Types of Suppliers: Wholesale, Traders, Manufacturers
Suppliers can take on many forms. While most people think the suppliers are the manufacturers of the product itself, they can actually be third parties, such as a wholesaler or a trader. Each of these supplier types functions in a unique way. And if you are looking to optimize your supply chain, you need to know their differences, as well as the benefits and disadvantages of dealing with each.
Wholesalers are companies that purchase products from manufacturers or other suppliers. They buy merchandise in bulk and often look for products not available in their country of operation. They import these global products and usually, resell them to the local market.
Wholesalers usually get their inventories from large manufacturing chains in China and import them to the U.S. or other Western countries. Because of this, they can sell higher than the retail price by 20-50%. However, you get convenience with the extra cost as you wouldn’t have to import the products yourself.
Moreover, wholesalers can be construed as middlemen who get rid of the language barrier between countries. If they have a warehouse in your country, you can enjoy better and easier communication.
While getting supplies from a wholesaler is a viable option, it does come with one big limitation. Wholesalers often cannot cater to companies who are looking for customized merchandise since they only import and carry standardized products.
Traders are similar to wholesalers, functioning as a middleman between the manufacturer and the end customer. However, unlike wholesale companies, they do not purchase and take ownership of the product. Instead, they work directly with the manufacturers for orders and become the front that supplies the merchandise.
Traders make it easier for end customers to access and buy products from the factories themselves. This is because they have good working relationships with a broad range of manufacturers and also have better communication with end customers. Because of their wide network, they can source a broad range of different products in bulk.
However, working with a trader also has its disadvantages. For one, they have a markup on products they supply, which is usually 5% or more. And while they are representing several factories, the end customers usually don’t get much information about where the products are coming from. Traders also don’t accept liability in case the product is defective or damaged.
Manufacturers are the most prominent type of supplier. They are the actual companies that own the factory producing the merchandise. Because of this, they have more control over the production process compared to other types of suppliers. For end customers, that means they are able to set terms, such as product customization, production time, quality standards, and more.
Because manufacturers make the products, there are no additional fees or markups involved when buying from them. You only pay for the actual cost of the product, as well as a small labor fee.
When working with manufacturers, however, keep in mind that most of their factories are located in non-English speaking regions. Because of this, communication can be more difficult compared to when coordinating with traders and wholesalers.
Now that you know the differences between wholesalers, traders, and manufacturers, you are in a much better position to determine where to source your products. When making the decision, make sure you consider your needs and priorities so that you can select the option that can meet your unique demands.
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