Supplier, vendor inequality hinders supply chain’s competitive edge

Editor’s Note: Norman Katz, president of supply chain consultancy Katzscan Inc., writes a monthly column for Supply Chain Management Review. Katz’s column appears on the third Monday of each month.

From a semantics perspective, the terms “supplier” and “vendor” may be so similar that they are interchangeable, synonyms to each other based on dictionary website lookups. But from a supply chain definition perspective, there is a more than subtle difference. Suppliers tend to provide raw materials and components. Vendors tend to provide finished products. If you were to differentiate companies that your organization does business with into those that are suppliers versus those that are vendors, you would probably put software solution providers and staffing firms into the vendor category because what they provide are finished products: software applications and people. Companies that provide CPG (consumer packaged goods) products to retailers and grocers are considered vendors. 

In the January/February 2024 issue of Supply Chain Management Review (which was also the inaugural issue of the redesign), Matthew Lekstutis of SGS Maine Pointe wrote an insightful article titled The 2024 CSCO Agenda.  In this article, Matthew highlights key points for how a company should—and I’m taking the points right from the article—maximize the strategic value of its supplier network and strengthen its supplier network. As Matthew states, a company’s relationship with its supplier network should never be just transactional. (General Motors learned this the hard way back in the 1990s. This was recounted in the December 2020 issue of Supply Chain Management Review in an article titled “Are We There Yet.”)  Matthew also points out that:

1. Suppliers need a standardized sourcing system.
2. Suppliers should be certified and undergo regular audits and business reviews.
3. Suppliers represent the largest cost and potential risk for a company.

As I read Matthew’s article, I could not help but relate what Matthew was writing to my experiences with supply chain vendor compliance, helping retail and grocery brands since 1993. The term supplier could have been swapped for the term vendor in Matthew’s article and it would have been just as relevant in the same ways.

Vendors need a single-source of truth as to where to locate and acquire the technical and operational specifications that define their relationship with a customer. Scattering these mandates just makes it all the more difficult to gather them and keep up to date. And these requirements need to be written to their audience: the vendors who have to comply with them, which is likely to be comprised of a demographic of companies from small to very large with various levels of understanding. Keep it simple as if you want your vendors to succeed, because that’s the ultimate objective, correct?

Related Article

 

The 2024 chief supply chain officer (CSCO) agenda

As we enter the 5th year of the Roaring ’20s: Decade of Digitalization and Disruption, supply network executives wield significant influence over strategic procurement, particularly in conditions where buyer power is amplified, and supply network risk is at an all-time high. CSCOs are the driving force in managing those risks and evaluating the effectiveness of key strategic procurement strategies: maximizing the strategic value of suppliers, strengthening the supply network, building technology solutions, and capitalizing on market headwinds.

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If your company uses a third-party software partner, transportation provider, or logistics company to engage with your vendors, then make certain that these companies are able to fully support your supply chain initiatives and fully support your vendors when they need help. Remember, your company still has the responsibility of the vendor relationship, just like you expect your vendors to have the responsibility of their supply chain relationships with their suppliers and vendors. 

Your company should ensure that your vendors are representing a valid business and quality products. The products your vendors are providing are going to your customers, so this is your reputation that is on the line. Don’t skimp on regular quality checks beyond those that your vendor says that they are doing, because it’s just not worth the risk if a consumer gets injured … or worse. 

Organizations are structured differently. Suppliers may fall under the purview of the chief supply chain officer (CSCO) or other roles such as procurement or purchasing. Vendors may fall under the purview of other executives rather than the CSCO, such as the chief commercial officer (CCO).  Since the supplier versus vendor objectives are different, the methodologies for success are very much aligned and the same. I think that it would behoove the two camps to come together and share ideas, strategies, and resources on what works and what doesn’t to improve the organization’s overall supply chain effectiveness.         

In a commoditized world, execution is the new competitive edge, and this includes working with suppliers—and vendors—to unleash new technologies and create unique products. 

Suppliers and vendors both want, need, and deserve the same supply chain treatment. Better solutions might be right within your organization. It will take some cross-organization collaboration to find out.

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