- Trade shows: Canton Fair, CES, logistics exhibitions
- Supplier referrals: Recommendations from industry peers or business partners
Pre-screening: Conduct an initial evaluation of supplier qualifications, product quality, and customer feedback.
Supplier Evaluation Criteria
When screening suppliers, the 5R principle can be used (Right Source, Right Quantity, Right Quality, Right Price, Right Time):
- Quality: Does the supplier meet industry standards? Do they have quality certifications (e.g., ISO 9001)?
- Price: Are the costs reasonable? Are there price advantages for long-term cooperation?
- Delivery Time: What is the supplier’s production capacity? Can they deliver on time?
- Service: Does the supplier offer good after-sales support? Is communication efficient?
- Reputation & Financial Stability: Is the supplier financially stable? What do past customers say about them?
Trial Orders and On-site Inspection
- Place small trial orders to test the supplier’s delivery capability and product quality.
- Conduct on-site factory visits to understand their production processes, equipment, and management systems.
- Assess their responsiveness to ensure they can adapt quickly to unexpected situations.
Establishing Long-Term Cooperation
- Once the trial order and inspection meet expectations, you can proceed with formal contract signing and establish a long-term partnership.
- Continuously monitor supplier performance and conduct regular evaluations to ensure compliance with quality, delivery, and cost requirements.
- Maintain alternative suppliers to reduce supply chain risk.
Conclusion
In conclusion, we hope that our years of experience as a supplier will help you pick the supplier you need. If you happen to be reading this article at the moment and you are looking for the right supplier of storage racks or display racks, then I think we might be one of your best choices!
So if you have a need, you are welcome to contact us!
