Chain of production and channels of distribution 14/09/2018 CHAPTER 22 Chain of production and channels of distribution This is the Title Slide R. DELANEY

The Chain of Production R. Delaney The Chain of Production The chain of production is the various production or processing stages that a good or service goes through before it is sold to the consumer. Example: Farmer grows wheat Farmer sells the wheat to the miller who makes flour Miller sells flour to the baker who makes cakes Baker sells the cakes to wholesalers and / or retailers Retailers sell the cakes to the consumers From this….. To this….

The Three Sectors of the Economy R. Delaney The Three Sectors of the Economy The primary sector is made up of the extractive industries who take (extract) materials from the land or the sea, e.g., Farming, fishing, mining, and oil and gas. The secondary sector is the manufacturing and construction sector of the economy. The firms in this sector use the goods produced by the primary sector and change them into finished products, e.g. the clothing, food processing and building industries. The tertiary or service sector provides services to all other sectors of the economy, e.g. mechanics and accountants.

The Channels of Distribution R. Delaney The Channels of Distribution Channels of distribution are the methods used to transfer finished goods from manufacturers to consumers. Common examples are: 1 Manufacturer wholesaler retailer consumer 2 Manufacturer retailer consumer 3 Manufacturer consumer

R. Delaney Wholesaling A wholesaler is a company or person that buys large quantities of goods from many manufacturers and sells them in smaller quantities to retailers.

Wholesaler aids manufacturer R. Delaney Wholesaler aids manufacturer Role played by wholesaler Benefit to manufacturer Buys very large quantities Manufacturers have a small number of customers, which reduces their overhead costs Stores the goods Manufacturers are saved the warehousing costs Promotes the goods to retailers and consumers Reduces the manufacturer’s advertising costs Pays promptly for goods Gives the manufacturer working capital for current expenditure Provides the manufacturer with information from retailers regarding consumer trends Prevents the manufacturers from making goods that may be going out of fashion

Wholesaler aids retailer R. Delaney Wholesaler aids retailer Role played by wholesaler Benefit to retailer Provides a wide range of goods Retailers need deal with only a small number of wholesalers rather than many manufacturers Sells goods in small quantities Retailers do not have to store large quantities of goods Delivers goods Reduces retailer’s transport costs and saves retailer’s time Provides credit facilities Retailers may be able to sell all their stock before payment is due Provides information about new products coming onto the market Prevents retailers over-stocking goods that may be going out of fashion

Cash and Carry Wholesalers R. Delaney Cash and Carry Wholesalers Cash and carry wholesalers act as supermarkets to retailers. Consumers are not permitted to shop in them. They differ from the traditional wholesaler because: They do not give credit. They do not deliver goods. They operate on a self-service basis. They provide ample parking space for retailers. Their prices tend to be lower than traditional wholesalers.

Functions of a retailer R. Delaney Functions of a retailer A retailer is somebody (or an outlet) who sells finished goods to consumers. Functions of a retailer: Provides a wide rang of d goods to consumers in one place Sells goods to consumers in small quantities Offers advice to consumers on products they may need Informs manufacturers of changing consumer trends Creates a demand for goods by advertising Arranges finance for consumers for expensive goods May accept “trade-ins” to make it easier for consumers to buy new goods

Recent trends in retailing in Ireland R. Delaney Recent trends in retailing in Ireland The arrival of international discount stores in the grocery and related products industry, e.g. Aldi and Lidl. Major growth in the number of shopping centres and retail outlets. Increasing use of e-commerce Growth of farmers’ markets Many retailers of expensive consumer durable products are now providing or arranging low interest rate loans. Growth in the promotion and acceptance of ‘own brand’ labelled goods. “A retail outlet”