In a supply chain, there is a seller, a manufacturer, or sometimes a middleman who contributes goods/services to the overall flow of the distribution. In general, the supply chain refers to a distributor of any product or service to another dealer. This can take place in a vertical supply process or a horizontal process. In a vertical supply process, products are distributed from the manufacturer/retailer to the ultimate customer, i.e., the end users. In a horizontal process, the manufacturer distributes goods/services to various dealers under the control of an overall vendor.
In most cases, direct manufacturers or retailers dominate the supply chain. They set up a number of distributors, which they promote or sell directly, and they provide them with raw materials such as raw material goods, components, labor, and other services. The manufacturers then provide the final products or deliver the final goods to retailers or end users. In short, it involves a high level of close interaction among the manufacturers, distributors, retailers, and end users. This may result to some problems, as sometimes, there are conflicts of interest among these different parties, leading to mismanagement of the distribution process.
The supply chain process also involves different roles, such as suppliers. A supplier plays an important role in the supply chain process, as he contributes to the evolution of the products or service by offering quality raw materials, components, labor, and other services. A vendor on the other hand, is a business person who offers goods/services to different customers. In a retailing environment, vendors are like owners or managers of the retail shop. They are the ones who decide which goods/services should be sold, and where they should be sold. They are also responsible for the maintenance of the shop premises, inventory management, and customer service.
The roles and responsibilities of both the manufacturers and suppliers overlap in some cases. As the name suggests, manufacturers play the role of ‘directors’ or’managers’ of a small business enterprise. The manufacturer makes the products or delivers the finished goods to the end users, and provides the retail prices and terms. On the other hand, suppliers play the role of ‘affiliates’ or ‘agreements-based agents’ who enter into agreements with the customers for the supply of goods/services.
There are many ways that a business can find itself benefited by the collaboration of both the manufacturers and the vendors. For instance, if the manufacturing company creates a new product, it can engage the services of the vendors to manufacture and market the product line. In doing so, it can reduce expenses associated with production as well as marketing. The result would be higher gross margin and a more efficient supply chain. More importantly, the products would have better quality and have more availability to consumers.
With the help of the vendors, the retailers too can benefit from the efficiency of the supply chain process. This means that if the retailer wants to sell goods, the products can be offered directly by the manufacturers at a wholesale price. Alternatively, the retailer can enter into agreements with other vendors who will sell the goods to them at a retails price. Either way, both parties stand to derive profits as the business enters into mutually beneficial relationships with the two parties.