An outside supplier, also known as an external supplier or vendor, is a business or individual that provides goods or services to another company but is not directly affiliated with that company. They operate independently of the company they are supplying and are typically involved in a contractual agreement or purchase order to deliver the necessary goods or services.
For example, a computer manufacturing company may rely on outside suppliers for components such as microchips, hard drives, and screens. These outside suppliers could be located anywhere in the world, and they deliver the necessary components that the manufacturing company needs to assemble its final product.
The use of outside suppliers can offer a variety of benefits, including the ability to access specialized expertise, reduce costs, improve efficiency, and focus on core competencies. However, it also requires careful management to ensure reliable delivery, product quality, and competitive pricing.
Example of an Outside Supplier
Let’s imagine a hypothetical company, FastCar Inc., which designs and assembles high-performance sports cars. To create their products, they rely on several key components like engines, tires, braking systems, and electronics.
FastCar Inc. does not manufacture these parts themselves. Instead, they purchase these components from a variety of outside suppliers:
- PowerEngine Co., a renowned engine manufacturer, provides the high-performance engines.
- ToughTire Ltd., a globally recognized tire producer, supplies high-grip racing tires.
- BrakeMaster Inc., a company specializing in high-performance braking systems, delivers the necessary brake assemblies.
- SmartElectronics Corp., an electronics company, provides the advanced onboard computer systems and infotainment units.
All these businesses are outside suppliers for FastCar Inc. They supply the necessary components, which FastCar Inc. assembles into their final sports car product. FastCar Inc.’s supply chain management team works closely with these outside suppliers to ensure timely delivery, quality, and cost-effectiveness of the components.