Difference Between Vendor and Subcontractor

For a business to operate optimally, many parties are involved, mainly suppliers and consumers. Suppliers are essential in businesses as they enable the creation of cost-effective supply chains. Among the suppliers commonly involved in business operations include vendors and sub-contractors. Although both may be classified as suppliers, they have various differences.

What is a Vendor?

These are persons who sell and supply products to a wide range of customers including individuals as well as large companies. Vendors operate in a very competitive environment whereby consumers compare product characteristics including quality and price. While vendors are common in small supplies, they may be used by large companies in a bid to ensure supply chain continuity when other suppliers are unable to deliver. 

Through partnerships, vendors play an important role in the business sector by allowing companies to share technical risks, expertise, logistics as well as development costs.

Who is a Sub-Contractor?

These are parties which work under a prime contractor. Usually, sub-contractors work on tasks in major projects that have a limited completion period. Examples of tasks carried out by sub-contractors include working on sectors of a building under construction, such as plumbing and drainage, landscaping and electrical work.   

There are various categories of sub-contractors including:

• Domestic – This is a sub-contractor appointed by the main contractor.
• Nominated – This is a sub-contractor who is nominated by the client and instructed to work under the main contractor.
• Named – This is a sub-contractor selected via a tendering process and works under the main contractor.

Similarities between Vendor and Subcontractor

Both are essential in ensuring the smooth running of the supply chain

Differences between Vendor and Subcontractor

Selection process

While vendors are hired by the customer or a contractor, a sub-contractor is hired by the client, the general contractor or selected through a tendering process.

Products and services

A vendor supplies off-shelf products, which include products that anyone can purchase. On the other hand, a sub-contractor carries duties as specified by the general contractor.

Performance goals/Penalties

Vendors are expected to deliver specifies, quality and timely products failure to which the goods are rejected. On the other hand, sub-contractors are expected to deliver as per specifications failure to which may attract penalties or legal action.

Vendor vs. sub-contractor: Comparison Table

Summary of Vendor vs. Sub-contractor

A vendor is a person who sells and supply products to a wide range of customers including individual as well as large companies. On the other hand, a sub-contractor is a person or an entity who work under a prime contractor. While these two may have various differences, they are important in ensuring the smooth running of the supply chain.

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