Supply Chain

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    Supply Chain

    Direct selling to consumers:

    Methods include the following:

    • The internet
    • Direct mail
    • Door-to-door selling
    • Mail order catalogues
    • Direct response adverts
    • Shopping parties
    • Telephone selling

    Retailer:

    These are businesses that buy goods and sell them straight to consumers. They provide several services:

    • They buy large quantities from manufactures and wholesalers, breaking bulk.
    • They sell in locations that are convenient to consumers., supermarkets
    • Add value to products by providing other services. These might include help with packing or delivery, repair services, information about products, warranties and gift wrapping.

    Wholesaler:

    • Wholesalers usually buy from manufacturers and sell to retailers.
    • A wholesaler stocks goods produced by many manufacturers. Therefore, retailers get to select from a wide range of merchandise

    Agents & Brokers

    • The role of agents or brokers is to link buyers and sellers.
    • They are used in a variety of markers, for example travel agents sell holidays and flights for holiday companies, airlines and tour operators.
    • Manufactures may also use agents when exporting.
    • Agents can reduce the risk of selling overseas because they have knowledge of the country and the market.

    Nature of the product

    Different types of products may require different distribution channels. For example:

    • Most services are sold directly to consumers. It might not be appropriate for window cleaners and hairdressers to use intermediaries. This is because unlike goods, services cannot be held in stock
    • Fast moving consumer goods like breakfast cereals, crisps and toilet paper cannot be sold directly by manufacturers to consumers. This is because such goods could not be sold effectively by manufacture in single units. Wholesalers and retailers are used because they break bulk.
    • Businesses product high quality ‘exclusive’ products such as perfume or designer clothes will choose their outlets very carefully. The image of their products is important, so they are not likely to use supermarkets for example.
    • Products that needs explanation or demonstration, such as technology products or complex financial products might need to be sold by expert salespeople or specialists.

    Cost

    • Cheapest distribution channels.
    • Prefer direct channels.
    • If intermediaries are used, they will take a share of the profit.
    • Larger supermarkets will try to buy direct from manufacturers as they can bulk buy and get low prices.
    • Independents are more likely to buy bulk from wholesalers and will have to charge higher prices as a result.
    • Many producers now sell direct to consumers from their websites. This helps keep costs

    The market

    • Producers selling to mass markets are likely to use intermediaries.
    • In construct, businesses targeting smaller markets are more likely to target customers directly.
    • Producers selling overseas markets are likely to use agents because they know the market better.
    • Businesses selling goods to other businesses are likely to use more direct channels.

    Control

    • For some producers it is important to have complete control over distribution.
    • For example, producer of exclusive products does not want to see them being sold in ‘downmarket’ outlets as this might damage their image.
    • Some products, such as heating systems, require expert installation and need to comply with health and safety regulation. Producers of such products might prefer to handle installation themselves and deal directly with customers. They can then ensure safe installation more easily.

    Despite the advantages to both consumers and businesses of online distribution, there are some drawbacks for businesses.

    • They face increasing competitions, since selling online is relatively cheap method of distribution. It can also be organised from any location in the world, at any time. Meaning more overseas competition.
    • Lack of human contact, which might not suit some customers.
    • There is heavy reliance on delivery services where e-trailers often lack control on the quality of delivery
    • Technical problems online. For example, websites can crash or be attacked by a virus
    • Security risk as computer hackers might gain access to sensitive information

    There are also drawbacks for consumers.

    • Cannot physically inspect goods before purchase
    • Risk of poor after-sales-service
    • Exclusion of customers without internet access or credit cards.
    • Bogus traders may be more difficult to identify online
    • People may have problems taking delivery of goods, for instance if they work all day

     

     

     

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