Supplier

economic-dictionary

A supplier is a natural or legal person who professionally provides or supplies a certain good or service to other individuals or companies, as a form of economic activity and in exchange for a counter service.

By definition, the provider is responsible for supplying third parties with different resources that it has. In a professional manner, it grants third parties said resources for the development of their commercial or economic activities.

This provision can take place both for goods or services already transformed and destined for sale, as well as for raw materials or more elaborated or transformed elements destined for later modifications. In this sense, both an agricultural supplier of wheat and a wholesaler of bread that offers its product to the final points of sale could be considered as a supplier.

In companies, usually, the purchasing departments are assigned to choose the different suppliers. Some suppliers that the company is going to support in order to organize supplies. This is often done taking into account cost saving motivations, geographic proximity, synergies between companies, or tax benefits of some kind.

Difference between supplier and creditor

Usually there is a distinction between these two concepts. The distinction lies in the fact that suppliers supply goods or services directly related to the economic activity of the buyer. This is the case of a carpenter whose material supplier is a wholesaler specialized in wood.

The case of the creditor is different. The creditor offers goods and services outside this relationship (financing, electricity or telephone supply ...). A clear example could be a creditor credit institution that offers financing to a company for the development of its activity in question.

This difference exists even in accounting terms. Thus, there is an accounting item for suppliers and another item for creditors.

Provider example

To give an example of a provider, suppose the following case:

We have a shoe store. This store sells shoes of all kinds, from sports to heels. Shoes for women, men and children. Since we are not a shoe producer, we must buy the shoes from someone. So we contact different companies that can supply us.

After contacting different companies, due to proximity, price, availability and quality, we decided to keep only two. These two companies will be our suppliers.

Why are they providers? Because they supply us with what makes up our economic activity.

Finally, we must bear in mind that the supplier is not always the manufacturer. For example, if we want to sell Nike-branded shoes, we don't have to buy directly from Nike. We can buy from another company that in turn sells Nike shoes.

Tags:  markets economic-dictionary Commerce 

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