Knowledge Base - Updating 3.2.x
That's step 6: Using FTP, delete the /vendor and /cache folders from the board's root folder
on the host.
Step 7 says: Via FTP or SSH upload the remaining files and folders (that is, the remaining CONTENTS of the phpBB3 folder) to the root folder
of your board installation . . .
Basically you're removing the /vendor and /cache folders on the server and replacing them with the fresh ones in the update package.