Distributor

Definition

A distributor is an intermediary entity that purchases goods from manufacturers and sells them to retailers or directly to consumers. Distributors play a crucial role in supply chain management by ensuring that products are delivered efficiently, managing inventory levels, and often providing additional services such as marketing and logistics support.

5 Must Know Facts For Your Next Test

1. Distributors help bridge the gap between manufacturers and consumers, making it easier for products to reach the market.
2. They often provide value-added services such as warehousing, transportation, and order fulfillment, enhancing the efficiency of the supply chain.
3. Distributors usually negotiate prices with manufacturers and retailers, allowing them to earn a profit margin on each transaction.
4. They play a vital role in managing inventory, helping to balance supply with demand and reduce excess stock for both manufacturers and retailers.
5. In some cases, distributors may also be involved in marketing activities, promoting the products they carry to drive sales.

Review Questions

• How do distributors enhance the efficiency of the supply chain?
  • Distributors enhance supply chain efficiency by acting as intermediaries between manufacturers and retailers or consumers. They manage logistics, such as warehousing and transportation, ensuring that products are delivered promptly and cost-effectively. By handling inventory management and order fulfillment, distributors reduce the burden on manufacturers and help maintain an optimal supply level in retail environments.
• Discuss the various value-added services that distributors provide in supply chain management.
  • Distributors offer several value-added services in supply chain management, including warehousing, transportation, inventory management, and marketing support. By providing these services, they ensure products are stored properly and delivered on time, reducing costs associated with stockouts or excess inventory. Additionally, their marketing efforts can boost product visibility and sales in the retail market.
• Evaluate the impact of distributors on market dynamics and competition among manufacturers.
  • Distributors significantly impact market dynamics by influencing how products are priced, promoted, and delivered to consumers. Their relationships with multiple retailers can create competitive advantages for certain manufacturers, as they determine which products receive better placement or promotional support. This dynamic can lead to increased competition among manufacturers to secure favorable terms with distributors, ultimately affecting pricing strategies and market share.

Related terms

Supply Chain Management (SCM): The management of the flow of goods and services, encompassing all processes that transform raw materials into final products.

Logistics: The detailed coordination of complex operations involving people, facilities, and supplies to ensure the efficient movement and storage of goods.

Wholesaler: A wholesaler is a type of distributor that buys large quantities of goods from manufacturers and sells them in smaller quantities to retailers or other businesses.