What is a Supplier?
The upstream partners in your supply chain who provide the raw materials, components, and goods your business needs to operate.
Quick Definition
A supplier is a company that provides raw materials, components, or goods to another business for use in production, resale, or operations. Suppliers are the upstream partners in your supply chain.
- Provide inputs for manufacturing or operations
- Often used interchangeably with "vendor"
- Critical for supply chain continuity
Understanding Suppliers
Suppliers are the foundation of your supply chain. They provide the materials, components, and products that your organization needs to create value for customers. Without reliable suppliers, production stops, shelves go empty, and operations grind to a halt.
While "supplier" and "vendor" are often used interchangeably, suppliers traditionally focus on providing inputs—raw materials, components, and goods used in production or resale. The relationship with suppliers is often deeper and more strategic than transactional purchasing.
Key aspects of supplier relationships:
- Sourcing — Finding and selecting the right suppliers for your needs
- Negotiation — Establishing terms, pricing, and agreements
- Collaboration — Working together to improve quality and reduce costs
- Risk Management — Monitoring and mitigating supply chain risks
Organizations increasingly view suppliers as partners rather than just sources of goods. This shift toward strategic supplier relationships drives innovation, improves quality, and creates competitive advantage.
Types of Suppliers
Raw Material Suppliers
Provide basic materials—metals, chemicals, agricultural products—used in manufacturing.
Component Suppliers
Provide parts and components that are assembled into finished products.
Finished Goods Suppliers
Provide complete products for resale or internal use without further processing.
Global Suppliers
International suppliers offering cost advantages, specialized capabilities, or unique materials.
Why Supplier Management Matters
Of product cost comes from suppliers
Supply chain disruptions from supplier issues
Average savings with strategic sourcing
Suppliers directly impact product quality, cost structure, and ability to serve customers. Strong supplier relationships are a competitive advantage.
Supplier Management Best Practices
Segment Your Suppliers
Classify suppliers by strategic importance and spend. Focus resources on critical suppliers.
Diversify Your Base
Avoid single-source dependencies where possible. Have backup suppliers for critical materials.
Monitor Lead Times
Track and manage delivery times. Build appropriate inventory buffers for key materials.
Collaborate on Improvement
Work with key suppliers on quality, cost reduction, and innovation initiatives.
Manage Global Risks
Understand geopolitical, currency, and logistics risks in your international supply base.
Supplier Risks to Monitor
- ×Single-source dependency — Relying on one supplier for critical materials
- ×Financial instability — Supplier financial problems can disrupt supply
- ×Quality issues — Defects flow downstream and impact your products
- ×Compliance failures — Supplier violations can create liability for you
Related Terms
Vendor
Company that sells goods or services to your organization
Purchase Order
Document authorizing a purchase from a supplier
Accounts Payable
Department managing supplier invoices and payments
Procure-to-Pay
End-to-end purchasing and payment process
Invoice
Document requesting payment for goods or services
Three-Way Match
Matching PO, receipt, and invoice before payment