Question Danielle Business & Management

Channel of Distrubution for a Purchaser

As a purchaser, what is the importance of understanding the channel of distribution?

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Answer Expert #26026

The term ‘distribution channel’ essentially defines how goods or services reach the end user or consumer. The overall channel forms a chain of businesses or suppliers, which is an integral part of the product or service delivery process. Each ‘middle-man’ within a distribution channel acts as a cog in a larger machine which allows delivery of a product to the end user. From a purchaser’s perspective, a distribution channels forms the basis of multiple elements; these include core aspects such as price, lead time and availability of products. A longer distribution channel often means that an overhead is added each time an intermediary is included in the channel, a shorter channel on the other hand means a lower overhead added across the distribution line. While a smaller distribution channel might be beneficial to the purchaser in some cases, the importance of a longer channel to reach a wider audience cannot be undermined. As a longer distribution channel often means that there might be multiple tiers of purchasers, this effectively defines the cost and the availability of a product or service. Global distribution of any product or service often relies heavily on a fairly complex and long distribution channels, though a similar approach applies to almost all fast moving consumer goods. A purchaser therefore needs to understand the distribution channel in order to extract the highest possible value from a product or service being purchased.