1. 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

2. 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….

3. 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.

4. 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

5. 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.

6. 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

7. 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

8. 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.

9. 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

10. 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”